(CBS) — A new government report projects that the budget deficit for 2019 will be close to $900 billion (4.2 percent of gross domestic product (GDP)) and predicts that economic growth will slow as the effects of President Trump’s tax cut on business investment begin to drop off. The Congressional Budget Office suggests in the Budget and Economic Outlook it released Monday that economic growth will “decline sharply” in the fourth quarter this year.
The CBO’s economic projections were finished before the partial government shutdown, but it estimated that as a result of the shutdown, real GDP was 0.1 percent lower in the fourth quarter of 2018, and it will be lower in the first quarter of 2019 by 0.2 percent or $8 billion. The CBO estimated that the shutdown delayed $18 billion in federal discretionary spending. Most of the lost output is expected to be recovered as the year goes on, although CBO estimates that about $3 billion in GDP will permanently be lost as a result of the shutdown.
The shutdown “dampened economic activity,” according to the CBO, primarily due to the “loss of furloughed federal workers’ contribution to GDP, the delay in federal spending on goods and services, and the reduction in aggregate demand.” President Trump on Friday agreed to end the shutdown for three weeks pending debate over funding of the border wall. The president, however, appeared less than optimistic about reaching a deal on border security, telling the Wall Street Journal that he puts the odds at less than “50-50” that lawmakers will make the deadline.
To see highlights form the report, visit our partners at CBS.
Read CBO’s report here: