The federal budget deficit is expected to balloon to $1 trillion by the 2020 fiscal year, according to a new forecast from the Congressional Budget Office. The good news, says Alan Clayton-Matthews, an associate professor of economics and public policy at Northeastern University, is that unlike a household debt, the growing national debt “never has to be paid off.” The bad news? The federal government is running out of tools it can deploy to bolster the economy when it dips into a recession.
The budget deficit—the gap between what the government spends and what it takes in through taxes and other sources of revenue—is expected to reach $960 billion for this fiscal year, which ends on Sept. 30. The deficit will widen to $1 trillion by fiscal year 2020, its growth attributed in part to the Tax Cuts and Jobs Act of 2017, Clayton-Matthews says.
Among other changes, the law reduces tax rates for business and individuals, meaning the federal government isn’t bringing in as much tax revenue as it used to.