US federal budget deficit to top $1 trillion next year
The federal budget deficit will exceed $1 trillion in 2020, according to figures released by the Congressional Budget Office (CBO).
The CBO projects the 2019 deficit is up $63bn on earlier projections and will reach a year-end total of $960bn, while deficits over the next decade are expected to be $809bn higher than predicted, averaging $1.2 trillion between 2020 and 2029.
Over the next 10 years, deficits — the difference between revenue and expenses — are expected to fluctuate between 4.4% and 4.8% of gross domestic product (GDP), well above the average over the past 50 years.
“As a result of those deficits, federal debt held by the public is projected to grow steadily, from 79% of GDP in 2019 to 95% in 2029 — its highest level since just after World War II,” CBO’s director Phillip L Swagel said in a statement.
The CBO puts the increase in its ten-year deficit projections down primarily to recently-enacted legislation the Bipartisan Budget Act, which raises discretionary spending caps for fiscal years 2020 and 2021, and is expected to add $1.7 trillion to the deficit, and additional allowances for disaster relief and border security in 2019, adding a further $255bn.
Sluggish economic growth
The escalating debt load is being exacerbated by sluggish economic growth, as well as spending and tax cuts. US GDP is expected to reach 2.6% this year, falling to 2.1% in 2020, according to the CBO.
“The nation’s fiscal outlook is challenging,” Swagel said. “Federal debt, which is already high by historical standards, is on an unsustainable course, projected to rise even higher after 2029 because of the aging population, growth in per capita spending on health care, and rising interest costs.”
“To put it on a sustainable course, lawmakers will have to make significant changes to tax and spending policies—making revenues larger than they would be under current law, reducing spending below projected amounts, or adopting some combination of those approaches,” he added.
Budget agreement
President Trump signed into law the Bipartisan Budget Act, a two-year budget agreement, on August 2, in a bid to avert the possibility of another government shutdown and the first ever federal default.
The agreement to lift spending caps and raise the debt ceiling avoids the prospect of the government defaulting on its loans and averts a financial crisis in the short term, but adds to the deficit.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told The Guardian: “The recent budget deal was a budget buster, and now we have further proof. Both parties took an already unsustainable situation and made it much worse. If Congress keeps extending tax cuts, debt will likely exceed the size of the economy within the decade.”
About Mia Hunt
Mia is a journalist and editor with a background in covering commercial property, having been market reports and supplements editor at trade title Property Week and deputy editor of Shopping Centre magazine, now known as Retail Destination. She has also undertaken freelance work for several publications including the preview magazine of international trade show, MAPIC, and TES Global (formerly the Times Educational Supplement) and has produced a white paper on energy efficiency in business for E.ON. Between 2014 and 2016, she was a member of the Revo Customer Experience Committee and an ACE Awards judge. Mia graduated from Kingston University with a first-class degree in journalism and was part of the team that produced The River newspaper, which won Publication of the Year at the Guardian Student Media Awards in 2010.
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