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The deficit report card is in. Trillion dollars is now the new normal

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Chart courtesy Congressional Budget Office.

(CNN Money) — The nonpartisan Congressional Budget Office on Monday released its 10-year budget and economic outlook, and the news isn’t good.

The report shows a notable deterioration in the country’s debt outlook, thanks largely to the trillions in tax cuts passed by Republicans and a pricey two-year budget deal recently passed by both parties.

The CBO now projects trillion-dollar deficits will start in 2020, two years ahead of what it projected just 10 months ago, although it will come close ($981 billion) by next year. By 2028, the agency expects the deficit to top $1.5 trillion.

“The legislation has significantly reduced revenues and increased outlays anticipated under current law,” the CBO report notes.

Related: Interest payments on US debt could top $1 trillion

Trillion-dollar deficits, of course, were a hallmark of the financial crisis a decade ago — and its aftermath, the Great Recession. Economic activity fell off a cliff and interest rates dropped to historic lows.

The big difference, though, is that the US economy today is fairly strong, and interest rates are on the rise, further pushing up borrowing costs.

While dollar amounts are telling, the magnitude of deficits is even better measured as a share of the economy. Starting this year, annual deficits will exceed the 3.5% of GDP recorded last year. They will range from 4% to north of 5% over the next decade. The peak comes in 2022, then moderates to just below 5% after 2025, when the recently passed tax cuts for individuals expire.

Thanks to the anticipated rise in interest rates coupled with growing debt, the CBO now projects that annual interest costs alone will hit $915 billion by 2028. That’s “roughly triple what they are this year in nominal terms and roughly double when measured as a percentage of GDP,” the CBO said.

If the tax cuts set to expire after 2025 are continued — something Republican lawmakers have said they want — and if scheduled spending cuts from current levels don’t occur, then the deficit and debt picture deteriorates further.

The result? Total debt held by the public — a reflection of cumulative deficits over the years — would reach about 105% of GDP by the end of 2028. That level has only been exceeded once in the country’s history.

As it is, debt is on track to hit nearly 100% by 2028.

Related: Interest payments on US debt could top $1 trillion

The Trump administration, meanwhile, has contended that the new tax law in combination with the rest of the White House economic agenda will not only generate enough new revenue to pay for the tax cuts, but raise an additional $300 billion over a decade.

In the meantime, Republicans are scrambling to show voters that they’re working to reduce deficits, even though some of the most vocal, self-proclaimed deficit hawks in the party voted for both the tax cuts and the higher spending caps.

The House GOP this week will vote on a balanced budget amendment. And President Trump, despite just signing a $1.3 trillion spending bill passed by Congress, reportedly wants to cancel select portions of the funding. But doing so could require Congressional approval, which might be hard to wrangle.