AP Photo/Jacquelyn Martin
- A recently passed bipartisan budget agreement is expected to push the national deficit above $1 trillion next year.
- The Congressional Budget Office significantly raised its federal deficit projections for the next decade Wednesday.
- The CBO estimated the budget agreement President Donald Trump signed into law this month would add roughly $1.7 trillion to the deficit over the next decade.
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The bipartisan budget agreement passed President Donald Trump signed into law this month is expected to push the national deficit above $1 trillion next year as federal spending outpaces receipts at a faster pace than under previous legislation.
In an updated report Wednesday, the Congressional Budget Office significantly raised its federal deficit projections for the next decade. The $809 billion increase would take the deficit to roughly $12.2 trillion by 2029. That adjustment would be even larger if the Federal Reserve had not signaled lower interest rates were ahead, which reduces the cost of servicing debt.
The two-year budget agreement passed on August 2 increased domestic and defense spending and suspended the debt ceiling, which the CBO estimated would add roughly $1.7 trillion to the deficit over the next decade.
Trump said the deal was a "real compromise in order to give another big victory to our Great Military and Vets." But he faced criticism from budget hawks for backing of the agreement, which was crafted in part by Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi.
"The recent budget deal was a budget buster, and now we have further proof. Both parties took an already unsustainable situation and made it much worse," the Committee for a Responsible Federal Budget said in a statement Wednesday. "If Congress keeps extending tax cuts, debt will likely exceed the size of the economy within the decade."
Lawmakers typically have more tools to reduce the national debt when the economy is solid, but legislation in recent years has taken it the opposite direction.
With growth set to slow in the coming months, deficit projections appear poised to increase further. The White House announced this week further tax cuts were under consideration to juice the economy, but it has not yet offered details on a proposal.
In June, a Republican congressman who helped craft the $1.5 trillion tax-cut package passed in 2017 walked back the claim that they would lift the economy enough that revenue from growth would make up for the loss in tax receipts.
"We will know in year 8, 9, or 10 what revenues it brought in to the government over time," Rep. Kevin Brady of Texas said at the Peterson Foundation’s fiscal summit in Washington. "So it’s way too early to tell."
Trade disputes sparked by the Trump administration could also dim the outlook, the CBO said Wednesday. By 2020, they forecast that tariffs would reduce the level of real output by roughly 0.3%/
"The effects of the tariffs on trade flows, prices, and output are projected to rise over the next year," the agency said.
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Source: Business Insider – gheeb@businessinsider.com (Gina Heeb)