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

The US deficit will balloon to more than $1 trillion (?710 billion) in 2020, fuelled by tax cuts and increased spending, according to the Congressional Budget Office (CBO).
Republicans claimed their economic policies would pay for themselves by stimulating growth.
Instead the non-partisan CBO said the cumulative debt would be the same size as the overall Gross Domestic Product in 10 years' time. "That amount is far greater than the debt in any year since just after World War Two," it concluded.
The analysis was greeted with anger from Democrats, who accused President Donald Trump of sabotaging the budget to help the wealthy, and unease from those conservatives who have chafed at his recent, populist spending decisions.
Overall, it suggests that $1.5 billion in tax cuts and a recent $1.3 trillion federal spending package will drive economic growth and spending during the next two years.
Trump tax cuts forecast to send US deficit to $1 trillion in 2020

A copy of the $1.3 trillion spending bill is stacked on a table in the Diplomatic Room of the White House in March

Credit:
AP
The good news is that the GDP will grow at 3.3 percent through 2018 and 2.4 percent next year, before rising inflation and interest rates cool growth.
But the impact of the tax cuts mean that the deficit – the difference between the federal government’s annual incomings and outgoings – will increase from $665 billion in the 2017 fiscal year to $804bn in 2018 before reaching $1 trillion by 2020.
Recent reports have suggested that Mr Trump has privately voiced concern about the growing deficit although analysts suggested the early growth could bolster Republicans’ message of jobs and prosperity during November’s mid-term elections.
Tax changes by income
Democrats said it exposed the hypocrisy of a party that had lambasted Barack Obama for his deficit record.
Robert Reich, who served as labour secretary under Bill Clinton, said: “Trump and Republicans in Congress only complain about the federal debt to justify cutting Social Security, Medicare, and Medicaid. They have absolutely no problem blowing up the deficit to cut taxes for the wealthy and corporations.”
The ultimate impact is that the cumulative deficit - or debt - will grow to $11.7 over the next decade compared with previous forecast of $10.1 trillion.
And that is before any impact of a trade war with China is added into the calculation.
Chuck Schumer, who leads Democrats in the Senate, said Republicans would use the growing deficit to drive through cuts to retirement and health care programmes.
"The CBO's latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself," he said.
Michael Peterson, of the Peterson Foundation, a budget watchdog, said: “Today’s CBO report confirms that major damage was done to our fiscal outlook in just the past few months.
"This is the first forecast to take into account the recent tax and spending legislation, and it’s clear that lawmakers have added significantly more debt on top of an already unsustainable trajectory.
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