Wednesday, September 12, 2018 1:00 am
Budget deficit soars despite good economy
Government spending up 33 percent this year
Damian Paletta and Erica Werner | Washington Post
WASHINGTON – The U.S. budget deficit is reaching levels that are abnormally high for a robust economy, and lawmakers from both parties are proposing ideas that would make the deficit swell even further.
The government spent $895 billion more than it brought in from taxes and other revenue sources during the past 11 months, the Congressional Budget Office said this week, a 33 percent increase from one year before.
Typically, the deficit shrinks during strong economic times, as the need for costly government support wanes and tax revenue rises. In 2000, the last time the unemployment rate was at its current level of 3.9 percent, the government ran a surplus, meaning tax revenue eclipsed all spending.
The dynamic is much different now.
Corporate tax receipts fell 30 percent in the past 11 months, the CBO said, precipitated by the large reduction in rates from the massive tax overhaul passed by Congress last year. Spending levels have risen sharply as a result of a bipartisan agreement to shed budget caps put in place to maintain fiscal discipline and pour more money into both military and domestic programs.
“It's not just irresponsible, it's wildly irresponsible,” said retired senator Kent Conrad, D-N.D., who added that lawmakers are pushing the deficit higher because of political expediency.
Among the Republicans, the loudest voices recently have come from outside Congress.
“With a booming economy, full employment, a soaring stock market and record asset values, we should be shrinking the deficit, not growing it,” Mitt Romney, a Republican and Senate candidate in Utah, wrote on his campaign website Monday. He said other conservatives have largely been “silent” on the issue since President Donald Trump took office.
Yet there are signs the borrowing binge has only begun.
Leading House Republicans proposed an additional $646 billion in tax cuts this week – a number that could grow to roughly $2 trillion over a decade – and a growing number of prominent Democrats have proposed expanding access to government-sponsored health care, which could add trillions.
A number of congressional Republicans have defended the tax law's impact on the debt, saying they believe cutting taxes will ultimately lead to so much economic growth that it more than compensates for the loss in revenue.
“I think it's a very modest investment in a dramatically better economy where, a lot of people in our country who really lost hope in finding a good-paying job, now have hope and are actively seeking those jobs,” House Ways and Means Committee Chairman Kevin Brady, R-Texas, said.
As the government borrows to plug the hole between revenue and spending – the deficit – it adds to the national debt by borrowing money. Lawmakers from both parties have said this saddles future generations of Americans with huge fiscal burdens, and it could also make it extremely difficult to respond to an unforeseen shock, such as a financial crisis, a natural disaster or a terrorist attack.
The government has $21.5 trillion in debt, up from $12.8 trillion in 2010, when a fiscal commission led by Alan Simpson and Erskine Bowles sought ways to reduce the deficit. And the cost of maintaining this debt is snowballing, driven higher by spending and rising interest rates.
The government is projected to spend $390 billion on interest payments next year, an amount almost equivalent to its entire $401 billion budget for Medicaid, the health insurance program for the poor, according to the CBO.