The Congressional Budget Office projected Thursday that the federal deficit would reach $896 billion for fiscal 2019, up $117 billion from the year before.
That would be the largest shortfall, relative to the economy, since 2012, when the U.S. was still suffering from the financial crisis. The deficit projection was nearly unchanged from the nonpartisan congressional scorekeeper’s previous estimates in January.
Thursday’s projections assume that Congress and the Trump administration do nothing to increase spending between now and Sept. 30, the end of the fiscal year. But that’s unlikely. Senior senators expect to hash out an emergency disaster aid package with the president in the near-term, and in the long-term negotiations to prevent a government shutdown could raise spending on defense and domestic programs.
[Related: Monthly federal deficit hits record high in February of $234 billion]
Acting White House chief of staff Mick Mulvaney, a fiscal hawk during his time as a member of the House of Representatives, all but conceded defeat on keeping spending down during an on-stage interview at the Milken Institute Global Conference in Los Angeles on Tuesday.
“We’re probably not capable of balancing the budget right now. … Washington does not have the ability to do that,” said Mulvaney. “Yes there will be a head-to-head battle over spending, it happens every year, and the fight will be over how much we increase spending.”
Even without increases to current spending levels, the Congressional Budget Office expects the annual deficit to exceed $1 trillion beginning in 2022. At current deficit levels, the federal debt would by 2029 reach its highest levels since the period immediately following World War II, as measured as a share of economic output.
The Congressional Budget Office projects increasing mandatory spending to drive much of the deficit, with rising healthcare costs and an overall aging population expected to increase Medicare spending substantially over the next decade.
Revenues are also expected to increase over the decade, but not as fast as the rise in spending. Also, some of those higher taxes are supposed to come from the scheduled expiration of the individual tax cuts included in the 2017 GOP tax overhaul. Those tax cuts are likely to be extended, at least in part, as similar tax cuts passed during the George W. Bush administration largely were.
[Also read: Fed holds rates steady amid Trump pressure to ease money, calls economic growth ‘solid’]
