Trump signs deal to end brief agency shutdown, boost US spending

WASHINGTON: A brief US government shutdown ended on Friday after Congress passed and President Donald Trump signed into law a temporary spending deal expected to push budget deficits past US$1 trillion annually with new military and domestic outlays.

But Trump is expected to unveil on Monday a fiscal 2019 budget plan that will be based on rosy assumptions, including economic growth of 3.2 per cent next year, a White House official said.

That level is well above the 2.5 per cent growth achieved in 2017 and the 2.5 to 2.7 per cent range of economists’ forecasts for this year. The White House’s plan also anticipates that the strong growth will go on for years, the official said, with 3 per cent growth in 2021, only tapering to 2.8 per cent in 2026.

The growth assumptions in Trump’ s budget were first reported by the Wall Street Journal.

The Trump budget also assumes very low interest rates, with the benchmark 10-year Treasury yield averaging 2.6 per cent this year. But the 10-year yield closed at 2.86 per cent on Friday, and the Federal Reserve is expected to hike rates three times this year.

Such optimistic assumptions would make deficits look smaller in Trump’s budget plan after Republicans in December approved massive tax cuts expected to add about US$1.5 trillion in new debt over a decade. Republicans contend that the tax cuts will fuel a spike in economic growth.

The White House also will amend the budget plan to take into account the higher spending levels in the budget deal passed just before dawn on Friday, a senior official in the Office of Management and Budget said.

Friday’s spending measure, which ended an hours-long partial government shutdown, was approved by a wide margin in the Senate and survived a rebellion from conservative Republicans in the House of Representatives who objected to non-military spending increases.