U.S. economic growth is expected to “gradually” slow over the next four years under the weight of President Donald Trump’s trade policies, less consumer spending and an ebb in government buying, Congress’ nonpartisan budget scorekeeper predicted Wednesday.
In its latest economic outlook, the Congressional Budget Office predicted that the economy will expand 2.3 percent this year and then grow at an average annual rate of 1.8 percent over the next decade.
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The federal deficit will total $960 billion this year, the budget office predicts, increasing its estimate by $63 billion compared to its May assessment. The primary cause: the $2.7 trillion two-year budget deal congressional leaders struck with the Trump administration this summer.
The $19.1 billion disaster aid package that Congress cleared in June, as well as the $4.6 billion border aid measure passed that month, also contribute to that higher deficit estimate.
CBO also took into account the fact that increased federal spending from legislation like that is expected to boost economic growth by acting as a fiscal stimulus over the next few years.
The budget office lowered its previous interest rate projections, explaining that sustaining low rates in the near-term will decrease borrowing costs and potentially prevent the deficit from topping $1 trillion this year.
The forecast follows a bond inversion this month that has economists concerned the nation is headed toward an economic downturn, since such a flip has occurred before every recession since the 1950s. But the president and his economic advisers say the economy will keep humming long enough for Trump to clinch reelection in 2020.
While the president has said the “economy is way too strong” and the country will “soon be winning big on Trade,” the budget office predicts the tariffs Trump has imposed will lower economic output by driving up the cost of goods, spurring uncertainty that results in less business investment and prompting retaliatory tariffs that reduce U.S. exports.
Trade barriers imposed since January 2018 will reduce household income by 0.4 percent by next year and the level of real GDP by about 0.3 percent over that time, the budget office predicts.
CBO also forecast in its report that debt held by the public will grow steadily over the next decade, from 79 percent of GDP this year to 95 percent in 2029 — the highest level since just after World War II.
The nation’s fiscal outlook is “challenging,” the budget office said, with federal debt “on an unsustainable course” that can only be righted with “significant” changes to both spending and tax policy changes that bring in more revenue.
Trump said Tuesday that he has “been thinking about” the prospect of a payroll tax cut, a move that would undercut the more than $1 trillion in revenue the tax drums up each year to support programs like Social Security and Medicare.
In new survey results released this week, the National Association for Business Economics found that about three in four economists surveyed said the next recession will hit by the end of 2021. More than one third said they predicted a recession would occur in 2020.
The president accused the “Fake News Media” last week of “doing everything they can to crash the economy because they think that will be bad for me and my re-election.”