CBO Projection: US Deficit Tops $1 Trillion Two Years Ahead of Schedule
Prior to the 2016 election, Ryan McMaken noted that history shows the fastest way to increase government spending is to vote Republican:
[F]or decades, we've been told that a vote for the GOP is a vote for "smaller government." This is repeated both by Republicans, who say it like it's a good thing, and by Democrats who still seem to think that the GOP is committed to cutting grandma's safety net.
If we look at federal spending, though, it's easy to see that the myth of the budget-cutting Republican president is just that: a myth.
As such, it's no surprise that projections for the US deficit has now ballooned to over $1 Trillion two years sooner than previously estimated.
The U.S. budget deficit will surpass $1 trillion by 2020, two years sooner than previously estimated, as tax cuts and spending increases signed by President Donald Trump do little to boost long-term economic growth, according to the Congressional Budget Office.
Spending will exceed revenue by $804 billion in the fiscal year through September, jumping from a projected $563 billion shortfall forecast in June, the non-partisan arm of Congress said in a report Monday. In fiscal 2019, the deficit will reach $981 billion, compared with an earlier projection of $689 billion.
The nation’s budget gap was only set to surpass the trillion-dollar level in fiscal 2022 under CBO’s report last June.
Of course many pundits and Democrats in Washington are going to direct the blame to Republican tax cuts passed year - the one really good policy we've seen from Congress.
Naturally anyone familiar with the CBO would be justified in questioning the accuracy of their work (these estimates, for example, include projecting interest rates of 4% by 2021 - higher than the Fed's own projections.) In this case, however, increased deficits were inevitable given that the Trump Administration has allowed Republicans in Congress the cover they've needed to finally act on bipartisan hostility to the sequestration caps on the Federal budget. The GOP has managed to get increases in military spending that are larger than Russia's entire defense budget, while Democrats have been able to receive funding for all sorts of projects that the GOP would have objected to if Obama was still in office.
Now the proper reaction to these new fiscal concerns should be for both sides of the isle to get serious about spending. What we will instead see are new calls to increase revenue - perhaps by increasing taxes that are easier to hide than the income tax - and renewed calls to abolish the debt ceilings.
At the end of the day though, this news really should simply be seen as another reminder that US default is just a matter of how, not if.