We’ve Already Blown Past Last Year’s Federal Budget Deficit

To grasp what dire shape the budget deficit is in, one only needs to glance at a handful of recent Bloomberg News headlines. There was “U.S. Posts Largest-Ever Monthly Budget Deficit in February” in March, followed by “U.S. Budget Gap Balloons to $739 Billion Despite Tariff Revenue” in June. In July, the headline was “U.S. Budget Gap Widens to $747 Billion in 9 Months Through June,” and the first sentence of the article noted that the deficit had grown by 23 percent this fiscal year, “as rising spending eclipsed a small bump in revenue from the Trump administration’s tariffs. And now, as the summer ends, we have U.S. Budget Deficit Already Exceeds Last Year’s Total Figure,” which notes that federal expenditures between October and June were up 6.6 percent over the previous fiscal year. The $866 billion budget gap so far this fiscal year represents a 27 percent increase over the same period last year. 

The ever-expanding deficit is a direct result of policy choices: the tax cuts passed by President Donald Trump and congressional Republicans in 2017, followed by the spending increases called for in the bipartisan budget deals that followed. The math here is about as basic as it gets. When you reduce tax revenues on the one hand and then increase spending on the other, you increase the deficit, which measures the gap between revenues (taxes) and outlays (spending).  

These policy choices have contributed to a federal budget outlook that the Congressional Budget Office (CBO) has repeatedly described as unsustainable—as in, we can’t keep doing this forever. We are currently on track for deficits that exceed $1 trillion starting in 2022, which is expected to equal more than 5 percent of the entire economy. Every dollar that moves through the economy will contain a deficit nickel. Since 1946, that’s only happened five times, mostly in the immediately aftermath of the Great Recession. 

But we are not in a recession. In fact, by many measures, these are boom times for the economy, with unemployment rates holding historic lows. That is another reason to worry about the size

You can read the rest of this article at: https://reason.com/2019/08/13/weve-already-blown-past-last-years-federal-budget-deficit/