Federal Budget Deficit Set To End Fiscal Year Near $1 Trillion, And Continue Growing
The Federal Budget Deficit is set to end the Fiscal Year close to $1 trillion, and to continue growing after that.
With just about a month to go in the current Fiscal Year, the Federal Budget Deficit has soared to close to $1 trillion:
The federal deficit hit $895 billion in the first 11 months of fiscal 2018, an increase of $222 billion, or 32 percent, over the same period the previous year, according to the Congressional Budget Office (CBO).
The nonpartisan CBO reported that the central drivers of the increasing deficit were the Republican tax law and the bipartisan agreement to increase spending. As a result, revenue only rose 1 percent, failing to keep up with a 7 percent surge in spending, it added.
Revenue from individual and payroll taxes was up some $105 billion, or 4 percent, while corporate taxes fell $71 billion, or 30 percent.
This puts the U.S. well on course for budget deficits at $1 trillion and more, and, as CBS Marketwatch notes, makes this years budget deficit the fifth highest ever:
The budget deficit is widening in a big way. In the first 11 months of the fiscal year, the deficit was $895 billion, which is $222 billion more than the previous year. Outlays have climbed 7% while revenue rose 1%.
Corporate taxes have plummeted by 30% this fiscal year, both because of the lower rate as well as the expanded ability to immediately deduct the full value of equipment purchases. Individual income and payroll taxes have climbed 4%, as increasing wages — mostly, due to more people having jobs — offset a lower withholding rate.
Spending on Social Security and Medicare have climbed 4% as more baby boomers retire, outlays on net interest on the debt have jumped 19% in part due to a higher rate of inflation triggering more payments to inflation-protected securities holders, and defense spending has jumped 6%.
Kevin Hassett, the White House chief economic adviser, was careful in a briefing with reporters on Monday to say the corporate tax cuts — but not the whole package — would pay for themselves with higher growth.
“I think that the notion that the corporate tax side has about paid for itself is clearly in the data,” he said. “On the individual side, there was about a trillion-dollar cost. About $700 billion of that was a refundable child credit that got expanded at the last minute to get the votes they needed to pass it.”
(The Joint Committee on Taxation estimates the modification to the child tax credit to cost $573 billion over a decade, and that the individual side cost $1.13 trillion in total.)
Other administration officials have made more sweeping claims that the entire tax cut would pay for itself, including Treasury Sec. Steven Mnuchin and former National Economic Council Director Gary Cohn.
This is hardly surprising news, of course. When the GOP Congress and President Trump combined forces earlier this year to get a budget passed in the wake of the January government shutdown, it became evident that the era of trillion dollars budget deficits, which we last saw in the early years of the Obama Administration when the economy was still clawing its way out of the hole created by the Great Recession. The difference this time was that these record-setting deficits would be occurring in the middle of a recovery that has been moving forward since the summer of 2009 at a time when financial markets are becoming sensitive to increased debt and interest rates. When the final budget deal was put forward in mid-February, it included massive spending increases in almost every budget category that busted through the controls that had been put in place by the Budget Control Act of 2011. As The New York Times noted at the time, this effectively means that Republicans have learned to love the deficits and debt they once claimed to abhor. In other words, the Republican Party, which had spent the Obama years railing about spending and deficits, had become the party of deficits and debt. By April, the Congressional Budget Office had officially forecast that we’d be seeing trillion dollars deficits by the end of Fiscal Year 2019 and just a few months later, the national debt crossed a new benchmark and was north of $21 trillion.
As I’ve said many times in the past the supposed Republican fidelity to fiscal responsibility and their concern about rising Federal Budget deficits and the National Debt is something that has proven to be little more than a political slogan that was largely based on who controlled the White House. During the Presidencies of Bill Clinton and Barack Obama, for example, Republicans argued that out of control spending and deficits were destined to drive up interest rates, cause the national debt to explode, and increase interest rates. They used these issues as political cudgels against the Democratic White House during both Administrations and, of course, as a way to appeal to voters and supporters during the elections that took place during those Presidencies. During those times that the GOP managed to take control of both the White House and Congress, though, the message was quite different and the true nature of the Republican Party and its alleged concern for deficits and debt was revealed for the fraud it that it is.
During the Administration of George W. Bush, for example, Republicans managed to preside over massive increases in spending that were quite plainly fiscally irresponsible. On the domestic side of the equation, they introduced a massive new trillion dollar entitlement in the form of Medicare Part D without finding a way to pay for it. Similarly, they introduced education policy legislation such as the No Child Left Behind program that led to increases in Federal spending, again without any provisions about how it was going to be paid for in the future. Under President Bush’s leadership, they authorized and fought two wars, only of which was actually justified and necessary, that imposed serious financial burdens on the Federal Government both while the war was being fought and well into the future. On top of all that, they cut taxes. While that is not a bad thing in and of itself, and I’m certainly not going to argue against the lower tax burden that I and most other Americans had during the Bush years, from the perspective of fiscal responsibility it’s an utterly insane strategy. This is especially true with respect to the issue of the Iraq and Afghanistan Wars. In the past, we had traditionally found ways to finance wars via what usually ended up being a combination of higher taxes and short-term debt in the form of war bonds and other means of financing. No such effort was made to do this during the Bush years even though it’s likely that the White House could have made a convincing political argument that we needed to find a way to pay for the war that was necessitated by the September 11th attacks. Instead, President Bush chose to basically let the political capital he had gained in the wake of the attacks and the Republican Party in Congress took the position of Alfred E. Neuman and adopted a “What, me worry?” position when it came to fiscal responsibility.
Now that there’ another Republican in the Oval Office, the GOP is returning to form.
The data you’re using is a month old and the budget deficit has already exceeded $1 trillion.
The higher the better.
The war in Afghanistan may have been justifiable (I disagree but think there were reasons for it) but it was never necessary, anymore than shooting oneself in the balls is necessary for birth control.
Oh, it’s even worse than that. According to insiders, Trump decided a good way to deal with the deficit was to print more money. Remember when we worried that deficits would lead to inflation? Good times.
This is one of the reasons I voted for Clinton. The only time our budget has *ever* been controlled is when the White House and Congress are in opposite hands (mostly GOP Congress and Dem White House).
The other striking thing about this is the complete and total radio silence from the conservative punditsphere about this. I mean they are not talking about it at all. It will be fun, in a grim sense, to watch them, after Democrats take things back, to immediately blame the Democrats for the fiscal mess. I mean, they keep repeating the false mantra that Obama gave the nation its first trillion dollar deficit.
@Hal_10000: That crashed economy he inherited had NOTHING to do with it.
There’s a Trump quote for every occasion…
Feature, not bug.
@Hal_10000:
Along those same lines, one of the other poison pills awaiting the Democrats, if they take things back in the fall, is the Obamacare lawsuit in Texas.
After the Republican’s total failure to control the budget, immigration, or fix healthcare, the best thing possible for them is to lose control of Congress so they can go back to just blaming the Democrats for everything.
Democrat: your trillion dollar deficit goes too far.
Republican: your trillion dollar deficit does not go far enough.
With apologies to Futurama.
@Hal_10000:
LBJ produced a balanced budget in 1969 under a Democratic Congress (technically just after he left office, but definitely as a result of his policies, notably a surtax).
Of course the Republicans are silent. They’ve intentionally traded in long term sustainability for a temporary goose to the economy with their short-sighted tax package. An economy that had been solidly recovering for years. Why save for a rainy day, right? Let’s blow it all on our corporate overlords.
It’s also important to note that, perhaps more than any other issue, this is a generic Republican problem, not a Trump problem in particular. Had John Kasich or Marco Rubio won the 2016 election we’d be seeing more or less the same result here (minus the laughably illiterate remarks, of course). Indeed, on the forms of federal spending that Trump in particular cares about (the border wall, infrastructure), the GOP Congress has so far rebuffed him.
The GOP budgetary agenda is, and has been for roughly the past 40 years, a series of policies that objectively cause deficits to soar while claiming against all available evidence to bring deficits down. It is a scam–an agenda whose one and only goal is to enrich the rich, while taking advantage of an unearned and long-outdated stereotype of Republicans as the benefactors of lucid, responsible governance. And the media falls for it, again and again and again.
Anyone who utters the sentences “fiscally responsible conservatives” or “the party of family values” should be laughed out of the room from this point on and into eternity.
This was just so colossally stupid and irresponsible, and was totally avoidable. A tax cut when the economy is booming is economically unsound and baffling.
I don’t have a problem with the $1T deficit…My only problem with this is the timing.
There are times when you want to ramp up the deficit, for valid reasons.
This is not one of them.
The economy is fairly strong; we continue to operate on the Obama economy, only now we have lower wage growth and higher inflation.
Exploding the deficit while in the midst of a record long bear market is nothing more than economic malpractice.
We are due for a recession…whether it is due to Dennison’s retarded economic policies, or merely because it is statistically inevitable. The question ever Dennison sycophant should be asking themselves; when the next recession hits are we going to go to a $2T deficit in order to weather that storm?
@Ben Wolf:
IIRC you’re an economist, so I’m curious as to why you said that. Snark? Or do you side with the guys who say we still need stimulus? If so, wasn’t the tax cut as structured poor stimulus?
It appears Keynes was pretty much right. Are we not reaching the point Keyenes said we should start accumulating surpluses against the next recession? We’d have been far better off had W accumulated surpluses against the last one?
@Kylopod:
They also have a longstanding goal of using the deficit to kill, or more likely privatize(1), SS and Medicare.
_______
(1) It must make Goldman Sachs absolutely nuts to see that huge pool of money and not have their hooks in it.
GOP deficits are good. Democrat deficits are bad. This seems to be basic conservative economics(modern version, old time conservatives like Milton Friedman would disagree, but he’s a conservative in name only by modern standards).
What I find interesting about it this time around is that even the 10% of conservatives who are fiscal conservatives and were publicly unhappy about Reagan’s and Bush Jr’s deficits, are keeping quiet, at least in public. Which suggests the divisions in the GOP run so deep now that they’re afraid of being kicked out if they speak out against Trump.
I’m not even sure to what group the Trump conservatives primarily belong (I’m talking here about the conservatives who support Trump over other conservatives, the 44% who voted for him in the GOP nomination). They’re definitely not fiscal conservatives, and they’re not particularly social conservatives (Trump was basically a Democrat who was for abortion and didn’t care one way or another about gay issues for most of his life); the best I can come up with is they’re primarily nationalists who don’t really care much about fiscal or social issues.
Fiscals and socials are willing to follow Trump, but they’ll dump him in a second if it becomes convenient to do so. But he seems to have his followers who’ll dump the party if it removes Trump, and it appears others (like the fiscal conservatives who would normally be unhappy about the deficit) are afraid to speak up.
@george: I think it’s a mistake to think hardcore Trumpists don’t care about social issues. First, some of his strongest and most fervent support comes from white evangelicals. Second, “social issues” don’t just refer to abortion or homosexuality or other “religious” debates; the phrase can also encompass immigration, among other things. I’m not trying to get into a semantic argument here; the point is that the Trump movement has largely been devoted to everything but fiscal issues.
@Kylopod:
You’re right about immigration, I forgot about that. Which I suppose is why social conservatives support Trump – they care more about the immigration issue than abortion or gay marriage.
But I still have the feeling that most social conservatives would dump him for a true social conservative in an instant if it were possible. Whereas Trump’s die hard supporters would stick with Trump even if he decided to open the borders to anyone in the world who wanted to come – he has a cult of personality among them, which is what makes it so hard for the GOP to get rid of him; those die hard votes would be lost to the GOP if they turf Trump, so they need him to resign.
40% of Americans never bother voting. 55% vote for the same party every year. Politics in America is about getting the remaining 5% who will change who they vote for (including not voting some years). Getting rid of Trump is cutting out some of the GOP’s allotment of that 55% who always vote the same, and the party is scared to do that – its like in governments with proportional representation where a small extreme party carries a lot of weight in a coalition because their loyalty is to themselves and not to the coalition.
And you’re 100% correct; fiscal responsibility has been the absolute furthest thing from Trump’s mind. Not only the insane tax reform, but starting simultaneous trade wars with China, the EU, and NAFTA?
And, just today, the House Ways & Means committee has advanced a bill to make the individual tax cuts permanent, making this mess longer-lasting and more damaging. These people are well and truly idiots.
@GVOR08: As I keep telling everyone: Brexit Brexit Brexit.
I’m not gonna say it’s going to automatically cause a financial meltdown–I’m saying that with the interconnectivity of the financial and economic world I wouldn’t be surprised if it did. Which is one reason why I took a large chunk of my US stock market gains off the table and shoved them into bonds and third-axis (i.e. gold) investments.
I do realize that it’s just as likely that with a Brexit everyone will plow into the US stock market as The Only Place To Invest In, sending it up even further, but I think I’ll limit my speculative activity to the $4000 that’s in my “playing stock trader” account. Everything else is essentially hedged.
But wait, there’s more. Consumer price inflation shows signs of kicking up. Just wait until the Trump deficits have to be financed at significantly higher interest rates. Anyone want to make a bet on how long it is until Mnuchin has to go hat in hand to Beijing to beg China to purchase all those lovely T-bonds?
@Hal_10000:
Not just in the punditsphere, we’re seeing it play out here. It’s noteworthy that in the hours since this surfaced, JBK, MBunge, TM01, @John430, and Paul L. have all appeared and posted in articles both above and below this one on the page.
For some reason, this post appears to be kryptonite to them.
I remember when the rising debt was an existential issue for movement conservatives.
Dishonesty is a feature, not a bug.
Will the chickens ever come home to roost?
I mean, for America, yes, probably, but what about for the Republicans? Will there be any price to pay at the ballot box for this?
@SC_Birdflyte: BTW china only owns $1.8 trillion of our $21 trillion debt.
@mattbernius: Hannity doesn’t come on til evening, right? They gotta get their talking points before they can bestow their worthy opinions on us libtards, because the truth is they don’t know a damn thing about economics in the real world. Only what’s parroted to them, in easily remembered phrases.
I noticed the same thing with a real life friend, I sent him the deficit article, and it was radio silence. He was all in on fake numbers from Puerto Rico, though. Talking points have been issued on that one.
Can’t be true. If it were, the Tea Party pats would be in the streets rioting over such fiscal irresponsibility.
@teve tory: True, and they are multiple other factors that affect China’s economic decision-making, but we’ll have to beg someone to buy them. Saudi Arabia and the UAE, perhaps?
@Paine: Alas, the Tea Party people were only about two or three issues–1) “muh taxus are to durn high”, 2) “I’m agin’ spending for stuff I don’t want–like Head Start and daycare for po’ kids (you po folk should stop spending all yo money on likker and cigarettes and pay for yo own damn preschoo’), and 3) [my personal favorite BTW] “don’t turn mah Medicare into a socialized medicine scheme.” It was only as fiscal irresponsibility intersected those issues that they even considered the deficit as existing at all.
@Paine: @Just nutha ignint cracker: I frankly don’t think most Tea Partiers could correctly define “the deficit.” I’m dead serious about this. For example, take a look at what Tea Party Nation founder Judson Phillips said in a 2010 interview:
There are several problems with this answer, but to me the most striking thing is that Phillips does not seem to understand the difference between government revenue and economic growth.
This type of illiteracy is rampant on the right, where “deficit” is just a vague, meaningless term for government spending on whatever liberals care about, regardless of its actual outcome on either the fiscal situation or the economy (which they erroneously believe to be the same thing). Spending on things conservatives care about (e.g. the border wall, defense, sometimes Medicare or Social Security or infrastructure–heck, just about anything, really, as long as it isn’t something they associate with lazy brown people) don’t count.
Mods, please rescue my post.
@Kylopod:
Again, that happened here as well. One of our well-known serial trolls, in of his passed personae, completely miffed his explanation of the debt ceiling and then spent a few post arguing everyone else had it wrong before realizing the truth.
@Just nutha ignint cracker:
I think you are really discounting the amount that racial animus — coded as “poor and city folk” and “takers” — and an urban/rural divide drove (and continues to drive) a significant portion of the Tea Party.
@teve tory: Yes. People keep saying W borrowed from China to pay for his wars. Mostly he borrowed from SS. And the GOPs want to not pay it back.