CBO report: Deficit to hit $897 billion in 2019, $1 trillion by 2022

Jan. 28 (UPI) -- The federal deficit will rise to $897 billion this year but isn't expected to surpass $1 trillion for another three years, the Congressional Budget Office said in a report Monday.

Prior CBO projections indicated the deficit would surpass the $1 trillion threshold by 2020, but 2018 declines in emergency relief spending on hurricanes and other disasters altered the outlook. Interest costs on the debt were also lower than expected last year.

"The federal budget deficit is about $900 billion in 2019 and exceeds $1 trillion each year beginning in 2022," the analysis said. "Over the coming decade, deficits (after adjustments to exclude shifts in the timing of certain payments) fluctuate between 4.1 percent and 4.7 percent of gross domestic product well above the average over the past 50 years."

The annual deficits, which average 4.4 percent for the coming decade, are significantly higher than the 1.8 percent average projected growth of the U.S. gross domestic product. The recent tax cut, combined with increased spending under President Donald Trump, are not typical economic policy, the CBO report noted.

"That average deficit is not only large but also unusual for times of low unemployment," CBO Director Keith Hall said in a statement on Monday. "At the end of 2018, the amount of debt held by the public was equal to 78 percent of gross domestic product. In CBO's projections, debt equals 93 percent of GDP by 2029 and about 150 percent of GDP by 2049. Even at its highest point ever, just after World War II, debt was far less than that: 106 percent of GDP."

The central factors driving growing deficits, however, showed no signs of slowing, the report said. Entitlement payments, such as Social Security, are growing as the country's population ages, and tax revenues decreased after the 2017 overhaul of the tax code.

The accumulated U.S. debt is at its highest level since World War II, the CBO said. The non-partisan budget agency said the 35-day federal shutdown is expected to reduce the country's economic output by $11 billion in the most recent two quarters. It expects, though, for the drag on the economy to be overcome by delayed spending activity by the fourth quarter of 2019. Overall, the government closure is expected to permanently cut $3 billion from U.S. economic growth.