CBO Projects Strong Economic Growth in 2018 and 2019; Trillion Dollar Deficits By 2020 | Citizens Against Government Waste

CBO Projects Strong Economic Growth in 2018 and 2019; Trillion Dollar Deficits By 2020

The WasteWatcher

Today, the Congressional Budget Office (CBO) released its annual Budget and Economic Outlook for 2018 to 2028.  In order to include several important pieces of budget and spending legislation that passed recently, particularly the Tax Cuts and Jobs Act, the Bipartisan Budget Act, and the Omnibus Appropriations package, CBO pushed its usual January release date to April.

According to CBO’s projections, economic growth is expected to surge over the next two years, with gross domestic product (GDP) expanding by 3.3 percent in 2018 and 2.4 percent in 2019.  Real GDP growth would then decrease to around 1.7 to 1.8 percent from 2020 to 2028.  CBO attributes these economic trends to the three major laws mentioned above, along with rising federal budget deficits over the ten-year window. 

While the short-term rise in GDP is certainly some good news for the economy, the projected deficits over that time span are concerning.  CBO’s report estimates deficit levels of $804 billion and $981 billion over the next two years respectively, and $1 trillion dollar deficits starting in 2020.  The 2018 deficit estimate of $804 billion is $242 billion larger than the previously projected deficit (June 2017), primarily because of a reduction in estimated revenues as a result of tax reform.  From 2018, budget deficits will have risen by 5.1 percent in 2022, a trend only exceeded by five previous years (four during the 2007 to 2009 recession). 

Altogether, deficits over the decade will be $1.6 trillion higher than previously projected by CBO and by 2028, debt held by the public would total nearly 100 percent of GDP; the most since post-World War II.

CBO stated that, “Such high and rising debt would have serious negative consequences for the budget and the nation.”  While the benefits of tax reform should not be overlooked, including a projected high short-term GDP growth and low unemployment, the deficit and debt forecasts are daunting and need to be addressed. 

The positives of tax reform will be absolutely undone if Congress cannot get its fiscal house in order.  Deficit reduction measures and other fiscal restraints to curb excessive spending must receive serious consideration, including the Balanced Budget Amendment, which the House plans to bring to the floor on April 12, 2018.

Economists from both sides of the aisle agree that a debt crisis is looming.  Where they disagree is how Congress got us here and how they can get us out.  Regardless of where you land on the political spectrum, taxpayers should agree that CBO’s numbers are alarming and politicians’ insatiable appetite for massive deficit spending must be restrained.