Figures the Treasury Department released last week showed that fiscal year 2017 ended with a $666 billion shortfall, which actually was lower than the CBO projection of $693 billion. However, the office expects the deficit to fall to $563 billion in 2018 then hit $689 billion and $775 billion in the following two years.
The 2017 debt represented 3.5 percent of GDP, an increase of 0.3 percentage points from the previous year.
CBO does not see the deficit passing the $1 trillion mark until 2022, when it is estimated at $1.03 trillion, then expects it keep rising to $1.46 trillion by 2027.
Debt and deficits have been contentious issues this year as Congress has debated the merits of the Trump administration's tax reform plan, which could amount to $1.5 trillion in relief. White House officials insist the provisions to lower corporate and individual rates would pay for themselves through increased economic growth.
"Through a combination of tax reform and regulatory relief, this country can return to higher levels of GDP growth, helping to erase our fiscal deficit," Treasury Secretary Steven Mnuchin said in a statement. He added that the tax reform plan "will help place the nation on a path to improved fiscal health and create prosperity for generations to come."
Goldman, however, projects that the government will have to raise the debt ceiling again in March. The country's debt load now totals $20.4 trillion, an increase of about 2.5 percent in 2017.
From a practical standpoint, Hatzius said the increased deficits will require the Treasury to issue more debt. That's potentially problematic because one of the main buyers of government bonds has been the Federal Reserve, which has begun to step back from its role as a player in the Treasury market. The Fed this month started the process of reducing its $4.5 trillion balance sheet, most of which is made up of bonds it bought during its stimulus efforts from the financial crisis.
Goldman projects that the Fed's operation will require the public to absorb an additional $175 billion in 2018, then $286 billion and $214 billion the following two years.
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