Official Estimates for Budget Projections by the Congressional Budget Office provided a quite bleak outlook on US Deficit and Debt over the next decade while confirming a positive impact on growth over the near term.
On the economic front: growth will be pushed higher on a temporary basis, some positive effects on potential growth in the next decade, yet remaining in the 2% range
- Spurred by fiscal stimulus, GDP is expected to grow at 3.3 % rate this year and 2.4 % in 2019, while the unemployment rate will be pushed significantly below the natural rate.
- By 2020, excess demand will support consumer price inflation (Core PCE) running slightly above the Federal Reserve’s target of 2%.
- Real potential GDP growth is expected to be faster over the next five years than it has been recently (average annual growth 2.0% in 2018-2022 vs 1.4% in 2008-2017), in part because of the greater incentives to work and invest from the 2017 tax act.
On the Deficit and Debt profile: bleak outlook with deficit projected to reach 5% of GDP in 2022. Debt held by the public to 96% of GDP in 2018- 100% in 2028 (and it could be higher)
- Budget deficits will continue increasing after 2018, rising from 4.2% of GDP this year to 5.1% in 2022
- Deficits remain at 5.1% between 2022 and 2025 and then declines, as some tax provisions are scheduled to expire under current law; projected deficits average 4.9% of GDP over the 2021–2028 period
- CBO projects Debt held by the public to rise from 78% of GDP by end of 2018 to 96% of GDP by 2028 (and could reach 105 % of GDP if some provisions due to expire in 2026 were extended)