(CN) — The Congressional Budget Office said Monday the combined effects of President Donald Trump’s tax cuts and last month’s budget-busting spending bill will send the government’s budget deficit spiralling toward the $1 trillion mark.
The nonpartisan legislative office said the tax cuts combined with the just passed spending bill will push the budget deficit to $804 billion this year and just under $1 trillion in 2019 before peaking at 5.4 percent of gross domestic product in 2022.
CBO projected that real GDP will rise to 3.3 percent in 2018, before dropping below 2017 levels to 2.4 percent next year. The average growth over the entire decade remains moderate, at 1.9 percent.
The CBO also estimated that the stimulus effect of the tax cuts will add 0.7 percent on average to the nation’s economic output over the coming decade.
Those effects will only partially offset the deficit cost of the tax cuts. The administration had promised the cuts would pay for themselves.
The CBO’s Budget and Economic Outlook report said the nation’s debt burden, the total amount the government owes relative to the size of the economy, will reach 96 percent of GDP by the end of the decade – the highest level since the end of World War II.
The report suggests that the higher deficits could lead to dramatically higher debt interest payments, a drop in capital stock and productivity, and decreased fiscal flexibility.
Worse, it could ultimately lead to an economic downturn and make a fiscal crisis more likely.
The deficit would permanently breach the $1 trillion mark in 2020 unless Congress reins it back, the CBO said.
The Associated Press contributed to this report.