WASHINGTON – In a new report released Wednesday, the nonpartisan Congressional Budget Office (CBO) estimates the federal budget deficit, or the difference between revenue and expenses, will exceed $1 trillion by 2020.
The CBO says the federal budget deficit is $960 billion in 2019 and will average $1.2 trillion between 2020 and 2029, causing the federal debt to balloon to 95% of GDP in 2029 – “its highest level since just after World War II.”
“The nation’s fiscal outlook is challenging,” said CBO director Phillip Swagel in a statement.
In order to put levels of debt at sustainable levels, “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.”
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The CBO revised its original estimates to include a larger deficit and debt because of increased spending by the federal government this year after budget caps were lifted, as well as expenditures on disaster relief and border security.
Deficits have also increased in recent years because of decreased tax revenues. The tax reform passed by Republicans in 2017 cut income tax rates for individuals and corporations.
The director also notes that “higher trade barriers” will have a significant impact on the economy and could “reduce” U.S. GDP by about 0.3% in 2020 compared to what GDP could be without tariffs levied by the U.S. and other countries.
The most recent round of tariffs, scheduled to go into effect on Sept. 1, would impose a 10% tariff on $300 billion worth of Chinese products. Economists say the tariffs would impose additional costs on American consumers.
Trump said on Wednesday he was considering a cut in the payroll tax in an attempt to stimulate the economy amid some worries about a recession.
By Thursday, he reversed his position and said he did not want a tax cut.
“I’m not looking at a tax cut now,” he said. “We don’t need it” because the economy is doing “very, very well.”