The tax-cut deal inked by President Obama and House Speaker Paul D. Ryan last month has put a major dent in the federal budget, helping send the deficit soaring by 24 percent, the Congressional Budget Office said Tuesday.
The $544 billion deficit projected for 2016 marks the first year since 2009 that the red ink has grown, and it powers the deficit back up over the half-trillion mark, where it had been for most of Mr. Obama’s tenure.
And the rest of the decade will only get worse, the CBO said, with Social Security beginning to draw down its trust funds in 2018, and overall deficits surging back above the $1 trillion mark by 2022.
Struck by the grim news, budget watchdogs said politicians needed to heed the wake-up call.
“Turning a blind eye to the problem, as so many congressional and presidential candidates have done, merely means they are passing the buck to the next generation as concerns about political damage outweigh policy advantages,” said Steve Bell, senior director of economic policy at the Bipartisan Policy Center.
CBO projections contained some good news, with the economy showing signs of solid growth in 2016 and 2017, finally overcoming some of the “slack” that built up during the 2008 Wall Street collapse and the Great Recession. Analysts said more people will be enticed back into the labor force, but inflation and interest rates will also rise as the economy ticks along.
But spending and taxes remain the biggest problem for the budget, with the twin deals at the end of last year to break the sequester budget caps that had held spending in check, and to extend a series of special interest tax breaks.
Combined, they meant the government needed more money than ever — but had less flowing in.
Overall, spending will spike by 6 percent in fiscal year 2016, to reach $3.9 trillion. That amounts to 21.2 percent of the country’s output as measured by gross domestic product.
By contrast the government will collect just $3.4 trillion in taxes, or 18.3 percent of GDP.
Those trends will continue for the next decade, the CBO report. Taxes will hold steady at about 18 percent of GDP, while spending will rise from 21 percent to 23 percent — producing ever-worse budget news for the next president to handle.