This year’s deficit is expected to breach $1 trillion for the first time since the four-year period following the Great Recession. The highest deficit on record was in 2009, when it reached $1.4 trillion.
The increased deficits would amount to 4.6 percent of gross domestic product (GDP), compared with the 3 percent average over the past 50 years, said Phillip L. Swagel, head of the nonpartisan CBO.
After a decade, the debt-to-GDP ratio would hit $36 trillion, or 98 percent of GDP, the highest ratio since World War II. The current ratio is 81 percent.
“That debt path would dampen economic output over time,” Swagel warned, saying interest rates would go up and U.S. household income would be held back.
“Such a significant increase in federal borrowing would also elevate the risk of a fiscal crisis,” he added.
Projections for deficits have risen in recent years, particularly after the 2017 GOP tax cuts and after both parties agreed last year to significant increases to defense and domestic spending. A last-minute deal to scrap three significant ObamaCare taxes in December ramped up deficit projections even more.
The growing deficits will also make it harder to rein in spending down the line, as the government spends more each year on paying interest on the debt.
Interest costs alone will rise from 1.7 percent of GDP this year to 2.6 percent in 2030, costing the government an average of $592 billion a year in the coming decade.
The other major driver of deficits is mandatory spending on retirement and health programs, which are expected to spike as the population ages and health care costs increase.
Rep. Steve Womack (R-Ark.), the ranking member on the House Budget Committee, said the CBO projections confirmed that deficits were on an “unsustainable trajectory.”
“In order to practice fiscal discipline, the Budget Committee must first put forward a budget, which did not happen last year and likely will not this year,” he noted.
The Hill reported this month that House Democrats expected to skip doing a budget resolution for 2020, given that congressional leaders had already agreed to top line spending numbers for 2021.
But Rep. John Yarmuth (D-Ky.), the committee’s chairman, pointed to the GOP tax cuts, which CBO estimated would cost the government $1.9 trillion over the course of a decade, as a key culprit for the rising deficits.
“The budget baseline released by CBO today confirms that President Trump’s economic policies did not create a sustained boost for the economy like he has claimed,” Yarmuth said.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, a budget watchdog group, said one of the biggest concerns with rising deficits was how the money was being spent.
“It would be one thing if we were running up deficits to fund investments in the future, but that’s not what’s happening,” he said, adding that investments only accounted for “a tiny fraction” of the spending in the budget.
“If a policy is important enough to enact, it should be important enough to pay for,” Peterson added.
Treasury Secretary Steven Mnuchin has repeatedly argued that the tax cuts would pay for themselves and have no discernible effects on the deficit.
Swagel pushed back against that notion on Tuesday.
“The projection was that the deficit including the macroeconomic feedback would increase the deficit by about 1 percent of GDP, and that’s about what we see today,” he said.
The White House has predicted that economic growth would rise to 3 percent a year as a result of its policies, but those levels of growth never materialized.
CBO’s increased its projections for growth for the year, but the outlook remained well below the White House levels.
According to the projection, growth this year would slow less than expected, to 2.2 percent from an estimated 2.3 percent in 2019. That figure is above the previously projected 2.1 percent.
Over the decade, however, GDP is expected to grow at a more anemic pace of 1.7 percent, below the historical average.
Still, the resilience of the economy in recent years puts President Trump in a strong position as he seeks a second term, as voters traditionally care more about the availability of jobs and good wages than predictions about deficit figures down the line.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, had harsh words for Congress after the CBO report came out.
“When are lawmakers going to wake up?” she asked.
Over half the recent increase in the deficit, she noted, came from new legislation, pushing up debt projections.
“Lawmakers should all take the Hippocratic oath to stop making things worse – no more charging new things to the nation’s credit card,” she added.