US federal deficit to reach $1tn next year, report says

Dominic Rushe in New York

US federal debt will top $1tn next year even as Donald Trump explores tax cuts and other giveaways that are only likely to increase the deficit.

According to figures released by the Congressional Budget Office (CBO) on Wednesday the US national debt is growing faster than expected and will reach $960bn for the 2019 fiscal year, which ends 30 September, and $1tn for the 2020 fiscal year.

On current projections debt held by the public is expected to reach 95% of gross domestic product (GDP) – the broadest measure of the economy – in the next 10 years, its highest level since just after the second world war.

The CBO previously predicted a $896bn deficit for 2019 and a dip to $892bn for 2020.

Trump came to power criticizing the US’s huge debts and promising to pay them off. Instead he has contributed to rising debts by signing a $1.5trn tax cut bill and spending packages that have not been accompanied by spending cuts.

The escalating debt load is being driven by sluggish economic growth as well as spending and tax cuts. US GDP is expected to reach 2.6% this year and fall to 2.1% in 2020, according to the CBO.

As the economic expansion slows Trump has said he is exploring a series of tax cuts to stimulate growth that will further deepen debts.

Deficits usually shrink in times of high employment and the US is experiencing the longest growth in job creation since records began.

Government debt as a share of the economy is expected to rise from 79% this year to 95% in 2029.

On the campaign trail Trump was a persistent critic of government spending. In 2016 he said he would eliminate the national debt “over a period of eight years”.

In July Congress reached a deal to increase federal spending and raise the government’s borrowing limit in a move that pushed the next budget discussion into 2020, after the next election.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said: “The recent budget deal was a budget buster, and now we have further proof. Both parties took an already unsustainable situation and made it much worse. Debt is now going to grow to almost the size of the economy within the decade. If Congress keeps extending tax cuts, debt will likely exceed the size of the economy within the decade.”