CBO estimates that the GOP tax law alone will add $1.852 trillion to the deficit over a decade, after accounting for the expected short-term boost to the economy. Years of red ink ahead for federal budget thanks to GOP tax law

A decade of red ink is on the way for the federal budget, in large part because of the GOP tax law enacted in the first year of the Trump presidency, a congressional scorekeeper forecast Monday

The Congressional Budget Office estimates that the U.S. federal budget deficit will blow past $1 trillion within two years, hitting that mark for the first since time since 2012.


Legislation passed by the GOP-led Congress — including last month’s mammoth spending bill — will push up the cumulative deficit over a decade by $1.6 trillion compared with the CBO’s last estimate in June 2017.

The nonpartisan CBO estimates that the GOP tax law alone will add $1.852 trillion to the deficit over a decade, after accounting for the expected short-term boost to the economy.

The U.S. is now projected to hit the $1 trillion deficit mark two years ahead of previous estimates.

The CBO had projected in June that the federal deficit wouldn’t cross that threshold until fiscal 2022.

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President Donald Trump’s own budget blueprint — a dream document that comes with deep cuts to domestic spending — doesn’t forecast deficits will hit $1 trillion until fiscal 2021.

The rising tide of red ink in a Republican-controlled Washington is a painful message for Republican leaders in Congress, who made deficit reduction a central part of their crusade against former President Barack Obama’s agenda.

That same party has since passed the huge package of tax cuts, spurring even fellow conservatives to accuse the GOP of abandoning its platform of fiscal prudence.

After 14 months of Trump’s presidency, national debt is also expected to skyrocket: Debt held by the public would exceed $29 trillion within 10 years, up from $16 trillion this year.

That debt held by the public would be the largest percentage since 1946 and more than twice the average of the past 50 years.

The CBO report does project that the tax law will help jolt the economy, with modest bumps in compensation, corporate profits and business income. GDP growth is expected to average 1.9 percent over a decade, less than the Trump administration had projected.

Most of the bump to the GDP would be seen in the near term. Real GDP is expected to grow by 0.3 percent in 2018 and 0.6 percent in 2019, before peaking at 1.0 percent in 2022 — offering a more optimistic outlook than previous comparisons done by outside analysts like Moody’s Analytics.

That growth will prompt the Federal Reserve to push interest rates even higher “than they would have been without the tax act,” according to CBO.

The deficits would be even higher over a decade if Congress moves to expand its tax law, as GOP leaders hope to permanently extend a series of personal tax breaks that are currently set to expire by 2025.

Extending those provisions would raise the deficit by another $650 billion, according to the CBO. And permanently repealing Obamacare taxes like the so-called Cadillac tax would cost another $324 billion.

CBO projects that both the tax law and the spending bill will add fuel to the economy in the short-term, heating up household and business spending.

That fiscal stimulus would help create jobs and drive down the unemployment rate “significantly,” according to the report. CBO says its two-year forecast is even “stronger” than similar projections from the Federal Reserve.

But that economic growth would level off after about two years, in part because of rising interest rates and prices.

“Although the rise in federal spending is likely to stimulate the economy in the near term, it is projected to lower the real GDP in later years because of the largest budget deficits that result,” CBO cautioned in the report.

Some Republicans, including Trump, have still demanded fiscal austerity on the edges of government: Trump himself threatened to veto last month’s $1.3 trillion appropriations bill in part because it contained tens of billions of dollars more than he requested.

But Trump has also opted to ignore potential budget shortfalls as he talked up big gains for the Pentagon and protections for Medicare and Social Security recipients.

The federal government is projected to return to trillion-dollar deficits for the first time since Obama, who oversaw $1 trillion-plus deficits between 2009 and 2012 during the Great Recession and its aftermath.

Over the last fiscal year, the U.S. ran a $666 billion budget deficit, up $79 billion from the year before — figures that White House budget director Mick Mulvaney described as a “smoke alarm for Washington.”

Republicans argue that the rising cost of entitlement programs, like Medicare and Medicaid, are the largest drivers of the federal debt.

Those programs, which total 13.1 percent of GDP this year, are expected to rise by about 1 percent in 2018. Over a decade, that spending would increase by 6 percent, reaching $4.4 trillion within a decade.

But a notable group of economists — including former Federal Reserve chair Janet Yellen — penned an op-ed Monday arguing that an increase in spending to those programs is not primary cause of that deficit increase.