U.S. on track to reach deficit over $1 trillion in 2020

WASHINGTON — The U.S. government’s budget deficit is projected to reach $1.02 trillion in 2020, according to a report released Tuesday by the nonpartisan Congressional Budget Office, as the federal government continues to spend much more than it collects in tax revenue.

A combination of the 2017 tax cuts and a surge in new spending has pushed the deficit wider. This year would mark the first time since 2012 the deficit breached $1 trillion, a threshold that has alarmed some budget experts because deficits typically contract — not expand — during periods of sustained economic growth.

Overall, the CBO projected that the federal government will spend $4.6 trillion in the fiscal year that ends Sept. 30 and bring in $3.6 trillion in tax revenue.

And some of the costliest government programs are projected to experience expansions in the next decade. Spending for Medicare, which provides health care for older Americans, will rise from $835 billion in 2020 to $1.7 trillion by 2030, while annual federal spending on Social Security will grow from roughly $1.1 trillion to $1.9 trillion over that span.

The CBO’s estimates assume that Congress will allow tax cuts for individuals passed in Republicans’ 2017 tax law to expire in 2025. GOP lawmakers in Congress will at least try to extend most if not all of these provisions.

This year’s deficit would be an increase from 2019, when the government deficit grew to $984 billion. The deficit in 2016, President Barack Obama’s last full year in office, was $585 billion. CBO now projects that the deficit will be at least $1 trillion each year in perpetuity unless policymakers make changes.

The CBO also projected the economy would grow by 2.2 percent in 2020, which represents a healthy clip but falls short of the 3 percent target set by the Trump administration. The projections were contained in the CBO’s annual budget and economic outlook.

With rising annual deficits, the total debt held by the government is also projected to grow dramatically, from about $18 trillion in 2020 to $31 trillion in 2030, according to the CBO’s projections. The U.S. government must pay interest on this debt to keep borrowing money.

“The U.S. economy is doing well, with low unemployment and rising wages that have drawn people off the sidelines and back into the labor force,” Phillip Swagel, the CBO’s director, said in a statement. “But our projections also suggest that over the long-term, changes in fiscal policy must be made to address the budget situation.”

The deficit outlook appears slightly worse than it did just a year ago. In 2019, bipartisan majorities in Congress approved new spending bills that added more than $500 billion to the deficit over the next decade. The most expensive new policies were the permanent repeal of taxes created under Obama’s Affordable Care Act.

The CBO projection also appears to cast doubt on recent statements by President Donald Trump and other administration officials that the 2017 Republican tax cut is creating enough revenue through new economic growth that it will offset all near-term losses. White House officials have defended the $1.5 trillion tax legislation, which slashed tax rates for businesses and many households.