The two-year budget deal passed earlier this month to raise spending caps in 2020 and 2021 will add $1.7 trillion over the next decade to the federal deficit, according to new analysis from the Congressional Budget Office (CBO).
The deficit is now projected to approach $1 trillion this year and expand to . While the main drivers of deficits over the next 10 years are entitlement programs like Social Security, Medicare and Medicaid, the spending deal and the tax cuts enacted in 2017 are also contributing to push the nation into levels of debt unseen since the end of World War II.
“Federal Debt, which is already high by historical standards, is on an unsustainable course, projected to rise even higher after 2029 because of the aging of the population, growth in per capita spending on health care, and rising interest costs,” said CBO Director Phillip Swagel. “To put it on a sustainable course, lawmakers will have to make significant changes to tax and spending policies – making revenues larger than they would be under current law, reducing spending below projected amounts, or adopting some combination of those approaches.”
CBO projects the economy to grow by 2.3 percent this year, buoyed by strong labor market conditions with low unemployment. After 2019, however, consumer spending and purchases of goods and services by federal, state and local governments are projected to grow at a slower pace.
Though some fiscal hawks objected to the budget deal negotiated earlier this summer, most Republicans and Democrats were eager to raise the budget caps that would have led to strict spending cuts this fall. Without action, sequester would have resulted in $71 billion in defense spending cuts and $55 billion in domestic spending cuts. Lawmakers will still need to pass individual spending bills to avert a government shutdown on Oct. 1, but the budget deal sets overall spending levels that should make it easier for Congress to negotiate those individual appropriations bills.