WASHINGTON (Reuters) – A brief U.S. government shutdown ended on Friday after Congress passed and President Donald Trump signed into law a temporary spending deal expected to push budget deficits past $1 trillion annually with new military and domestic outlays.
But Trump is expected to unveil on Monday a fiscal 2019 budget plan that will be based on rosy assumptions, including economic growth of 3.2 percent next year, a White House official said.
That level is well above the 2.5 percent growth achieved in 2017 and the 2.5 to 2.7 percent range of economists’ forecasts for this year. The White House’s plan also anticipates that the strong growth will go on for years, the official said, with 3 percent growth in 2021, only tapering to 2.8 percent in 2026.
The growth assumptions in Trump’s budget were first reported by the Wall Street Journal.
The Trump budget also assumes very low interest rates, with the benchmark 10-year Treasury yield averaging 2.6 percent this year. But the 10-year yield closed at 2.86 percent on Friday, and the Federal Reserve is expected to hike rates three times this year.
Such optimistic assumptions would make deficits look smaller in Trump’s budget plan after Republicans in December approved massive tax cuts expected to add about $1.5 trillion in new debt over a decade. Republicans contend that the tax cuts will fuel a spike in economic growth.
The White House also will amend the budget plan to take into account the higher spending levels in the budget deal passed just before dawn on Friday, a senior official in the Office of Management and Budget said.
Friday’s spending measure, which ended an hours-long partial government shutdown, was approved by a wide margin in the Senate and survived a rebellion from conservative Republicans in the House of Representatives who objected to non-military spending increases.
White House to amend budget request amid new spending bill: official
Republican Senator Rand Paul, objecting to deficit spending in the bill, launched a nine-hour, on-again, off-again protest and floor speech late on Thursday that delayed passage of the deal past midnight, when funding for the government ran out. He had harsh words for his own party.
“Now we have Republicans hand in hand with Democrats offering us trillion-dollar deficits,” Paul said.
House Democratic leader Nancy Pelosi and others in her party had opposed Friday’s bill because Republican House leaders would not guarantee her a debate later on bipartisan steps to protect about 700,000 “Dreamer” immigrants from deportation.
These young adults were brought illegally to the country as children, mostly from Mexico. Trump said in September that he would end by March 5 former Democratic President Barack Obama’s Deferred Action for Childhood Arrivals (DACA) program that protects the Dreamers from deportation.
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