The U.S. annual budget deficit will exceed 1 trillion dollars by 2020, as tax cuts and spending increases signed by President Donald Trump strain the country's finance, the nonpartisan Congressional Budget Office (CBO) said on Monday. The deficit will be US$804 billion for the current financial year, which ends on September 30, a big rise from the US665 billion deficit for fiscal 2017 and US$242 billion more than the CBO projected last (northern) summer.
Between the lines: Republicans have spent almost a decade campaigning on fiscal restraint.
Senator Chuck Schumer of NY said the report "exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself" and warned that Republicans will now use the rising debt to call for cuts to welfare programmes such as Social Security.
Senate Democratic Leader Chuck Schumer said the lower revenues and higher deficits resulting from the tax overhaul will prompt Republicans to call for cuts to social safety net programs such as the Social Security retirement program and the Medicare health insurance program for the elderly.
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If lawmakers take the route of least resistance, the CBO estimates that in ten years, the debt - which reflects the accumulation of deficits over the years - could reach 105% as a share of the economy, higher than at any time except right after World War II. Next year's growth will rise from 1.5 percent to 2.4 percent.
The CBO said the tax cuts and the additional spending will boost consumer demand, supercharging the economy. Yields move in the opposite direction from bond prices, rising when the prices of bonds paying fixed interest rates fall.
The official conservative party line during the Reagan era, when Republicans introduced the modern phenomenon of the large structural deficit, was that it was necessary to run the red ink in order to win the Cold War.
The figure would be even larger if the tax cuts for individuals and families do not expire as scheduled.
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As it is now, things are looking bad enough.
The government would borrow about 19 cents of every dollar it spends this year. "Analysts have said for years that a debt problem was looming on the horizon", said Shai Akabas, economic policy director at the Bipartisan Policy Center.
"The budget outlook is no reason for alarm", wrote Paul N. Van de Water, senior fellow at CBPP. "The American people deserve a Congress that is focused squarely on helping the middle class, not patronizing Kabuki theatre - like sham "balanced budget" votes - from Republicans who blew up the deficit to benefit wealthy special interests".
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