Federal Government Set To Borrow $1 Trillion This Year

The Federal Government will borrow more than $1 trillion this year for the first time in more than a half-decade.

A new analysis reveals that the Federal Government will likely incur an addition $1 trillion in debt this year alone:

It was another crazy news week, so it’s understandable if you missed a small but important announcement from the Treasury Department: The federal government is on track to borrow nearly $1 trillion this fiscal year — President Donald Trump’s first full year in charge of the budget.

That’s almost double what the government borrowed in fiscal year 2017.

Here are the exact figures: The U.S. Treasury expects to borrow $955 billion this fiscal year, according to a documents released Wednesday. It’s the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year.

Treasury mainly attributed the increase to the “fiscal outlook.” The Congressional Budget Office was more blunt. In a report this week, the CBO said tax receipts are going to be lower because of the new tax law.

The uptick in borrowing is yet another complication in the heated debates in Congressover whether to spend more money on infrastructure, the military, disaster relief and other domestic programs. The deficit is already up significantly, even before Congress allots more money to any of these areas.

“We’re addicted to debt,” says Marc Goldwein, senior policy director at Committee for a Responsible Federal Budget. He blames both parties for the situation.

What’s particularly jarring is this is the first time borrowing has jumped this much (as a share of GDP) in a non-recession time since Ronald Reagan was president, says Ernie Tedeschi, a former senior adviser to the U.S. Treasury who is now head of fiscal analysis at Evercore ISI. Under Reagan, borrowing spiked because of a buildup in the military, something Trump is advocating again.

(…)

Trump’s Treasury forecasts borrowing over $1 trillion in 2019 and over $1.1 trillion in 2020. Before taking office, Trump described himself as the “king of debt,” although he campaigned on reducing the national debt.

The Committee for a Responsible Federal Budget predicts the U.S. deficit will hit $1 trillion by 2019 and stay there for a while. The latest borrowing figure – $955 billion – released this week was determined from a survey of bond market participants, who tend to be even faster to react to the changing policy landscape and change their forecasts.

Both parties claim they want to be “fiscally responsible,” but Goldwein says they both pass legislation that adds to the debt. Politicians argue this is the last time they’ll pass a bill that makes the deficit worse, but so far, they just keep going.

This news comes on top of the fact that the tax reform bill that was passed in December is expected to add at least $1.5 trillion to the National Debt over the course of ten years, a number that could leap higher if the economy doesn’t perform as strongly as expected or if we end up going into recession at any point in that period. Additionally, as I noted back in April, earlier forecasts had stated that, thanks to the tax cut and the fact that it’s unlikely that we’ll see significant spending reduction from this Congress or White House any time in the near future, we are headed for an extended period of time during which the annual budget deficit is expected to exceed $1 trillion per year for the next several years. This, of course, will accelerate the growth of the National Debt considerably over the course of the next several years at least. This is likely to lead to higher interest rates and slower economic growth all on its own, thus creating a vicious cycle in which the debt drags down the economy while the economy causes government revenue to decrease while spending continues to increase.

Supporters of President Trump and the Republicans, of course, will no doubt point out that this isn’t the first time that the Federal Government will borrow this much money while running up annual deficits of a trillion dollars, We saw the same thing during the early years of the Obama Administration, and that became a political cudgel that Republicans used to attack the President and the Democrats both when they were in the minority and when they took control of the House of Representatives. After that happened in 2010, those deficits formed much of the basis for the numerous confrontations between the White House and Democratic Senate on one side and the Republicans on Capitol Hill on the other.

However, there’s a profound difference between the trillion-dollar deficits during the Obama years and those we’re headed into now. The Obama deficits came in the wake of the Great Recession and, while they were at least partly due to increased spending such as the 2009 stimulus package, one of the main reason for the size of the deficits in those years was the fact that Federal revenues were still feeling the impact of the Great Recession for several years after the recession ended. Furthermore, those large deficits largely ended with the 2012 Fiscal Year. After that, they slowly began to fall to the point where they ended up below $500 billion in Obama’s second term. Part of the reason for that, of course, was due to the restraints on spending that were put in place due to the budget deals reached between the Republican House and the Obama Administration, but it’s also attributable to the fact that revenues began to return to normal as the economy recovered from what had been the worst economic downturn since the end of World War II.

These projected Trump Era deficits are different, though, because they’d be taking place during a period of economic growth. In fact, the Administration’s own forecasts are already assuming that the budget deficit will rise at the same time that they believe, without any real evidence, that economic growth will be far stronger in the coming years than it has been since the Great Recession ended. If those forecasts turn out to be wrong, which is certainly likely, then the deficits will be even higher than currently projected unless Congress and the White House either cut spending significantly or find a way to increase revenue. Right now, it appears that there is neither the political will nor the desire to do this. In any case, it’s unlikely that any significant moves will be made this year given the impending midterm elections. What happens after that is anyone’s guess.

FILED UNDER: Congress, Deficit and Debt, Donald Trump, Economics and Business, Politicians, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Andy says:

    Don’t forget that all that debt means interest payments. Currently, they run ~300 billion a year, in a decade the CBO estimates they’ll be three times that. To put that in perspective, it will be the third-biggest budget item after Old-Age and Survivors Insurance (a component of Social Security) and Medicare.

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  2. Kathy says:

    I think the strategy is one the Cheeto understands well: it’s the next guy’s problem.

    While there may be some validity that lower tax rates generate more revenue through increased economic activity, there are limits tho this. If the economy doesn’t grow enough, revenues will go down. At some point, if the rates are low enough, no amount of possible growth raises revenues.

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  3. An Interested Party says:

    I’m sure this is somehow the fault of Democrats because as we all know, Republicans are responsible fiscal conservatives…

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  4. Hal_10000 says:

    Also, keep in mind that first trillion dollar deficit was actually Bush 41’s (FY 2009). Obama added $300 billion to that in stimulus spending but it came down every year after that. Trump has run us into trillion dollar deficits in one year while the economy is doing OK.

    He’s doing to us what he did to his businesses — sucking as much money out as he can while piling up debt and leaving everyone else holding the bag. We can’t act surprised at this point.

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  5. Daryl's other brother Darryl says:

    If I ever hear a Republicanist talking about fiscal responsibility again…
    And the Tea Baggers, what a bunch of fvcking phonies; they claimed to be all about economics, but clearly they just couldn’t stand the idea of a black man in the White House.

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  6. Daryl and his brother Darryl says:

    If I ever hear a Republicanist talking about fiscal responsibility again…
    And the Tea Baggers, what a bunch of fvcking phonies; they claimed to be all about economics, but clearly they just couldn’t stand the idea of a black man in the White House.

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  7. TM01 says:

    @Kathy:

    I think the strategy is one the Cheeto understands well: it’s the next guy’s problem.

    I see we’re back on to that History Started With Trump thing again.

    Because Democrats have been SO responsible.

    Maybe it’s time we address spending, especially entitlement spending.

    I’m old enough to remember when GWB proposed significant reforms to social security and left had a fit.

    So please don’t pretend that Democrats are anywhere close to fiscally responsible.

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  8. TM01 says:

    @Daryl and his brother Darryl:

    And the Tea Baggers,

    What the hell is it with the Left and blatant homophobia.

    See, you’re still the problem.

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  9. Slugger says:

    I am 72. All my life, I have heard about the terrible consequences of deficit spending. Usually, the Cassandras have been Republicans, but, of course, they did not offer much praise for Bill Clinton who actually did produce a balanced budget one year. Is the deficit a real problem, or is it some chimera based on a mix of the very limited understanding we have of how economies work and politicians trying to spook people into voting for them?

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  10. Daryl and his brother Darryl says:

    @TM01:

    GWB proposed significant reforms to social security

    Privatization? That would have been awesome when he subsequently ran the economy into a death spiral. Everyone would have lost their SS AND their 401K’s. Brilliant!!!
    Why attack entitlements in order to pay for $1T in tax cuts Republicans just gave to most wealthy? How about, instead, reasonable tax increases on those who benefit the most from Government spending, yes, those same wealthy folks. You know, what Dennison campaigned on. How about cuts to the bloated military?
    You’re just dumb. There’s really nothing else to say.

    don’t pretend that Democrats are anywhere close to fiscally responsible.

    The actual record…you know, data, history…shows that the economy fairs much better off under Democratic Presidents than Republicans. Dennison is going to skew that data even further in favor of Democrats.

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  11. Daryl and his brother Darryl says:

    @TM01:
    What else should I call a bunch of old white racists wearing silly hats with tea bags stapled to them?!?!?

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  12. Andy says:

    @Daryl and his brother Darryl:

    The actual record…you know, data, history…shows that the economy fairs much better off under Democratic Presidents than Republicans. Dennison is going to skew that data even further in favor of Democrats.

    Except correlation isn’t causation. No one has been able to identify the levers that Presidents control to make the economy worse or better. The Executive branch ability to command or control or adjust long-term economic trends is extremely limited. Even adding in Congress the effects are hard to measure because big new legislative policies take many years before their full economic effects are felt. Presidents gain or lose on the economic scale by factors they can’t control, like demographics, events in the world economy, etc. It is wrong to give them credit or opprobrium for simply being in the chair when something happens.

    So I find the whole “party X is better for the economy than party Y” arguments don’t have a lot of actual empirical evidence or merit because the analyses that look at this consistently fail to control for these other factors.

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  13. KM says:

    @TM01:

    Maybe it’s time we address spending, especially entitlement spending.

    Why? It’s not the biggest thing we can cut so it’s not the place we’ll save the most. Bet you’re that person that chirps how much you’re saving by not buying the occasional $4 dollar latte a day but blows $100s a month going out to eat and drink several times a week. Effective budgeting is not getting rid of the small incidentals but controlling the larger costs as much as possible. Saving pennies means nothing if you’re burning through 20s faster then you can earn them.

    Let’s talk defense spending. Let’s talk corporate welfare. Let’s talk permanent tax cuts for the wealthy but temporary ones for the middle class. Let’s talk about how you’d rather pay Trump to go party at his own hotel 52 weekends a year rather then help the working poor out. Let’s talk about how seniors – you know, the people who tend to vote and vote R? – are NOT gonna like you touching their SS/Medicaid/Medicare and how you’re totally OK with screwing the younger generation then pissing off precious voters. Let’s talk about how much red states are screwed if you tried taking money out of their pockets because the majority of their residents need these programs to live.

    Then we’ll talk about “entitlements” and why you need a dictionary on what that word means. Hint – it’s not what the GOP tells you.

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  14. Mikey says:

    @Andy:

    Except correlation isn’t causation.

    It’s also not irrelevant.

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  15. Daryl and his brother Darryl says:

    @Andy:

    Except correlation isn’t causation

    Given…but the pattern is too damn consistent, over too long a period, to mean nothing. As I said…Dennison is just going to skew the data way over in favor of the Democrats; there is no reason whatsoever for anyone to believe that we won’t be borrowing even more money as Dennison’s term goes on.

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  16. Andy says:

    @Mikey:

    It’s also not irrelevant

    In what way and to what extent is it relevant? Please be specific.

    @Daryl and his brother Darryl:

    If the pattern wasn’t consistent over time then there would be no correlation to begin with.

    Again, where is the evidence? To what degree would the economy have been better had Gore won in 2000-to give one example?

    Unless one can at least attempt to identify a common causal factor to explain the correlation, and trace a line of causation, then there is nothing except a convenient talking point.

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  17. Mikey says:

    @Andy: There’s a very relevant correlation between current GOP control of Congress and the White House and the fact the annual federal budget deficit just nearly doubled.

    Although one could argue that’s full causation rather than correlation.

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  18. gVOR08 says:

    1. Yes, correlation is not causation, but it is a correlation, a fact which is subject to examination.
    2. This correlation may not support a claim of better Democratic econ policy, but it sure as hell does not support a claim of R policy superiority.
    3. The economists I’ve seen address this, including Dr. Krugman, fail to find an explanation, but being economists they look for macro econ policy explanations, which may not be the place to look.
    4. My own hypothesis, which I don’t begin to have the evidence to support, is that it’s partly small ball. Better regulatory and labor policy enforcement in the agencies. Better tax policy. Democrats, in general, have done better at avoiding doing big stupid things.
    5. Having said that, macro policy under Reagan, deliberately throwing a recovering economy back into deep recession, certainly didn’t help the Rs record. (The quite normal recovery after they were forced to loosen up money is the “Miracle of Reaganomics” of song and legend. )
    6. Then, under the heading of doing stuff big and stupid, there’s war and peace. Johnson and Nixon split the Vietnam war. Carter , Reagan, and Clinton avoided anything big, as largely did Obama. The Bushes made a hobby out of war with Iraq, and later an endless war in Afghanistan. I can’t help but feel that burning trillions of dollars may have some macro econ effect. Oh, I almost forgot Ford. If I keep trying I may eventually succeed in forgetting him completely.

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  19. Daryl and his brother Darryl says:

    @Andy:

    Again, where is the evidence?

    Trump.
    Republican Congress.
    A trillion in borrowing for the first time in years and double 2017, an Obama budget year.
    ’nuff said.

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  20. Andy says:

    @Mikey:

    And

    @Daryl and his brother Darryl:

    My response was about the overall economy, not the federal budget. You both are moving the goalpost.

    When it comes to the budget, I agree the GOP is much worse when it comes to deficit spending.

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  21. Andy says:

    @gVOR08:

    Most of that is reasonable IMO, except the part about Afghanistan.

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  22. Daryl and his brother Darryl says:

    @Andy:
    You’re looking for a single cause, a magic bullet that explains an established pattern. Good luck.
    Circumstances differ, and thus causation, but the pattern, and thus the correlation, is the same.
    I hate analogies, but try this one:
    Traffic on I-95 sucks because Connecticut drivers are the worst in the country. One day it might be an accident. Another it might sprinkle and everyone has to slow down to a crawl. Or there might be a curve and they all have to come to a complete stop before they can negotiate it. Or there is someone driving 57mph in the fast lane. The causation is always different…but the correlation is clear…Connecticut drivers suck.

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  23. Kathy says:

    I’m wondering about some of the Cheeto supporters here. To paraphrase The Brain: Do they have a natural talent for missing the point, or is it something they must hone through practice?

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  24. al Ameda says:

    What is it about Republicans?
    George W Bush ran the wars in Iraq and Afghanistan off-budget and passed a tax cut at the same time, and Trump passed a tax cut while he demands a bigger Defense Budget at the same time.

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  25. michael reynolds says:

    The idea that presidents define economies has always been nonsense. Presidents raise or lower taxes, increase or decrease regulation, raise or lower budget requests. Those influence the economy, but don’t define it. And we don’t actually know how any of those factors influence the economy, or to what degree, or with what interactions with other factors.

    The truth is we don’t really have a clue how to control the economy, economics is not a science able to predict outcomes with useful accuracy. We act as if a president is driving the economy car, but that just is not reality. If it were we’d have eternal growth with low inflation and good-paying jobs for all. If we knew the econ version of 2+2 we’d all be saying 4 in unison.

    What we do understand is human nature. Give the rich more money and they will keep it. They won’t trickle it, they’ll do everything they can to hold onto it. They didn’t get rich giving money away. Give the poor more money, they’ll spend it right away. A dollar to a poor person is spent before it reaches his wallet. If you want more investment capital (or just stock buy-backs), give money to the rich. If you want to sell more goods and services, give money to the poor.

    We will never, ever be able to actually control the economy, because the economy is the system of everything, very much including humans, and a system involving 100 nations, with 100 different populations and governments, with unpredictable lurches in technology, ideology, with natural disasters, with wars and famines, contains far too much uncertainty. Let’s try something simpler: predict where your cat will go over the next hour. You can’t do it with any level of accuracy, and the system known as ‘cat’ is infinitely simpler than the system called ‘economy.’

    We’re all fighting over ‘the economy’ without half a clue how to fix it. Or what a fix would look like. We might as well be 17th century physicians arguing about bodily humors and miasmas. We clearly do not know what the fck we’re talking about.

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  26. TSK TSK says:

    @Slugger: Clinton never balanced the budget. At best you can declare that it was cash flow positive, but total liabilities continued to increase. The last real budget surplus was in… 1957. Feel free to check out treasury.gov if you remain confused about this.

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  27. TSK TSK says:

    @Hal_10000: The majority of FY2009 discretionary spending wasn’t passed until Obama entered office, but sure, whatever.

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  28. TSK TSK says:

    @KM: Entitlements aren’t just the biggest item of federal spending they are massively bigger than everything else. Social security alone is 1.5x the defense budget. Medicare alone is the size of the defense budget. Medicaid alone is 2/3 of the defense budget. And all of them are rising. But I don’t expect you’ll ever bother to educate yourself on the subject.

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  29. TSK TSK says:

    The Obama deficits came in the wake of the Great Recession and, while they were at least partly due to increased spending such as the 2009 stimulus package, one of the main reason for the size of the deficits in those years was the fact that Federal revenues were still feeling the impact of the Great Recession for several years after the recession ended.

    Oh please. Federal spending averaged over 23% (23.325%) of GDP over Obama’s first term. That is an unprecedented level of non-wartime spending. Care to know what the post-war average is? 19.3% And revenues? The post-war average is 17.2%. The average during Barry’s first term? 13.875%. So he exceeded the post-war average spending by 4% of GDP and had revenues 2.3% below the post-war average. Yeah, you might think that his spending had something to do with it. Source.

    And you conveniently forgot to mention that deficits started rising under Obama before Trump even took office. Yes, it fell to a low of 438BB in 2015 but then increased 150BB the following year to 585BB and increased yet again in 2017 to 665BB. Now I know Trump is an evil genius who is simultaneously a moron, but don’t you think that if he had such time traveling powers there’s so much more he would have done?

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  30. Kylopod says:

    @Andy: @michael reynolds: I agree that there’s very little evidence presidents have much control over the economy. If Gerald Ford or Ronald Reagan had won the 1976 election, they’d almost certainly have faced the same oil crisis that brought down Jimmy Carter’s presidency, and very likely a Democrat would have been elected in 1980. If Republicans hadn’t stolen the 2000 election, there would still have been a recession early in Al Gore’s first term. If John Kerry had won in 2004, he’d still have faced a major economic crash that would have all but ensured a Republican victory in 2008.

    Bill Clinton presided over a strong economy, but it was largely a result of the Internet revolution.

    What presidents do have a lot of control over, though, is the fiscal situation, and there the picture couldn’t be clearer: Democrats care about the deficit, Republicans don’t. Period. The modern GOP agenda is to push a set of economic policies that objectively cause the deficit to rise while claiming against all available evidence to be committed to lower deficits. They conceal the effects of their policies through a mixture of obfuscation, outright lies, advocacy of the empirically disproven “supply-side” fairy tale, and a dose of good old-fashioned economic literacy. Indeed, one of the biggest economic myths of all is that the federal budget provides a picture of how well the economy is doing. There’s certainly a relationship between the federal budget and the national economy, but they are not the same thing. Equating the two leads to support for bad policies, particularly the idea that balanced budgets are intrinsically a good thing, and that running high deficits is irresponsible governance under all circumstances–assumptions that much of the press routinely makes.

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  31. Ben Wolf says:

    @TSK TSK: That’s actually false. Real defense spending has been estimated high as $1.5 trillion once everything that actually involves defense is included.

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  32. Ben Wolf says:

    FYI, the American economy doesn’t run on digits. Find something real to complain about.

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  33. Jc says:

    @TSK TSK: GDP contraction has something to do with it, you know…a recession. Every POTUS exceeds that average during a recession post wartime because every POTUS spends more during a recession and does not raise taxes. Reagan was over 22%.

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  34. TM01 says:

    @Daryl and his brother Darryl:
    Wow.
    Talk about over simplifying things.
    The cratering was set in motion years ago thanks to govt programs you support, and your belief that Our Superiors can run and control an economy.

    As said earlier, correlation is not causation.

    The truth is, you can’t fix the economy. You need to leave it alone. Every time you try to fix it, you make it worse. Then you blame capitalism when your fixes fail. You can’t control something as complex as a full economy. Not well, anyway. Only your hubris makes you think you can.

    How about we stop baseline budgeting? Stop the omnibus bills. Maybe stop saying republicans want to push granny off a cliff just because they want to slow the growth in spending. Stop calling a smaller increase in spending a Cut.

    You know, try and be reasonable and have a rational discussion about federal spending instead of calling people terrorists, racist, etc.

    Can you do that? Or is that too much to ask?

    Also…. regarding modest tax increases for the rich, it is very fun to watch Democrats now campaign on reducing taxes on the rich, promising to bring back the SALT deductions for the rich. Too funny!

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  35. Ben Wolf says:

    @TM01:

    The truth is, you can’t fix the economy. You need to leave it alone. Every time you try to fix it, you make it worse. Then you blame capitalism when your fixes fail. You can’t control something as complex as a full economy.

    And yet capitalism is a system based on centralized control of an economy. The boards of directors and the CEOs of the top three thousand corporations control most of the country’s wealth, make all the decision on what to produce, where to produce, how to invest, who gets a job, how much they’re paid, when they can go to the bathroom. Generously, one hundred thousand people control the economic destiny of 330 million, just in the United States. And we haven’t gotten to the fact those hundred thousand have near-total control of government policy.

    And you think that’s free.

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  36. Daryl and his brother Darryl says:

    @TM01:

    The cratering was set in motion years ago thanks to govt programs you support

    That’s just utter fvcking nonsense.
    The crattering was primarily caused by lax regulations on banking…that permitted banks to engage in hedge fund trading with derivatives. Banks then needed more mortgages to fund the derivatives; they created interest-only loans and gave them to unqualified borrowers. In ’04 the Federal Reserve raised the fed funds rate just as the interest rates on all these new mortgages reset. Housing prices cratered and supply outpaced demand. Suddenly trapped homeowners couldn’t afford their mortgage payments, but also couldn’t sell their houses. In turn the values of the derivatives crumbled, and banks stopped lending to each other. That led to the financial crisis that led to the Great Recession.

    IMPORTANT TO NOTE THAT REPUBLICANS ARE ACTIVELY DE-REGULATING THE BANKING INDUSTRY AGAIN, AS WE SPEAK.
    Past is prologue.

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  37. KM says:

    @TSK TSK :
    Again, you people need to look up the meaning of the word “entitlement”. It’s not a swear word but rather it means you are getting what you are due. People have paid into SS their whole lives but you talk about it like it’s free candy being dropped from heaven.

    Unless you are willing to do your part and sign away any and all SS benefits for you and your beneficiaries, you are fine with accepting the “entitlement”. Funny how that works – people scream about how we need to cut “entitlements” but are never willing to sign away their rights to them to help keep the budget down. You’re willing to take money from others but not willing to accept the axe for yourself.

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