The federal budget deficit is growing faster than expected while jobs are growing a slower rate than previously projected, according to new data released by the federal government.
The nonpartisan Congressional Budget Office said in an updated forecast on Wednesday that the budget deficit will hit $960 billion in the 2019 fiscal year and will balloon to $1 trillion in the 2020 fiscal year. In May, the budget office did not expect the deficit to hit until 2023.
The CBO projected that the deficit would rise every year through 2023 and by 2029 will reach the highest level as a share of the economy since World War II, The New York Times reported.
Job numbers fall short by 500K:
A separate report from the Labor Department on Wednesday showed that the economy added 500,000 fewer jobs in 2018 and early 2019 than it previously reported.
The new data shows that the economy averaged 200,000 new jobs per month, compared to the 223,000 per month that it previously reported.
Just last month, the Commerce Department also lowered its estimate of economic growth in 2018.
“Investors in recent weeks have become increasingly concerned about the possibility of a recession, and the Federal Reserve last month cut interest rates in an effort to stave off a downturn,” The Times reported. “Guy Berger, chief economist for the career-focused social network LinkedIn, said the recent revisions were a reminder that official statistics often struggle to pick up turning points in the economy until it is too late.”
Data undercuts Trump’s tax cut boasts:
Trump long bragged that the tax cuts he signed in 2017 would lead to huge job growth and that the boost to the economy would cover the reduced revenues to the government.
“But economists who have examined the impact of the 2017 Tax Cuts and Jobs Act say it isn’t helping much in any of the ways advocates once advertised: overall growth, business investment, or worker pay,” CNBC reported.
The tax cuts failed to generate the 3% growth Trump promised and current growth levels are expected to fall back to the same levels they were at under Obama.
The deficit has continued to swell despite Trump’s claims that the booming economy would replace the revenues through higher spending and consumption.
“In reality, deficits have soared back toward the $1 trillion mark reached during the Wall Street crisis and Great Recession a decade ago. A Congressional Research Service analysis concluded that the law has produced no more than 5% of the growth needed to offset tax cut losses,” CNBC reported.
Wage growth grew by just 1.2% last year and the tax cuts led to “no obvious spike in investment” among companies that offshore their capital.
“The economic benefits of the Tax Cuts and Jobs Act seem to have petered out,” the Tax Policy Center said earlier this month. “The economy’s strength now seems to lie almost entirely with consumer spending.”
