The US budget deficit will surpass $1 trillion by 2020, Bloomberg said, citing the report of the Congressional Budget Office. The reason is tax cuts and an increase in government spending.
According to experts, the shortfall will reach $804 billion in fiscal 2018, compared with a deficit of $665 billion in fiscal 2017. In fiscal 2019, the deficit is seen to come in at $981 billion, versus a previous forecast of $689 billion.
Under the CBO's previous estimate in June 2018, the US budget gap was projected to rise above $1 trillion no earlier than in fiscal 2022. However, it had to be subject to major adjustments. The US spending continues to exceed revenue amid the US tax reform signed by the Trump administration. The tax overhaul is expected to contribute to federal revenue’s reduction.
The Congressional Budget Office’s report includes new projections for the effects of the tax-cut legislation. It is seen to increase the deficit by almost $1.9 trillion during the next 11 years, taking into account the increase in debt service costs. The US national debt is on track to approach 100% of gross domestic product by 2028. The CBO predicts that real GDP will expand by 3.3% this year and next year will slow to 2.4%, before slowing further to 1.8% in 2020. In 2017, the US GDP expanded by 2.3%.
The CBO forecasts the federal funds rate will be 2.4% in the fourth quarter this year, 3.4% by the end of 2019 and then will be raised to record 4% in 2021. It also expects the jobless rate to fall to 3.3% next year, compared with 3.8% this year.
