The deficit is estimated to climb to $804 billion this year and $981 billion in fiscal 2019, hitting $1 trillion in 2020 and topping $1.5 trillion in 2028, the Congressional Budget Office said in a report Monday.
In their latest semiannual budget and economic outlook, CBO said debt held by the public will rise to $15.7 trillion in fiscal 2018 and continue to grow, hitting $28.7 trillion or 96 percent of the size of the economy in 2028.
The deficit in fiscal 2017, which ended Sept. 30, was $665 billion. In the agency’s previous budget outlook, released last June, CBO estimated the 2018 deficit would be $563 billion, rising to $689 billion in fiscal 2019. Trillion dollar deficits were not set to return until fiscal 2022 under last June’s assumptions.
Last year’s tax overhaul, the two-year budget deal that led to higher spending caps for this year and next and the $1.3 trillion fiscal 2018 omnibus spending bill are the main contributors to the worsening fiscal picture compared to last year. In addition, several rounds of supplemental appropriations for the relief effort after three major hurricanes in 2017 have contributed to the larger shortfall.
“Projected deficits over the 2018-2027 period have increased markedly since June 2017, when CBO issued its previous projections,” the report said, adding that the tax and spending bills have “significantly reduced revenues and increased outlays anticipated under current law.”
Over the 2018-2027 period, CBO estimates the cumulative deficit would be $1.6 trillion larger than the June projection — $11.7 trillion rather than $10.1 trillion. Over that period, the agency estimates revenue will be about 2 percent less than projected last year, and spending about 1 percent higher.
CBO said the projected debt increase, approaching 100 percent of the Gross Domestic Product in 2028, “is far greater than the debt in any year since just after World War II.”
The agency also said that if Congress were to cancel the expiration of individual tax rate cuts and raise discretionary spending again after the budget deal expires in 2020, “the result would be even larger increases in debt.” The projections are generally based on the assumption that current laws remain in place.
Nevertheless, the tax and spending laws that are projected to increase the deficit and debt also are responsible for faster economic growth than CBO estimated last year.
The agency said real GDP and real potential GDP, a measure of economic capacity, “are now projected to be greater throughout the coming decade than projected last June, in part because of the significant recent changes in fiscal policy.”
The agency forecasts that economic growth will pick up from 2.6 percent in 2017 to 3.3 percent in 2018, falling to 2.4 percent in 2019 and 1.8 percent in 2020, measured from fourth quarter to fourth quarter.
The CBO also said the projections, especially the economic forecast, are even more uncertain than usual “because they incorporate estimates of the economic effects of the recent changes in fiscal policy — and those estimates are themselves uncertain.”