World

US Republicans preside over mammoth budget blowout

US Republicans preside over mammoth budget blowout

The non-partisan Congressional Budget Office (CBO) expects the Republican tax reform bill and 2018 congressional budget agreement to grow the economy over the coming years, but adds almost $2 trillion to federal deficit over the next decade.

According to top U.S. budget watchdog the Congressional Budget Office, America's budget deficit would be $US804 billion for the current financial year, which ends on September 30. The increase stems primarily from tax and spending legislation enacted since then-especially Public Law 115-97 (originally called the Tax Cuts and Jobs Act and called the 2017 tax act in this report), the Bipartisan Budget Act of 2018 (P.L. 115-123), and the Consolidated Appropriations Act, 2018 (P.L. 115-141). GDP growth is forecast to slow down after 2020, in part because all of this economic stimulus is likely to drive up interest rates. Real GDP growth would then decrease to around 1.7 to 1.8 percent from 2020 to 2028. That would be the highest levels since 1946 and more than twice the average over the past five decades.

The CBO report says that that 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. 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. At the same time, the long-term budget forecast counters the GOP's arguments that tax cuts will pay for themselves through economic growth. "Most of this growth is driven by consumer spending and business investment, but federal spending also contributes a significant amount this year", Hall said.

"The CBO's latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself", Schumer said in a statement Monday.

The national debt, which has topped $21 trillion, is expected to soar to more than $33 trillion in 2028.

His formal budget proposals have been far harsher, but the Republican-led Congress has pushed against his proposed cutbacks due to their political unpopularity and the need to attract Democratic votes in order to pass any plan.

The analysis "confirms that major damage was done" by the new tax law and the spending bill, said Michael Peterson, head of the nonpartisan Peter G. Peterson Foundation.

There is a nightmare scenario in which borrowers lose faith in the country's ability to pay back its debts, demanding higher interest rates on their loans and setting off a spiral of larger deficits and still-higher rates. That plan is widely viewed as a symbolic measure with little chance of passing Congress or winning the necessary ratification from the states.


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