Interest rates will be higher over the next decade because of the GOP’s megabill and drive up borrowing costs even for the federal government, Congress’ nonpartisan scorekeeper predicts in a new report released Monday.
In a final “dynamic” analysis of the massive domestic policy package President Donald Trump signed into law on July 4, the Congressional Budget Office estimated the measure will increase the federal deficit by $4.1 trillion over a decade. Because the bill’s red ink is not offset by more spending cuts or new revenue, CBO found, the legislation will drive up interest rates.
That increase could affect investors and regular people getting loans for a range of assets, from cars to homes. But it will also hike costs for the federal government in a real way, according to the budget office — increasing interest payments on the nearly $37 trillion national debt by $718 billion over a decade.
That’s higher than the $440 billion in extra borrowing costs CBO estimated in June, before Republicans reworked many of the bill’s policies to abide by Senate rules and woo the support of GOP lawmakers who were reluctant to vote in favor of the final product.
Congressional Republicans largely dismissed CBO’s deficit and interest rate warnings in the days before clearing the bill for Trump’s signature, arguing that the legislation would juice the economy far more than forecasters have ultimately predicted.
Oregon Sen. Jeff Merkley, the top Democrat on the Senate Budget Committee who requested the new CBO analysis, said in a statement Monday that “Republicans can’t spin the fact that this bill is bad policy” and that it’s “the height of hypocrisy coming from the party that claims to be fiscally responsible.”
CBO also estimated Monday how much it would cost to permanently extend a slew of tax cuts that the bill would only offer for a limited time — including the bill’s elimination of taxes on tips, overtime and car loans.
The Joint Committee on Taxation has predicted that, if Congress eventually makes these temporary tax policies permanent, it would add $800 billion to the deficit over a decade. At this point, CBO predicts, the bill would increase the cost of servicing the national debt by $789 billion over 10 years, hiking the legislation’s price tag to $5 trillion.
Brian Faler contributed to this report.
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