The Trump administration has outdone itself. After running up the biggest deficit in six years in fiscal 2018, the U.S. government managed to increase that massive budget shortfall by 26 percent in 2019.
So, when is a $984 billion budget deficit good news?
When you thought you might get a $1 trillion budget deficit.
A CNBC report said this would likely, “come as a relief to the Trump administration, which had previously forecast that the deficit would hit $1 trillion during the 2019 fiscal year.”
Never fear, the CBO estimates we could see trillion-dollar deficits again as early as 2020.
Acting Office of Management and Budget Director Russ Vought tried to put a positive spin on the numbers. “Americans from all walks of life are flourishing again thanks to pro-growth policies enacted by this administration,” he said in a statement accompanying the Treasury Department figures.
Nothing like borrowing yourself into prosperity.
Despite sneaking in at just under $1 trillion, the 2019 deficit still ranks as the largest budget shortfall since 2012. The federal deficit has only eclipsed $1 trillion four times, all in the aftermath of the 2008 financial crisis.
The $984 billion deficit amounts to 4.7 percent of GDP. That’s the highest percentage since 2012. It was the fourth consecutive year in which the deficit increased as a percentage of GDP. The debt-to-GDP ratio is estimated to have increased a hefty 26 percent over last year.
The pundits in the mainstream media tend to focus on the Trump tax cuts as the cause for the surging deficits, but revenues rose in FY2019. Spending is the real culprit.
Total government receipts increased by 4 percent to $3.46 trillion. Corporate tax revenues came in at $230 billion, a 12 percent increase over FY2018. Individual tax revenues rose 2 percent to $1.72 trillion. Customs duties rose 70 percent and hit a record high of $71 billion thanks to the trade war.
But spending rose by over 8 percent, totaling $4.45 trillion. There were significant increases in both military and domestic spending. Uncle Sam spent $376 billion just paying interest on the existing debt.
The spending will continue into the foreseeable future. The bipartisan budget deal signed by President Trump over the summer suspended the borrowing limit for two years and will increase discretionary spending from $1.32 trillion in the current fiscal year to $1.37 trillion in fiscal 2020 and then raises it again to $1.375 trillion the year after that. The deal will allow for an increase in both domestic and military spending.
Speaking of the national debt; it increased by $1.2 trillion in fiscal 2019, according to Treasury Department data. The gross national debt currently comes in at a staggering $22.84 trillion and climbing.
To put that into perspective, last February, the national debt topped $22 trillion. When President Trump took office in January 2017, the debt was at $19.95 trillion. That represented a $2.06 trillion increase in the debt in just over two years. The borrowing pace continues to accelerate. The Treasury borrowed $800 billion in just two months. (If you’re wondering how the debt can grow by a larger number than the annual deficit, economist Mark Brandly explains here.)
During the presidential campaign, Trump promised to deal with the skyrocketing national debt. In fact, he said he could take care of it “fairly quickly.”
A Lot of Excuses
Trump supporters continue to offer a lot of excuses for this reckless behavior.
One person told me, “The president didn’t realize just how big the spending problem was, but he’s working on it.”
I find this a little difficult to swallow given that an entire political movement (the Tea Party) blew up to address the profligate spending in the Obama years. I knew how bad the spending problem was and I wasn’t running for president. Trump knew. And yet he still claimed he could take care of it “fairly quickly.”
I’ve also heard Trump supporters offer a version of the 3-D chess excuse to justify the deficits. You have to increase spending before you can cut it, or something like that. They claim that economic growth once Trump’s policies really take hold will eventually eliminate the debt. This is a pipe-dream. government debt and spending retard economic growth. Europe’s spending binge serves as a prime example.
The most frequent excuse advance by Trump supporters is that it’s unfair to blame the surging deficits and ever-increasing debt on the president. After all, Congress passes the spending bills – never-mind that these same people were perfectly happy to blame Obama for the massive deficits his administration ran during his first term. And given that administration officials like Vought insist on taking credit for the “pro-growth policies,” shouldn’t they also have to take responsibility for the negative impacts?
The truth is the president bears at least some responsibility for spending, budget shortfalls and debt.
While Congress does pass spending bills, the president signs these bills. He doesn’t have to sign them. If reining in debt and deficits was a priority, Trump would have vetoed these bills and insisted on spending cuts. Instead, he called for more spending, particularly for the military.
The executive branch also plays an integral role in the budgeting process. Executive branch departments submit spending requests that Congress uses to set spending levels. The president has complete control over how much money various departments request.
Finally, the president’s complete silence on deficits and debt indicates that it’s not a priority. Trump didn’t even mention the national debt during the last State of the Union address.
It’s also important to note that Republicans controlled both the House and the Senate when Congress passed the spending bills that authorized the last two years of massive deficit spending. If ever there was a time to cut spending, it was when the supposedly fiscally conservative GOP controlled the entire government.
Congress bears a great deal of responsibility for Uncle Sam’s fiscal malfeasance, but so does the president. His supporters need to quit making excuses, hold his feet to the fire and insist that he deal with the debt.