Budget Deficit

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

The $866 billion budget gap so far this fiscal year represents a 27 percent increase over the same period last year.

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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 and trajectory of the federal deficit. As the CBO noted in May, "during the past 50 years, in years when the unemployment rate has been below 6 percent—as it is now—deficits averaged just 1.5 percent of GDP." Typically, when the economy looks as strong as it does now, and as strong as it has for the last several years, deficits have dropped. Instead, Congress is pushing deficits higher than ever. 

At the same time, debt and deficits have almost entirely dropped off the radar as a national political issue for both parties. The leading Democratic candidates have shrugged their shoulders at rising debt, and some have even flirted with the idea that it's not—and won't ever really be—a problem at all. President Trump pushed for the most recent budget deal, which will add $1.7 trillion to the federal debt over the next decade, and Mitch McConnell (R–Ky.) presided over a vote to pass it in the Senate. When Trump was warned by staffers that the current budget trajectory risked a budget crisis, he reportedly shrugged it off, saying, "Yeah, I won't be here." No one wants to talk about rising debt and deficits, or do much of anything to reverse course.

Doing so would also be a matter of simple math and policy choices. As CBO dryly noted in a late 2018 report on reducing debt and deficits, "to put the federal budget on a sustainable long-term path, lawmakers would need to make significant policy changes—allowing revenues to rise more than they would under current law, reducing spending for large benefit programs to amounts below those currently projected, or adopting some combination of those approaches." 

Just as increasing the deficit is a product of reducing revenues and increasing spending, reducing the deficit can only be accomplished by doing the reverse—taxing more and/or spending less. Given the broad political resistance to increasing middle class taxes, and the prominence of mandatory spending programs such as Social Security and Medicare in the federal spending schema, that almost certainly means an emphasis on the latter, perhaps with a dose of the former—which just happens to be the historical formula for reducing budget deficits. Until that happens, expect the deficit doom headlines to continue. 

NEXT: The Trump Administration's New "Public Charge" Rule is a Plan to Cut Immigration, not Reduce Burdens on the Welfare State

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52 responses to “We've Already Blown Past Last Year's Federal Budget Deficit

  1. When you reduce tax revenues on the one hand and then increase spending on the other, you increase the deficit…

    Which of these policy decisions does libertarianism demand demonization?

    1. Neither if you are R.

      1. Unless, of course, tax cuts or spending increases or higher deficits are associated with brown people. Then they demand demonization.

      2. It’s a good thing libertarians aren’t republicans then.

        Also: Fuck you, cut spending. (that’s a royal you)

        1. The DEBT is not the DEFICIT. And the DEFICIT is not the DEBT. They are separate problems.

          Government BORROWING drives up the debt, not government SPENDING.

          The solution to our debt problem is simple: STOP ISSUING DEBT-BASED MONEY! Begin issuing pure “unbacked” fiat money to fund the deficit, rather than going further into debt. The inflationary impact of unbacked dollars is no worse than the inflationary impact of the same amount of debt-backed dollars. Issuing unbacked dollars will halt the increase in the national debt and its crushing $479 billion in annual interest. Paying off part of the maturing debt each year and rolling over the rest will eventually bring the national debt (and its taxpayer-financed interest payments) down to zero. See http://www.fixourmoney.com .

    2. Tax revenues are up since the tax rate cuts. When you get your premise wrong you look rather silly. We have a deficit problem due to spending.

  2. Tax revenues have gone up, so we know what the real problem is.

    1. Not according to Sudderman. He has written multiple articles about the evils of stealing less of people’s money.

      1. You’re more or less a con man thief in my book. You’re running your mouth on here all day. We all know your ass ain’t earning that paycheck. You should keep your mouth shut you ungrateful leech.

        1. Now there is some fine intellectual give and take.
          Captain of the debate team, right?

        2. I wonder if this is Jason’s new sock, since he was outed as McJizz.

      2. Cite one.

        1. Also, while you’re providing that cite, make sure to quote the specific part of the article which you think does what you say.

    2. Tax revenues have gone up for the past 70 years. This time however, they have increased the least.

      1. Just put the numbers out there to prove your point. Should be easy

  3. have to assume long-running trend of 535 kicking can down road to protect phony-baloney jobs will continue to shine.

  4. Oddly the phrase “House of Representatives” nor the name “Nancy Pelosi is mentioned in this article. Has that bastard Trump unilaterally passed budgets or something?

    The budget deficit is up 27% this year over last. Has anything changed since last year?

    It is perfectly reasonable to criticize Trump and all of Congress for the budget deficit. They own it. But to write an article about the budget deficit while only mentioning Trump and the Senate and not the House is pathetic. Sudderman remains the worst.

    1. hahaha. Of course this isn’t Trump’s or R’s fault at all. They are victims. Always victims.

      1. Clingers have been victims all of their deplorable, shambling, bigoted lives.

        Victims of the culture war. Victims of progress. Victims of their betters. Victims of the reality-based world.

        Their suffering will ease soon enough, upon their replacement.

      2. hahaha. Of course this isn’t Trump’s or R’s fault at all. They are victims. Always victims.

        Well, what John actually said was

        It is perfectly reasonable to criticize Trump and all of Congress for the budget deficit. They own it.

        So, Jfree, how does your projection of your victimhood garbage apply here?

        1. Because he is singling out the House for special mention. He is singling that out because it is Dem now. With the implication that things were better before on the spending front. It’s the usual DeRp whatabout and lesser evil partisan bullshit that serves as a political tactic of excusing/immunizing one’s own side of actual accountability.

          But in fact the House has only been Dem since Jan – and this fiscal year started in Oct last year. The entirety of this House’s spending influence has been on five pieces of legislation. Only one of which – two weeks ago – actually sets the stage for significant increased spending – next year.

          IOW – whatever crap we can look forward to from this House, it is completely deceitful to blame them for anything YET. Blaming them NOW serves only that partisan political purpose.

          1. Here are the five pieces of legislation

            IOW – passed budget committee, passed House, passed Senate, signed into law and thus now subject to being spent.

            1. Somethings screwing up with that link. This site really needs an edit function

      3. “It is perfectly reasonable to criticize Trump and all of Congress for the budget deficit. They own it. “

        So what part of what John wrote gives Trump or the R’s a pass JFree?

        1. So what part of what John wrote gives Trump or the R’s a pass JFree?

          Oddly the phrase “House of Representatives” nor the name “Nancy Pelosi is mentioned in this article. Has that bastard Trump unilaterally passed budgets or something?

          This fiscal year started when R’s were in charge of the House last year. Until October, R’s own the entirety (absent some supplemental appropriation) of what is being spent. Any attempt to assert otherwise is the usual partisan con game and is proof that the person asserting (or defending said assertion) is a lying partisan hack with no interest in actual truth.

          1. BTW – there are no mulligans re credibility here. This stuff is well-known and has been for decades. You jump that Oct/FY gun for partisan political purposes, your credibility is permanently disqualified re ‘spending’. Once an untrustworthy lying partisan hack – ALWAYS an untrustworthy lying partisan hack.

    2. John, we expect Democrats to increase spending. If only Republicans weren’t giant cucks, maybe they would actually stand for what they believe in.

      1. In a sense, yeah, Democrats have a lower bar than Republicans because they are almost all completely insane. But they still deserve to be criticized for it.

        1. Let me know when Suderman ever defends democrats for their spending habits. In the meantime, criticism of democrats over spending is the default. Just assume it as a given.

  5. You worry too much, Suderman.. Our great grand-kids are good for it.. they would never welsh on our debts.. Now that we got that bit of unpleasantness out of the way, let the good times roll, and bring on the Free Shit™ !

  6. We elected a Democrat majority to the House and spending went up? I’m shocked. Shocked!

    1. You should check the relative performances of Democratic and Republican presidents and legislators, you half-educated, bigoted rube.

    2. But not a supermajority. If only there were another house with the good guys in charge.

      Or if someone could have used an “I forbid” card on this one. Maybe the same guy who said he would the next time, the last time he didn’t use the “I forbid” card when a bloated budget reached his desk.

      But yeah… Democrats are to blame for sure.

  7. ‘Moobs’ Schumers eyes are wonky. Did he have a stroke? Or did the Lizards not get the skin suit on correctly.

  8. Just the reason we need more destitute, unskilled foreigners!

    1. Agreed. Tax revenue (on sales if not income) coupled with way lower provision of tax-paid services than citizens? 100% benefit.

  9. In the alternate universe where Americans care about that number, President Mitt Romney is currently serving out his second term.

  10. So, tax cuts made a small difference.

    But what spending was increased by the last congress? How much?

    Or is there something else at work? There are structural increases built in to the budget by past administrations/congresses. We’ve got a long list of entitlements that only seem to go up in costs. Plus, we ran up how many trillion in debt over the last decade? How much more is the interest on 10 trillion bucks?

    So what’s really driving the increased deficit? Since revenue is actually up and the economy is growing at a healthy clip, driving revenue up further, I’m going to bet that there are massive increases in spending that are built in to the budget. Because I don’t remember any bold plan to spend another 500 billion dollars being passed in the last 2 years.

    1. A quick look shows that interest on the debt is the fastest growing category of federal spending…. Pushing from under $400 billion in some of the early Obama years toward $600 billion this year.

      That doesn’t account for everything…. but it is a $200 billion bump in the deficit that nobody voted for (well, nobody currently in charge…. even though a lot of the same people were actually in charge over the last 20 years as they added $20 trillion to the debt).

      And if interest rates ever approach a real number, what happens? I’m not even talking about stagflation numbers of 17%… what if they just jump up to a historically normal 7%? Suddenly we are paying not a half-trillion in debt service, but $1.5 trillion. Just to service the debt.

      Surely that day is coming, isn’t it?

      1. Here’s CBS from a couple of years back telling us that debt service payments were about to triple.

        https://www.cbsnews.com/news/u-s-national-debt-interest-costs-are-about-to-skyrocket-does-it-matter/

        Interestingly, their numbers show debt service hanging at $200 billion for the past decade even as debt soared, with service on the debt ballooning this year to $600 billion

        I’m not sure what the deal is there… several sources have the same numbers, and several others have service having been around $400 billion. Not sure how both can be true. Either way, everyone says that service on the debt is exploding, and only gonna get worse.

        But apparently they are saying it very, very quietly. Because nobody seems to be hearing it.

        1. At any rate, there seems to be a structural component to this increase in the deficit, just as there was a structural component to the decrease in the last couple of years of the Obama administration. You can’t keep spending high, pass huge new spending and see the deficit plummet without something out of your control changing…. (something like falling interest rates? A couple trillion in quantitative easing?)

          1. there seems to be a structural component to this increase in the deficit

            Yes – it’s called boomers hitting 65 and now drawing SS. Which started in 2010 – will peak in 2022 and remain the same for a decade or so before falling a bit. Medicare curve lags by about 5+ years – but won’t drop back a bit either.

            IOW – the window for fixing those two closed. Now we get to see what the end game looks like in 2030 or so.

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  12. Our country now has a debt in excess of 21T (yes trillion). The interest on this debt is growing rapidly. At some point, foreigners will stop buying our bonds, which is increasingly likely if US treasuries go to a negative yield. Then what? We will be in a world of hurt.

    This will not be solved over night. But I really wish someone would step forward with a proposal, any reasonable proposal, to pay down the debt to a very, very low level (under 500B, IMO).

    Remembering my history, this was a huge battle between Jefferson and Hamilton. Hamilton wrote that a national debt, if managed properly, would be a national blessing. Jefferson countered with the thought that the government belongs to the ‘living’ and that there should not be generational debt (which he defined as 19 years for a generation).

    In retrospect, I think Jefferson probably had this one right.

    1. We’ll have to start conquering foreign lands to cover our budgets.

      Lots easier to just kick the progs out and cut the budget.

  13. It would be so much easier to take Pete MacAdoodle Suderweigel seriously if he didn’t whine and scream like a hysterical little bitch during every so-called “government shutdown” or at someone suggesting that Medicaid should be cut by even one dollar.

    But then again, Pete MacAdoodle Suderweigel is one of the most shameless liars you’ll ever see in your life. He’s like the illegitimate love child of Matt Welch and Hildog:

  14. God forbid we adopt Switzerland’s and Hong Kong’s law of ensuring the federal government cannot spend more than what’s in the treasury.
    Then where all that graft money go?

  15. And yet nowhere does anyone explain why a federal deficit (which adds growth dollars to the economy) is a bad thing.

    The federal government can’t go broke; the economy needs growth dollars. So exactly what is the problem?

    1. There isn’t anything wrong with small, manageable, temporary government debts that eventually get paid back at some point. In fact, sometimes they’re absolutely necessary. That’s completely different from a massive and endlessly growing debt that will never be paid back.

      Economic growth that’s based entirely on the endless borrowing of money isn’t real growth, it’s an illusion. You’re just robbing one generation to enrich another generation. Real growth comes from the production of goods and service that people actually want and need and innovation (coming up with the “better mousetrap”.

      In fact, economists on both the left and right agree that massive, runaway debts eventually cripple a country’s potential growth. They call it the “debt overhang”.

  16. The issue that is guaranteed to sink the world….nobody but Reason readers seem to care about. Why is it that a midpoint normal people party can’t be organized by the Reason Podcast staff?

  17. Just wait until we get negative interest rates, the government will get paid to borrow and spend. Forget MMT.
    What is money?
    Buy hard assets.

  18. Since there are never any direct consequences for the government spending more than they take in, the process will continue into infinity. The government can always print more money. Unlike individuals, businesses and local or state governments, they won’t go broke. Now, as to what creating more money will do to the economic system…that is another story. So expect the politicians to continue unabated with no concern for the future of the country. What will happen when the recession arrives? What will happen when the spendthrift socialists start implementing all their freebies? Overtaxing the rich will be a sure prescription for disaster.

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