By Richard Cowan
WASHINGTON (Reuters) - The U.S. economy will grow at a "solid" rate of 2.2% this year, the non-partisan Congressional Budget Office forecast on Tuesday, but the federal budget deficit will hit $1.02 trillion.
The economy will be strong during this presidential election year, thanks in part to consumer spending, CBO said, but it forecast "higher inflation and interest rates after a decade in which both remained low, on average."
Economic growth will slow to an average annual rate of 1.7% from 2021 to 2030, CBO predicted, while inflation and interest rate increases will slow in 2023.
After topping $1 trillion in fiscal 2020, federal deficits will average $1.3 trillion per year between 2021 and 2030, CBO estimates, a level that some economists and policymakers warn is unsustainable.
Washington's budget deficit hit a peak of $1.4 trillion in fiscal 2009, after emergency measures to contain a severe economic recession that began two years earlier.
It hasn't topped $1 trillion since 2012 and fell to $585 billion at the end of President Barack Obama's second term in 2016.
The current and forecast deficits come under better economic circumstances, but after a Republican overhaul of the tax system, which reduced revenues over the short term. Federal outlays in 2020 will be $4.6 trillion, while revenues will hit $3.6 trillion, CBO estimates.
CBO projections assume that current laws governing taxes and spending will generally remain unchanged.
Under the current system, budget deficits will push overall U.S. federal debt held by the public to $31.4 trillion by the end of 2030, CBO estimated.
That would be 98% of gross domestic product, or the total monetary value of all goods and services produced in the United States. That's a higher rate than at any point since just after World War II, CBO said, and "more than double what it has averaged over the past 50 years."
Interest payments on federal debt, coupled with increased spending on mandatory federal programs like Social Security, will be the biggest contributors to climbing federal outlays in coming decades, the CBO said.
As a result, U.S. federal spending will grow more than revenues through 2050, CBO estimates.