The combined effect of President Donald Trump's tax cuts and last month's budget-busting spending bill is sending the government's budget deficit toward the $1 trillion mark next year, according to a new analysis by the Congressional Budget Office.
The twin tax and spending bills will push the budget deficit to $804 billion this year and just under $1 trillion for the upcoming budget year, the CBO report stated.
Economic growth from the tax cuts will add 0.7 percent on average to the nation's economic output over the coming decade, the report stated. Those effects will only partially offset the deficit cost of the tax cuts. The administration had promised the cuts would pay for themselves.
Instead, the report estimated that the GOP tax bill, which is Republican-controlled Washington's signature accomplishment under Trump, will add $1.8 trillion to the deficit over the coming decade, even after its positive effects on the economy are factored in.
The economic growth promises to drop the nationwide unemployment rate below 4 percent starting this year, the CBO predicted.
The report stated that federal deficits would permanently breach the $1 trillion mark in 2020 unless Congress stems the burst of red ink. The government would borrow about 19 cents of every dollar it spends this year. Deficits would grow to $1.5 trillion by 2028 — and could exceed $2 trillion if the tax cuts are fully extended and if Washington doesn't cut spending.
Republicans controlling Washington have largely lost interest in taking on the deficit, an issue that has fallen in prominence in recent years. Trump has ruled out cuts to Social Security and Medicare, and Capitol Hill Republicans have failed to take steps against the deficit since Trump took office.
Many economists believe that if deficits continue to rise and the national debt grows, government borrowing will "crowd out" private lending and force up interest rates. And if interest rates go up, the government will have to pay much more to finance the more than $14 trillion in Treasury debt held by investors.
The nation's $21 trillion debt would spike to more than $33 trillion after 10 years, with debt held by investors spiking to levels that would come close to equaling the size of the economy, reaching levels that many economists fear could spark a debt crisis.