U.S. annual budget deficit to surpass 1 trln United States dollars by 2020

Trump tax cuts forecast to send US deficit to $1 trillion in 2020

CBO Analysis: Tax cuts, spending to raise deficit to $1T by 2020

More noteworthy than the sheer magnitude of the projected deficits is the extent to which Congress and President Trump have spent the past year making them worse, approving large deficit-financed tax cuts in December and deficit-financed spending increases last month.

As a share of gross domestic product, the deficit is expected to climb from 3.5 percent last year to 4 percent this year, 4.6 percent in 2019 and 5.4 percent by 2022.

The new CBO analysis projects the USA will see the federal deficit rise above $1 trillion a year within two years - earlier than had been previously expected. In a decade, the red ink is expected to reach $1.5 trillion.

"During a time of low unemployment and economic expansion, we should be taking reasonable steps to put our debt on a sustainable path - but instead we are piling up trillions of bills", he said. After that, however, the CBO expects economic growth to slow, largely due to slower growth in the labor force.

If Congress continues to let deficits balloon, it faces several long-term risks.

The Republicans in their budget resolution allowed for the tax law to add $1.5 trillion to deficits, but insisted throughout the process that the impact on the debt would be minimal.

Senate Democratic Leader Chuck Schumer said the lower revenues and higher deficits resulting from the tax overhaul will prompt Republicans to call for cuts to social safety net programs such as the Social Security retirement program and the Medicare health insurance program for the elderly.

The CBO's annual report on the economy and US budget typically releases in January but was delayed so it can assess effects of the spending bill and tax overhaul.

The agency notes that its projections, especially those for economic growth, however, are "more uncertain than usual this year because they incorporate estimates of the economic effects of the recent changes in fiscal policy", which are themselves uncertain. The deficit will average 4.9 percent of GDP over the 2019-2028 period, exceeding average economic growth over the same period by almost a percentage point.

"The tax cuts passed past year actually added an amount to America's long-run fiscal challenge that is roughly the same size as the pre-existing shortfalls in Social Security and Medicare".

He also warned against the Republicans' push for a balanced budget amendment to the Constitution, saying it would tie policymakers' hands during economic downturns, preventing them from injecting any spending stimulus.

Because the CBO can only make projections based on current law, its outlook will include the phase-out of some tax cuts in the middle of the next decade. Deficits can snowball, as larger deficits require larger interest payments, pushing the government to borrow more and more money to close the gap.

Federal debt held by the public is already quite high by historical standards.

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