The federal deficit could hit $1.1 trillion next year and $1.7 trillion in fiscal 2028, piling on debt that exceeds the size of the economy by the end of the decade, according to a Committee for a Responsible Federal Budget report released Friday.
If Congress extends individual tax cuts beyond their scheduled expiration and continues to raise discretionary spending levels above statutory caps, the debt will grow even faster, reaching $33 trillion or 113 percent of gross domestic product by fiscal 2028, the CRFB analysis said. Under that scenario, annual deficits would top $2 trillion within 10 years.
The CRFB said in Friday’s paper that last year’s tax cut and the newly enacted budget deal among other legislation have “turned a dismal fiscal situation into a dire one.”
Acknowledging that the Congressional Budget Office projection due April 9 will be based on a much more sophisticated analysis, the committee said it employed CBO methods in its estimate in an effort to “seek to inform the conversation until CBO has a chance to release its full report.”
The CRFB has long been urging Congress to tackle the rising debt, which is growing faster than the economy, through spending cuts, tax increases or a combination. But in the latest report, the organization warns that the magnitude of the danger has increased.
“While our high and rising debt was already on an unsustainable path a year ago, our updated projections show substantial fiscal deterioration since then and suggest the country is approaching uncharted territory,” the report says. “These high levels of debt will most likely crowd out productive investment, slow wage growth, and could increase the likelihood of an eventual fiscal crisis.”
CBO’s last baseline budget update in June 2017 estimated the deficit — $666 billion at the end of fiscal 2017 — would top $1 trillion in fiscal 2022 and reach $1.5 trillion in fiscal 2027 if current laws generally remained unchanged. Under that projection debt held by the public, which excludes Treasury debt held by other government accounts such as the Social Security trust fund, would hit $25.5 trillion or 91 percent of GDP in fiscal 2027.
In its report, CRFB estimates that under current law, debt held by the public will hit $29.4 trillion or 101 percent of GDP in 2028.
In reaching its conclusions, the committee factored in the costs of the tax cut, the agreement to raise discretionary spending caps for two years, disaster relief and rising interest costs. The committee also followed the CBO convention that emergency spending and war spending continue to grow each year, which could inflate the estimate since emergency and war costs may fall in the future.
In an alternative projection, CRFB assumed the tax cuts are made permanent and Congress continues to pass budget deals that raise the discretionary spending caps. Under this scenario, the report says, the deficit will reach $2.4 trillion in 2028, while debt climbs to $33 trillion.