US Deficit Racing Towards $1 Trillion as 'Fiscal Crisis' Looms

Trump tax cuts forecast to send US deficit to $1 trillion in 2020

The economic growth promises to drop the nationwide unemployment rate below 4%, the CBO predicted.

The budget deficit is then expected to grow to $1 trillion by 2020. The gap between spending and revenues will balloon over 1 trillion dollars in fiscal 2020 and keep expanding for years.

Moreover, the Trump administration plans to increase spending drastically over the next two years.

The rising deficit means that a larger part of the government's spending is paid for voluntarily by investors rather than compelled payments taken from taxpayers.

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More worrying for politicians the CBO projections and CBO also assumes significant tax increases toward the end of the 2020's because the Trump tax cuts were created to give permanent cuts to corporations and heirs of large estates, but linked these to temporary, expiring tax cuts for the middle class.Trump and the Republicans were forced to do this because the $US1.5 trillion budget limit did not allow them enough money to cut all the taxes they wanted to cut.

The CBO said the tax cuts and the additional spending will boost consumer demand, supercharging the economy.

In its 2017 projection, the CBO estimated that by 2027 the national debt would comprise 88.9 percent of the gross domestic product, just below the level at which economists say its load would itself harm the economy. Numerous tax cuts are set to expire after 2025, while higher spending levels expire after two years.

The agency said it now expects America's cumulative deficit over the next decade to grow to $11.7 trillion compared to a previous forecast of $10.1 trillion.

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House Republicans are also expected to vote this week on a balanced-budget amendment to the Constitution, which would force federal revenue and spending to balance.

The figure would be even larger if the tax cuts for individuals and families do not expire as scheduled.

Donnelly said, "This report confirms my serious concerns about the ballooning deficit, which Speaker Ryan has said he wants to pay for through cuts to Medicare and Social Security, putting seniors and retirees at risk". But such a measure has little chance of passing and the effort will largely be about political messaging.

The government has been able to finance its debt relatively cheaply because of a decade of historically low interest rates since the recession. And not a word from the debt and deficit mob and those conservatives who reckon higher spending will be inflationary.

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"It's all hand-waving and conjecture: There's no grounding in valid economic principles that this is a debt crisis", said Stephanie Kelton, a left-leaning economics and public policy professor at Stony Brook University and a former economic adviser to Sen.

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