CBO Predicts Persistently Large US Federal Deficit in Next Decade

WASHINGTON (Sputnik) - Changes in US tax laws, the $1.3 trillion federal spending plan for 2018 and an anticipated slowdown in US economic growth are expected to push the budget deficit to historically high levels totaling nearly 100 percent of gross domestic product by 2028, the Congressional Budget Office (CBO) predicted in a report on Monday.

"As deficits accumulate in CBO’s projections, debt held by the public rises from 78 percent of GDP (or $16 trillion) at the end of 2018 to 96 percent of GDP (or $29 trillion) by 2028," the report said. "That percentage would be the largest since 1946 and well more than twice the average over the past five decades."

The report cites 2017 tax legislation and the $1.3 trillion bipartisan budget for 2018, which increased spending caps, as key reasons for a growing budget shortfall, as well as an assumption that annual economic growth will remain below 2 percent after a temporary surge this year and next.

The CBO assumptions of a sluggish economy for much of the next decade clash with claims by President Donald Trump that his America first policies will result in GDP growth of at least 3 percent and possibly 4 percent in some years.

In contrast, the CBO report predicts annual growth of 1.5-to-1.7 percent from 2020 to 2028.

According to the CBO, a number of factors dampen economic growth, including higher interest rates and prices, slower growth in federal outlays and the 2026 expiration of personal income tax cuts that were enacted last year.