US budget deficits will approach or exceed $ 1 trillion annually over the next decade, says the Congressional Budget Office

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Annual U.S. federal budget deficits, the difference between what the government receives and what it spends each year, are expected to remain close to $ 1 trillion or more over the next 10 years, the Budget Office said Thursday. congressional. The nonpartisan budget arm of Congress reported that the fiscal deficit was expected to fall this year, from $ 3.13 trillion in 2020 to $ 2.26 trillion in 2021, and continue a downward path through 2024 to $ 905 billion. But after that, it would start to rise again and hit nearly $ 2 trillion in 2031, CBO said.

The forecasts are likely to be overly optimistic, as they are based on current law and do not take into account plans by Democrats in Congress to pass a $ 1.9 trillion economic aid package for the coronavirus in the next few weeks. The CBO forecast also assumes that the temporary tax cuts implemented in 2017 by Republicans will expire on schedule, increasing revenue and reducing the deficit. The deficits of 2020 and 2021 will be the largest and the second largest deficits in dollar terms, and the two largest deficits relative to the size of the economy, since 1945. “Those deficits, which were already projected large by historical standards before the onset of the 2020-2021 coronavirus pandemic, have expanded significantly as a result of the economic disruption caused by the pandemic and the enactment of laws in response, ”the CBO said. Federal debt, which some Republicans have begun to say has reached worrying levels and will likely be the center of attention later this year when the current suspension of the government debt ceiling expires, would reach 102% of gross domestic product in 2021. , a little more than in 2020. level. In 2031, the final year of the CBO forecast, the level of debt to GDP would rise to 107%, eclipsing the record seen in World War II. “The national debt will hit a new record and grow indefinitely from there. If that doesn’t worry you, you’re not paying attention, ”Maya MacGuineas, chair of the Deficit Committee for a Responsible Federal Budget, said in a statement. Democrats and many economists say deficit concerns should take a backseat to the need to prevent the economy from slipping back into recession as the pandemic weighs on economic activity. They also point to low interest rates that have kept the burden of borrowing relatively low even as the amount of debt has expanded. “The advance that Congress approved in December stopped some of the bleeding, but without solid action, the recovery will be long and painful,” Senate Majority Leader Chuck Schumer said at a news conference Thursday. The Democratic budget resolution adopted by the House and Senate projects a deficit of $ 3.8 trillion by 2021, though it is unlikely to be met as it is less than $ 1 trillion during the first third of the budget year. Democrats also said the budget was passed just to give them the ability to push through their recovery legislation based on party line, if necessary, and a more substantive budget that reflects their priorities will be considered this summer. “Do lower interest rates give us more fiscal space? Certainly. But we have used that space to enact COVID relief. Even with extremely low interest rates, the interest costs of CBO projects are on track to reach their largest share of the economy since the 1990s, ”said MacGuineas. The CBO in the report reiterated its optimistic forecast for the economy, even without further rounds of economic aid. It projected GDP to grow at a 4.6% pace in 2021, which would be the largest year-on-year gain since 1999. The size of the economy would reach its pre-pandemic level by mid-2021, but the labor market would take longer to recover. “In the CBO projections, the unemployment rate gradually declines until 2026, and the number of people employed returns to its pre-pandemic level in 2024,” the report said.