President Trump’s fondness for tariffs will take a small but very real bite out of the U.S. economy, the government’s chief scorekeeper said Wednesday.
The Congressional Budget Office also said the budget deal Mr. Trump and House Speaker Nancy Pelosi reached last month, boosting spending for both domestic and military programs over the next two years, will cost taxpayers to the tune of $1.7 trillion in extra deficits during the next decade.
The government will run a shortfall of $960 billion in fiscal 2019, and will top $1 trillion in red ink for 2020, the CBO said, beginning a streak that will last for the foreseeable future — including breaking the single-year deficit record by 2028.
Debt held by the public will nearly double over the next decade, reaching $29 trillion in 2029. At that rate it will be about 95% of America’s gross domestic product — a rate not seen since immediately after end of World War II mobilization.
“The nation’s fiscal outlook is challenging,” said Phillip L. Swagel, CBO’s director. “Federal debt, which is already high by historical standards, is on an unsustainable course.”
The report was the latest warning that solid economic growth and a strong job market have not solved the country’s long-term fiscal problems.
The good news, though, is that CBO doesn’t see an economic recession in the cards for this year, though there are some signs of risk.
Mr. Trump has sent mixed signals this week about the economy.
On Tuesday, he suggested it might need more stimulus in the form of a payroll tax cut, and he accused the “LameStream Media” of cheering for a recession. On Wednesday, he flatly ruled out tax cuts and said the numbers are looking fine.
“I’m not looking at a tax cut now,” the president said. “We don’t need it. We have a strong economy.”
He did, though, ramp up pressure on Federal Reserve Chairman Jerome H. Powell, calling him and his board “the only problem” the economy faces. Mr. Trump appointed Mr. Powell as Fed chairman.
“Doing great with China and other Trade Deals,” the president tweeted. “The only problem we have is Jay Powell and the Fed. He’s like a golfer who can’t putt, has no touch.”
In comments later to reporters he said he’s not demanding an interest rate cut, but would like to see one.
On China, his approach has been uneven. He announced a massive new round of tariffs, but then delayed some of them for three months, hoping to prevent them from slamming American consumers with price increases during the Christmas shopping season.
Mr. Trump insists that the costs of the tariffs are being borne by Chinese companies, not Americans, but the CBO numbers show a real impact in the U.S.
According to one measure, the tariffs will cut 0.3% from the U.S. gross domestic product by next year. And Americans’ average household income has been hurt, the CBO said, coming in 0.4% lower by 2020.
All told, the tariffs have affected about 11% of imports, or $263 billion worth of goods, the CBO said.
Mr. Trump counters that the tariffs are helping the federal government’s bottom line, and the CBO said there is some evidence for that.
The analysts calculate that the tariffs Mr. Trump has imposed over the last two years, if left in place over the next decade, would produce about $410 billion in additional revenue for Uncle Sam.
The president has vowed to redistribute some of that money to farmers to help compensate them for the market share they’re losing amid other countries’ retaliatory tariffs on the U.S.
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