The federal government will rack up $12.2 trillion in deficits through 2029, according to a new projection from the nonpartisan Congressional Budget Office (CBO), an $809 billion increase from its last projection in May.
The CBO, Congress’s official budgeting scorekeeper, said that the deficits would average 4.7 percent of gross domestic product (GDP) through the next decade, a significant increase from the 2.9 percent average over the past 50 years.
Fueling the increase from May’s projection is the bipartisan deal to raise spending caps, which would add $1.7 trillion to the deficit over the course of the next decade. The projection is particularly high because the deal raised stringent budget caps that would have cut spending, meaning that the lion’s share of the projected new deficit is in comparison with scheduled cuts, not new spending.
{mosads}“Deficits are now expected to be larger than previously projected, primarily because recently enacted legislation raised caps on discretionary appropriations for fiscal years 2020 and 2021,” said CBO Director Phillip Swagel.
Another $300 billion results from new spending on disaster relief and border security, similar to the number from all other legislative, economic and technical changes accounted for by CBO.
The deficit projections would have been even higher were it not for a decrease in interest rates, which lowered projected net interest spending by $1.4 trillion over the decade.
For 2019, the CBO projects that the deficit would come in at $960 billion, under the $1 trillion projected by the White House and Treasury Department.
On the economic side of the ledger, the CBO projected that growth would hover at 2.3 percent this year and continue to slow from there, averaging just 1.8 percent over the next decade, largely due to demographic changes in the U.S.
One additional drag on the economy is President Trump’s trade war.
“Higher trade barriers — in particular, increases in tariffs — implemented by the United States and other countries since January 2018 are expected to make U.S. GDP about 0.3 percent smaller than it would have been otherwise by 2020,” Swagel said.
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