Welcome Back To The World Of Trillion-Dollar Deficits

As predicted, the Federal Budget Deficit has crossed the threshold back into the world of trillion-dollar deficits. This is all due to the hypocrisy of Republicans and so-called conservatives.

The 2019 Fiscal Year for the Federal Budget ends at the end of this month, but we’ve already crossed the threshold into the land of budget deficits over $1 trillion per year for the first time since the end of the Great Recession:

The US budget deficit widened to $1.067 trillion for the first 11 months of the fiscal year, an increase of 19% over this time last year, the Treasury Department reported Thursday.

The current shortfall exceeds the full-year deficit for fiscal 2018, which was $898 billion.

President Donald Trump, who promised during the 2016 campaign to eliminate the federal debt, has instead overseen a dramatic increase in deficits.

The White House’s Office of Management and Budget has predicted that the deficit will exceed $1 trillion for the entire fiscal year, which ends on September 30. On Monday, the nonpartisan Congressional Budget Office said the federal deficit had surpassed $1 trillion in the first 11 months of fiscal 2019, according to its budget review.

The last time the gap was that big was in 2012, in the aftermath of the financial crisis.

A number of factors are driving the US deficit increase, including the $1.5 trillion tax cuts signed into law by Trump in 2017 along with a massive spending package passed by Congress.

The deficit is expected to swell to $960 billion in fiscal 2019, according to the CBO’s latest report, and average $1.2 trillion in each of the next 10 years. The CBO raised its forecast for this year’s deficit by $63 billion after Trump signed into law a bipartisan two-year budget deal over the summer.

In August, Congress agreed to a deal that would raise spending by an additional $320 billion over the next two years and suspended the debt ceiling through mid-2021.

None of this is surprising to anyone who has been paying attention.

We’ve seen deficits at $1 trillion before, of course. In the early years of the Obama Administration the Federal Budget Deficit exceeded that amount for two years in a row, a circumstance that happened due in part to both the contraction in federal revenues that occurred in the wake of the Great Recession and the increased spending reflected in part by the recovery package that the Obama Administration passed shortly after taking office. Along with the Democratic push for health care reform, those deficits became a campaign issue for Republicans and their victories in the 2010 midterms led to several showdowns with Democrats and, eventually, the passage of the Budget Control Act of 2011 that actually managed to put some breaks on spending that, along with increased revenues due to the economy recovery, reduced deficits steadily for most of the remainder of former President Obama’s time in office.

This time, the record-setting deficits that we are likely to see for the foreseeable future are coming at a time when the economy continues to boom during what has become one of the longest economic recoveries in history, and that they come at a time when financial markets are becoming increasingly sensitive to higher levels of debt and interest rates. Ordinarily, that should lead the Congress and the President to be more sensitive about taking action that increases the deficit and debt. Instead, we have the exact opposite.

When the final budget deal was put forward in mid-February of last year, for example, it included massive spending increases in almost every budget category and busted through the controls that had been put in place during the Obama Administration. 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. This is the same Republican Party, which had spent the Obama years lecturing Washington about spending and deficits. In the Trump Era. that same party has become the party of deficits and debt. By April of last year, 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

The word hypocrisy comes to mind here This, after all, is the same Republican Party that has preached the gospel of fiscal responsibility for years while at the same time ignoring those ideas when it has political power. The supposed Republican fidelity to fiscal responsibility and its 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. When former Presidents Bill Clinton and Barack Obama were in power, 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 Houses and members of Congress during both Administrations and, of course, as a way to appeal to voters and supporters. Riding this wave, the GOP was able to take control of both Congress and, eventually, the White House in 2000 and 2016. In the wake of both elections, though, everything changed.

As a result, here we are back in the land of trillion-dollar deficits that are likely to continue for years to come unless revenues increase and spending decreases. Regardless of who’s in power in Washington after November 2020, that quite simply isn’t going to happen.

Thanks, Trump. Thanks, Republicans. This is all your doing. 

FILED UNDER: Campaign 2020, 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. Guarneri says:

    “This is all due to the hypocrisy of Republicans and so-called conservatives.”

    I must have missed the Democrat cost cutting initiatives. And its the damndest thing. I can’t find the cost cutting initiatives in the Dem candidates proposals. Maybe I’m drunk from all the free beer…………..

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  2. Moosebreath says:

    @Guarneri:

    And for your next trick, you will claim that tax cuts (especially aimed at the wealthy) are not free beer.

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  3. Daryl and his brother Darryl says:

    @Guarneri:

    I must have missed the Democrat cost cutting initiatives.

    I guess you missed the Clinton and Obama Presidencies.
    Dumb fuq.

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  4. Matt says:

    @Daryl and his brother Darryl: Oh I already know the talking point he’ll use in response. “The only reason the deficit was reduced during the Obama and Clinton presidencies is because of the Republican controlled congress”…… Nvm that those very same congress critters will vote to explode the deficit when a Republican is president…..

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  5. An Interested Party says:

    I must have missed it when Republicans actually balanced budgets…oh wait, they never have done that on their own…talk about free beer…people can say whatever they want about Democrats, but at least tax and spend has the virtue of being more responsible than borrow and spend…

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  6. Kari Q says:

    Republican hypocrisy indeed. But they never tried to hide it; concern about the deficit was always just a ploy to keep Democrats from doing anything when they were in power. They must have been astonished that Democrats actually cared.

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  7. Gustopher says:

    Is just plain lying called hypocrisy now? I think you’re being unfair to honest hypocrites.

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  8. Gustopher says:

    @Guanoberry: There’s more than one way to fix a deficit.

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  9. al Ameda says:

    @Guarneri:

    Maybe I’m drunk from all the free beer…………..

    So the Republican tax cut paid for your free beer, but it did NOT pay for itself by reducing the deficit?

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  10. Kathy says:

    The lesson is clear: The US needs to maintain only Democrats in the White House until the debt is all paid up(*). It’s the only way to get the Republicans to behave.

    (*) No national debt is ever paid up.

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  11. Slugger says:

    I enjoy bashing Trump as much as anybody, and yes it is true that the Republicans have always expanded the deficit during my lifetime. However, are deficits bad? I have always heard bad things about deficits, and I see how deficits are destructive for a household, but I have trouble seeing damage in our national well-being from deficits. I would appreciate some enlightenment.

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  12. DrDaveT says:

    @Slugger:

    However, are deficits bad? I have always heard bad things about deficits, and I see how deficits are destructive for a household, but I have trouble seeing damage in our national well-being from deficits. I would appreciate some enlightenment.

    It’s a question of magnitude.

    Deficits are normal and healthy, at the national level. Borrowing from foreigners at very modest interest rates allows for productive investment, and not being tied to a balanced budget helps smooth year-to-year turbulence in revenues versus expenditures.

    …Until your debt gets large enough that you are spending a big fraction of your budget just on making interest payments to your creditors. At present, the annual interest on the debt is about $480B. That’s $480B that could be going for health care, or infrastructure, or stimulus, or welfare, or firming up our currently-hollow military capabilities, or whatever else you think the country needs most, but instead is mostly wasted.

    Currently, servicing the debt is about 10% of the budget. That’s not terrible, but it’s not great either, and the trend is bad. It’s also a positive feedback system that needs to be watched carefully.

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  13. Teve says:

    Agree with above, but also note that a little over 70% of US debt is held by Americans.

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  14. Just nutha ignint cracker says:

    @Kathy:

    (*) No national debt is ever paid up.

    [Shhhhhh… they don’t know this.]

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  15. michael reynolds says:

    @Slugger:
    For the last few years I rented, and I owned my cars so I had essentially zero debt. Now, I’ve bought a house and as a consequence I owe Wells Fargo a big pile of money. How has debt changed my life? Well, I like my house, and I didn’t used to. That’s pretty much it.

    Of course I bought a house I could afford. Had I bought a house I couldn’t afford, that’d be a problem. To me debt is all about what I can afford and what I want. As for the government I’d think the question is what we can afford, and whether we’re spending the money wisely. ie: do we like the house?

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  16. Kit says:

    @michael reynolds: @DrDaveT: I don’t think we are likely to have much in the way of disagreement, but I would phrase this a bit differently, or at least place the focus elsewhere. For me, the debt should ideally be an investment. When it’s the kids’ turn to pay off the debt that their parents rang up, these kids are working in a much larger economy, and the debt payments are modest. For those (not you two) who need an imperfect analogy, I’d liken it to buying a car in order to get a good job: eating up 10% of a handsome salary is much better than living debt-free on the streets.

    The problem with Trump is that today’s debt was simply a giveaway and does nothing to grow the economy.

    More generally, I’ll add that the problem with the debt comes from two groups. The first think of the nation as a big household. That’s what people know. Unfortunately, it works pretty much exactly the opposite. Both Joe Blow in the street and business men fit into this group.

    The next group are the sneaky MFers who use the public’s ignorance to ensure that money flows to the rich when times are good, and out of infrastructure and social programs when times are bad.

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  17. SC_Birdflyte says:

    Well, we know Agent Orange, in a Tweetpout a couple of days, demanded that the Fed lower interest rates into the negative range. Maybe that’s his solution to get more revenue.

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  18. David S. says:

    Yeah, as a rule of thumb, debt is value-neutral. Debt to good people is acceptable; debt to bad people is bad. This is why it’s okay to take out a loan from a bank, which has regulations around collection strategies, but not okay to take the same from a mob boss, who does not.

    Debt is an absolutely necessary part of society, simply because dynamic differentials in how much money everyone has is a basic part of what an economy is. Every time you make a transaction, there’s a theoretical transitionary period during which one party is in debt to the other: the actual transfer of value isn’t perfectly simultaneous. Loans are just an example of dragging that transitionary period out, with extra riders and qualifiers to make everyone feel comfortable with the extended time.

    Debt is an indication of trust. You trust the people you’re in debt to, and those people trust you to repay it. In the isolationist America-only world that many conservatives, even the saner ones, believe we should exist in, this means it makes no sense to be in debt to other countries, because that requires an amount of shared trust. So they’re very logically against having a deficit. They’re also wrong, but I repeat myself.

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  19. gVOR08 says:

    @Teve:

    Agree with above, but also note that a little over 70% of US debt is held by Americans.

    IIRC it was Dr. K who observed that the debt we’re leaving for our children is mostly owed to our children.

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  20. Kari Q says:

    The House GOP claims they are going to run on reducing the national debt. Isn’t that a little like an arsonist running on fire safety?

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