GOP tax cuts to balloon US deficit, debt

WASHINGTON: The US deficit will grow more than 20 per cent this year and reach US$1 billion by 2020, largely due to December’s sweeping tax cuts, the Congressional Budget Office said.

Stimulus from the tax cuts and subsequent spending increases will also boost short-term growth in the United States but not by as much as the White House expects, according to the CBO.

In December, President Donald Trump and Republican lawmakers slashed corporate and personal income tax rates to boost growth, a manoeuvre opposition Democrats denounced as a giveaway to the rich.

The budget deficit will grow to US$804 billion in 2018, or 4.2 per cent of GDP, up from US$665 billion in 2017. Prior to the stimulus package, the CBO had forecast the deficit would instead shrink to US$563 billion.

By 2020, the US budget deficit will rise to just over a trillion dollars and will exceed five per cent of GDP by 2022.

At the same time, GDP growth will rise to 3.3 per cent this year before cooling to 2.4 per cent the following year, in line with recent trends.

The Federal Reserve forecasts growth of 2.7 per cent in 2018 and 2.4 per cent in 2019.

The Trump administration is banking on higher growth to boost tax revenues and thus pay for the tax cuts, but economists say this is unrealistic. — AFP

An Airbus A318-111 with the Air France livery parked on the tarmac of Paris’ Roissy-Charles de Gaulle airport in Roissy during an Air France pilots strike. Air France staff stage on April 10 and 11, 2018 a two-day strike, the latest in a series pushing...