Solid growth of United States economy this year, but with increasing federal budgets

Solid growth of United States economy this year, but with increasing federal budgets

The Concord Coalition said today that new Congressional Budget Office (CBO) projections showing federal deficits and debt steadily rising over the next 10 years and leaping to historic highs over the longer term are an alarming signal that action is required to put the budget on a more sustainable path. "It's fine to engage in deficit spending, but Trump has used them to give tax cuts to billionaires, which does nothing to increase the well-being of the vast majority of Americans or improve the nation's productivity". Cumulative deficits over the coming decade are expected to total $13 trillion - a total that would have gone higher save for CBO's belief that yields on Treasury notes will remain unusually low as the government refinances its $23 trillion debt. That 10-year increase is the net result of changes that go in opposite directions.

Technical updates, including a $315 billion increase in projected Medicare spending, drove the deficit projection some more.

Under the new estimates, the deficit is projected to fall slightly to $1 trillion in fiscal 2021 and then commence a steady rise to $1.7 trillion in 2030.

"Other than a six-year period during and immediately after World War II, the deficit over the past century has not exceeded 4.0 percent for more than five consecutive years", the report said. If Congress extends the individual tax cuts, as it may be likely to do, the deficits and debt would be larger than CBO projects.

However, Swagel indicated a debt crisis isn't forthcoming, at least in the near term.

CBO said the problem is on both sides of the ledger. "The challenge is over time". Its up to date projections now present whole U.S. debt can have risen to 98 per cent of GDP by 2030, and 174 per cent by 2050. But interest rates are historically low, and economists say policy is driving the gap wider. He added that traders and other market participants should be confident that the US will eventually address the rising debt, without knowing whether it would be through spending cuts, tax increases or a combination. According to CBO, the average deficit over the last 50 years has been 1.5%. "Since CBO's last budget forecast in August 2019, projected interest costs have declined by $441 billion over a decade, reflecting rates that are 0.3 percentage point below the previous estimate", The Wall Street Journal's Richard Rubin writes. Not only is population growth slowing, sapping the economy of productive workers, but deficits also will tamp down on the economy's potential by crowding out private capital and market decisions.

The federal debt grows to 98 percent of GDP by 2030, and the economy expands at an average annual rate of 1.7 percent from 2021 to 2030.

The annual congressional report projects that the U.S. budget deficit is likely to blast through the symbolic threshold of $1 trillion this year despite a healthy economy with record low unemployment.

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