Washington, D.C.– The new Congressional Budget Office projection that U.S. budget deficits are expected to exceed $1 trillion by 2020 is a stark warning that the fiscal strains facing the United States are now at our doorstep, Shai Akabas, economic policy director at BPC, said.
“CBO projections show recent policy changes have made the situation worse. The recent budget deal and tax cuts have caused federal deficits to surge,” Akabas said.
CBO projects that publicly held U.S. debt will reach almost $29 trillion within 10 years, nearly eclipsing the size of the U.S. economy at 96 percent of GDP. That baseline estimate is almost certainly too low because it does not include potentially extending the higher spending and tax cuts in the future. When such factors are included, CBO estimates that annual deficits would surpass $2 trillion within a decade.
“No one can say they didn’t see this coming. Analysts have said for years that a debt problem was looming on the horizon,” Akabas said. “Now that it’s upon us, those who have their heads buried in the sand are in for a rude awakening.”
CBO’s report also includes updated economic projections, which show recent fiscal stimulus producing a short-term boost in economic growth to 3.3 percent for Fiscal Year 2018, but then dropping to 1.7 percent within a decade. This growth slowdown is projected to come at the same time that interest payments use up a growing portion of federal revenues, reaching 17 percent by 2028.