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Federal deficit to hit $1 trillion earlier than expected

W.H. tries to sell $4.4T budget wish list
White House tries to sell $4.4 trillion budget proposal that would add to deficit 02:27

America's federal deficit will top $1 trillion by 2020, two years earlier than prior estimates, as tax cuts and federal spending hikes take effect, the Congressional Budget Office said on Monday. 

That budget gap -- the amount by which the U.S. government spending exceeds revenue -- is then forecast to remain above $1 trillion through 2027. 

The nonpartisan agency also forecast in its annual outlook that growth will reach 3.3 percent this year, which would be a significant jump over the 2.6 percent gain in 2017. 

That would be a boost for President Trump, who has committed to generating growth of at least 3 percent.  But the CBO expects growth to slow to 2.4 percent in 2019.

Mr. Trump and other administration officials have repeatedly predicted that tax cuts, moves to repeal regulations on companies and other policies would push up the growth rate. 

The CBO typically releases its yearly forecast in January, but Monday's projections were delayed to reflect major tax legislation enacted in December and a subsequent two-year budget agreement.

Some economists warn that a rising federal deficit and overall national debt will cause interest rates to rise.

"Our goal should be to put the debt on a declining path as a share of the economy," state five former chairs of the White House Council of Economic Advisers in an opinion piece Sunday in the Washington Post. "That will require running smaller deficits in strong economic periods — such as the present — to offset the larger deficits that are needed in recessions to restore demand and avoid deeper crises," wrote Martin Neil Baily, Jason Furman, Alan Krueger, Laura D'Andrea Tyson and Janet Yellen.

"Last year's Tax Cuts and Jobs Act turned that economic logic on its head. The economy was already at or close to full employment and did not need a boost. This year's bipartisan spending agreement contributed further to the ill-timed stimulus," the five economists argued.

Who benefits from GOP tax plan? "The wealthy," Bloomberg editor says 03:23

By contrast, economists from the Hoover Institution, a right-leaning think tank at Stanford University, view last year's tax overhaul as a "good first step." 

"To address the debt problem, Congress must reform and restrain the growth of entitlement programs and adopt further pro-growth tax and regulatory policies," wrote Michael Boskin, John Cochrane, John Cogan, George Shultz and John Taylor in the Washington Post.

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