WASHINGTON, D.C., Jan. 24 (UPI) — The federal budget deficit is projected to increase to $8.6 trillion by 2027, according to the nonpartisan Congressional Budget Office.
CBO’s report was revealed Tuesday as President Donald Trump finalizes plans to slash taxes and increase spending on defense and infrastructure. He has pledged to spend $1 billion to improve the nation’s roads and bridges, while Senate Democrats are proposing a $1 trillion infrastructure plan.
A $8.6 trillion deficit will represent 5 percent of the United States’ gross domestic product in 10 years, according to estimates. CBO said budget deficits will remain below 3 percent of GDP through 2019, but will increase after 2019 because of continued growth in spending, including on Social Security and Medicare. Economists view anything above 3 percent as the danger point for the economy, according to The New York Times.
CBO said the share of debt held by the public is expected to rise to 89 percent in 2027. That debt held would be the largest since 1947 and more than twice the average over the past five decades in relation to GDP, according to the report.
CBO’s baseline estimate for this year is a deficit is $559 billion, or 2.9 percent of GDP and less than the $587 billion deficit posted in 2016. Outlays in 2016 were boosted by $41 billion because certain payments made on Oct. 1, 2016 — the first day of fiscal year 2017 — were instead made in fiscal year 2016 because Oct. 1 fell on a weekend.
“If there are no further legislative changes, both revenues and outlays (adjusted to eliminate the timing shifts) are projected to rise by about 4 percent this year,” the report said. “Higher receipts from individual income taxes would be responsible for much of the projected revenue increase, and net interest payments would be the fastest-growing component of the increase in spending.”
Revenues are projected to rise from 17.8 percent of GDP in 2017 to 18.4 percent by 2027. They have averaged 17.4 percent of GDP over the past 50 years.
CBO projects even bigger economic problems beyond 2027.
“If current laws remained in place, the pressures that contributed to rising deficits during the baseline period would accelerate and push debt up even more sharply,” the report said. “Three decades from now, for instance, debt held by the public is projected to be nearly twice as high, relative to GDP, as it is this year—and a higher percentage than any previously recorded.”
CBO expects modest inflation — 1.9 percent in 2017 and to 2.0 percent in 2018.
Over the next 10 years, real economic output is projected to grow at an annual rate of 1.9 percent. Trump promised an annual growth rate of 4 percent during his presidential campaign.