Government report says US budget deficit set to hit $897B

Government report says US budget deficit set to hit $897B

Government report says US budget deficit set to hit $897B

The nonpartisan Congressional Budget Office (CBO) said the cost of the shutdown will make the USA economy 0.02 percent smaller than expected in 2019. The impact was greater during the first quarter of 2019: $8 billion, or 0.2 percent of GDP.

As Donald Trump threatens another government shutdown, Congressional Budget Office (CBO) Director Keith Hall warns that another shutdown would increase the risk of "security incidents".

A federal worker stands with a placard reading "Will Work For Pay" as other federal employees stage a rally to call for a vote on the shutdown on Capitol Hill in Washington, Jan. 23, 2019.

Overall, the U.S. economy lost about $11 billion during the five-week period, CBO said. It also forecast customs duties will increase from 0.2 percent of GDP past year to 0.3 percent of GDP in 2019.

"CBO's estimates do not incorporate other, more indirect negative effects of the shutdown, which are more hard to quantify but were probably becoming more significant as it continued", the report said. "Some of those private-sector entities will never recoup that lost income", the CBO stated.

Most employees should be paid by Thursday for back pay, which one study estimated at $6 billion for all those furloughed.

The report comes amid fears of a global economic slowdown, as well as ongoing trade tensions between the United States and China and the lingering impact of the longest government shutdown in American history.

The U.S. economy is expected to lose $3 billion from the 35-day partial federal government shutdown over President Donald Trump's demand for border wall funding, congressional researchers said on Monday.

Members of the U.S. Coast Guard working without pay during the government shutdown and their families pick up produce, eggs, milk, bread and other supplies being distributed by Gather food pantry at the U.S. Coast Guard Portsmouth Harbor base in New Castle, New Hampshire, U.S., January 23, 2019.

The agency said overall damage amounted to about $11bn, but much of that will be recovered as work resumes.

Overall, Social Security and Medicare continue to be the biggest drivers of spending growth, which the CBO said will outstrip revenues and feed the annual shortfall.

The CBO, the federal agency charged with analysing the economy and budget for Congress, released the estimates on Monday alongside the broader outlook it prepares each year.

"In CBO's estimation, the shutdown dampened economic activity mainly because of the loss of furloughed federal workers' contribution to GDP, the delay in federal spending on goods and services, and the reduction in aggregate demand (which thereby dampened private-sector activity)", the report said.

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