Welcome To The Era Of Trump’s Trillion Dollar Budget Deficits
We're set to return to the era of trillion dollar budget deficits, and Republicans won't do a thing about it.
Later this week, the Congressional Budget Office is expected to release a report confirming that we will see Federal Budget Deficits exceeding one trillion dollars for the remainder of the Trump Presidency:
The new U.S. normal of $1 trillion or more annual federal budget deficits will officially begin this week when the Congressional Budget Office releases its economic and budget outlook report showing that the deficit will be at least that high every year Donald Trump is president.
Although there have been private sector projections for months (including my post from last October) that the government’s red ink will hit and exceed a trillion dollars for years to come, this will be the first report by Congress’s official budget watchdog since last year’s big tax cut and this year’s spending deal were enacted that will show the deficit rising precipitously and staying at that very high level through the next 10 years.
The official CBO projections are likely to be lower than the budget deficits that actually occur. CBO’s report is based on current law and makes no political judgements about what Congress and the president will do in the future. That means the deficit projections will be based on the presumption that the tax cuts enacted last year that currently phase out will in fact end. That means the CBO forecast will assume that future revenues will be higher and the deficit lower compared to what is likely to occur.The same is true for spending. For this report, the Congressional Budget Office doesn’t presume that any of the reductions proposed in the Trump 2019 budget will be enacted. That will increase the deficit outlook compared to what the White House will say it will be.
As conservatives and other supporters of President Trump will no doubt point out, this won’t be the first time that the Federal Government will run budget deficits in excess of a trillion dollars. The early years of the Obama Administration saw a similar phenomenon, and of course it became a point of criticism on the part of Republicans both when they were in the Congressional minority and when they took control of Congress in the 2010 midterm elections. Indeed, 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. As Forbes magazine’s Stan Collander notes in the article linked above notes, though, those deficits came in the wake of the Great Recession and, while they were at least partly attributable to increased spending in the early years of the Obama Administration such as the stimulus package that was passed when President Obama first took office, one of the main reasons for the size of those deficits was the fact that the Great Recession had a serious impact on Federal Government revenues that lasted for several years after the recession ended. Over time, though, that deficit gradually shrank, as this chart shows:
As you can see, the trillion dollar deficits ended with Fiscal Year 2012. After that, the budget gap gradually fell to the point where it was even under $500 billion in Fiscal Years 2014 and 2015. Credit for that decrease does lie, in part, with the budget deals that were reached between the Democrats and Republicans that resulted in at least some constraints on spending such as the sequestration deal that was reached to resolve the 2011 standoff over raising the debt ceiling. At the same time, though, a great deal of the credit for the decline in deficits lies in the simple fact that revenues returned to more “normal” levels after several years of being lower due to the impact of the recession.
The difference between those Obama Era deficits and the ones we’re likely to see under the Trump Administration is that these deficits will be taking place during a period of economic growth, Indeed, the Administration’s own budget projections assume rising deficits notwithstanding the fact that they believe, without any real evidence, that economic growth in the coming years will be stronger than it has been in the recent past. If it turns out to be the case, as it most likely will, that actual economic growth is slower than what the Administration and Republicans on Capitol Hill are forecasting, then the deficits will be even higher than they are currently projected to be unless Congress and the White House move to act by either cutting spending or finding a way to increase revenues. Even more ideal would be an effort to address the structural issues in the Federal Budget that are making these deficits possible, including addressing the controversial issues surrounding so-called “entitlement” spending. The odds of that happening in an election year are, of course, non-existent, and the odds of them happening in a non-election year aren’t much better.
Former Republican Senator Judd Gregg hits upon the problem quite well in The Hill:
One might assume that the president, who has railed against the inequity of sending American dollars to China in the form of our trade deficit, would be equally outraged at sending them all these American tax dollars to support payments on our debt.
This is not the case, however.
He and the Republican Congress are now on a path that is well trodden by their liberal counterparts in the Democratic Party: running up the debt to pay for the baubles of today at the expense of our children’s future.
It should be called by its actual name: inexcusable, irresponsible liberal spending.
But it is not.
According to the president and his abettors in the Republican Congress, it is called “deal making.”
The Art of the Deal has never been so misdirected and destructive.
Ralph Waldo Emerson famously observed, “consistency is the hobgoblin of small minds.” Certainly this philosophy has been put on steroids for most of this president’s time in office.
There is one exception.
The president has been unceasingly consistent in his lack of concern for, interest in or, one suspects, awareness of the deficits that his government is running up or their dire implications for coming generations of Americans.
As to the Republican Congress, someone asked if there are no “deficit hawks” left in the Congress? The answer is that there are not even any “deficit pigeons” in this Congress.
One can understand why the president is so oblivious to the results of his actions in exponentially increasing the federal debt.
He does not care.
As a businessman, running up debt that could not be repaid became one of his most successful tactics. Not paying his debts in full or filing for bankruptcy worked for him in his prior role as a hotel builder. It can be assumed that he sees it working in his present role.
Trillion-dollar deficits as far as the eye can see, along with $1 trillion interest payments? It is unsustainable, to put it kindly.
Bankruptcy for a nation, however, is not a viable option.
The bill passed by the Congress and signed by the president sets a fundamentally new tone for the Republican Party.
As Collender notes in his Forbes yet another proposal for a Constitutional Amendment requiring a balanced budget,column, this weeks news about the beginning of a new era a trillion dollar budget deficits isn’t likely to cause either the President or the Republicans on Capitol Hill to actually do anything year. As it stands, it seems fairly clear that neither the House or the Senate even intends to comply with the law requiring the passage of a Budget resolution setting forth their budget plan. Instead, they’ll just put together another massive Omnibus spending bill that will not address any long-term issues, and there certainly won’t be any discussion about rolling back the tax cuts that passed in December which are projected to add $1.5 trillion to the budget deficit over the next ten years. Instead, we will likely see mostly symbolic and meaningless move such a the vote scheduled for later this week on something that won’t actually pass Congress never mind the state ratification process and which will do nothing to address the issues actually causing these new record deficits. So much for the party of fiscal responsibility.