Exploring Tax Cuts, Jobs and CBO in the News

After visiting the CBO website, it’s clear that the reports on the tax cuts and spending increases in the U.S. budget deficit that are estimated to exceed $1 trillion by 2020 are accurate. According to the Congressional Budget Office, these tax cuts signed by President Donald Trump will cause a failure in boosting the long-term economic growth. The revenue shall be surpassed by the national spending with $804 billion in the fiscal year in September. This will increase budget deficits since the projected amount in June was $563 billion. The effects run to the fiscal year 2019, where the deficit is projected to reach $981billion, an amount high than the actual projection of $689 billion (Wasson & McGregor, 2018).

            According to the CBO’s report last June, the trillion-dollar level is contrary to a 2022 achievement in the nation’s budget gap. However, the increased growth of deficits in Trump’s administration due to a tax overhaul tends to curve to low federal revenue; thus, this will negatively affect the U.S. debt significantly. Investors should now worry due to the arising tariff threats between the U.S. and China that pose a potential negative impact on the world economy. The recent tax and spending legislation have led to more debt on the existing unsustainable trajectory. This will lead to a major damage in the fiscal outlook of the nation’s budget. It will also stimulate a rise in real GDP more than the potential GDP in the coming years.  The unemployment rate will, however, see a decrease to 3.3% in 2019 (Wasson & McGregor, 2018). Consequently, there will be a reduction in personal income tax rates in the future. I think the recent fiscal measures predicts an increase in pressure on matters such as health care due to an aging American population.

References

Wasson, E., & McGregor, S. (2018, April 9). U.S. Deficit to Surpass $1 Trillion Two Years Ahead of Estimates, CBO Says. Bloomberg. Retrieved fromhttps://www.bloomberg.com/news/articles/2018-04-09/u-s-budget-deficit-to-balloon-to-1-trillion-by-2020-cbo-says