Tag: national debt

GOP Won’t Be Able To Hide From It’s Big Deficits Before The Election After All

images.jpg

House and Senate Republicans who so far have successfully avoided talking about how their tax and spending policies are spiking the budget deficit won’t be able to pretend for much longer that the United States isn’t staring directly into a GOP-created fiscal policy abyss.

The U.S. Treasury and the Congressional Budget Office will issue separate reports just weeks before Election Day that show the actual 2018 deficit between $800 and $900 billion and the estimated 2019 deficit exceeding $1 trillion. The fiscal 2017 deficit was $665 billion.

The deficit numbers the GOP had hoped to bury at least until after the election will soon be available for all to see.

House and Senate Republicans so far have been able to avoid talking about the deficit by making a complete mockery of the Congressional Budget Act. Even though Congress is required by federal law to adopt an annual budget resolution (the only legislation all year that compares total revenues with total spending and forces representatives and senators to vote on the deficit), the GOP leadership decided early in 2018 to prevent that from happening.

No budget resolution meant no budget debate. No debate meant no media coverage. No coverage meant Republicans wouldn’t be asked to explain their votes in favor of trillion-dollar deficits when they had previously and emphatically demanded that the federal budget be balanced.

This cleverness will end when Treasury and CBO issue their reports this October in the final days of a fierce election. That will put the GOP’s breach of faith with its fiscal past on full display for all to see, report on, criticize and make snarky 280 character comments about.

download-1 copy.jpg

Given the Trump administration’s efforts to control the narrative on all issues and run roughshod over established rules and procedures, and given the president’s more-than-obvious belief that federal departments exist solely to do his bidding, delaying Treasury’s report until after the election would seem like something it would consider.

But while it’s possible that the White House could concoct a reason to order the report be held until after the election, Treasury’s Monthly Treasury Statement is expected, used and relied on by Wall Street. Delaying it for obvious political reasons may be a theoretical option but just isn’t likely.

In addition, the Congressional Budget Office has shown no willingness whatsoever to knuckle under to political pressure and so will almost certainly release its own Monthly Budget Review this October no matter what the Republican leadership demands it to do.

That means that the deficit numbers the GOP had hoped to bury at least until after the election will soon be publicly available.

This timing could not be worse for Republicans. Congress plans to be out of session by the time these two reports are issued so there will be no chance for the GOP incumbents running for reelection even to do something — like voting for a balanced budget amendment to the U.S. Constitution — before the election.

In addition, on top of all the recent multiple swamp-like events involving Trump former and former allies, this soon-to-be-confirmed break with long-time GOP deficit orthodoxy is almost certain to push a number of more traditional Republicans to reconsider if or how they will vote this November.

Don’t Forget To Follow Stan Collender on Twitter @thebudgetguy

Wait…Don’t Leave Just Yet…There’s So Much More:

Trump’s Deficits Will Cause Very Serious Challenges For Multiple Generations Of Americans
Here’s What I Told NPR This Morning About The Deficit (Spoiler Alert: It’s Not Pretty)
Trump’s Economic Lies, Damn Lies And Statistics Revealed For All To See
Ryan And McConnell: Lock’em Up 
This Is Why Trump Will Shut Down The Government
Raising The Chances Of A Government Shutdown This Fall To 60%
OMB Director Mick Mulvaney Says CBO Was Right After All
Yes…Trump Will Shut Down The Government This Fall
You’ve Been Warned: Trump’s Trillion Dollar Budget Deficits Are Here To Stay

 

Advertisements

Trump’s Deficits Will Cause Very Serious Challenges For Multiple Generations Of Americans

shutterstock_546595351.jpg

The headline above is not partisan hyperbole or a rhetorical flourish: The $1 trillion-plus annual Trump budget deficits that are about to start will soon create huge policy challenges future generations of Americans.

While presidents submit and Congress adopts one-year budgets (when they bother to do a budget at all, that is), the spending and taxing policies put in place in those budgets are more or less permanent.

This is certainly true with federal spending because most of it is “mandatory”‘ and will continue until Congress and the president change it. Given that most mandatory spending (Social Security, Medicare and many veterans benefits, for example) are growing in popularity, reductions aren’t likely any time soon…and maybe not at all.

A second category of mandatory spending — interest on the debt — is only going to increase as interest rates rise from their recent lows and the national debt increases precipitously.

If anything, the Trump deficits will be larger than estimated.

But mandatory spending (which, depending on whose numbers you use, is between two-thirds and three-quarters of that side of the budget) isn’t the only federal spending that’s ongoing. Everything else may officially be classified as “discretionary” and require an annual appropriation to be spent, but Congress and the president seldom make more than incremental reductions in some of these programs. Overall, this spending goes up continuously.

The permanent nature of the federal budget is also true with revenues. The tax code essentially operates as mandatory spending because most of it continues until a change is enacted. Even when some provisions are set to expire (such as the individual tax cuts included in last year’s bill in 2025), the expectation is that, like annual appropriations, they will be extended.

All of this means that we’re not going to grow out of this. Unlike the trillion-dollar deficits in the early years of the Obama administration that occurred because of an economic downturn (you still remember the Great Recession, right?) and temporary tax reductions and spending increases, the Trump deficits are the result of permanent changes in taxes and spending when the economy is doing well.

If anything, the Trump deficits will be larger rather than smaller than estimated as (1) the U.S. economy worsens, (2) there are military or natural disasters that require federal involvement and (3) additional spending and tax breaks are adopted. An annual budget deficit and national debt increase of $2 trillion is very possible.

This underlying budget situation — permanent trillion dollar-plus deficits every year of the Trump administration and beyond — will force U.S. politics and politicians to face challenges that they’ve never had to face before. Consider just these five.

1. How will the federal government respond to the next economic downturn? Will Americans, who throughout U.S. history have expressed great anger about Washington’s red ink, decide that a deficit that approaches or exceeds $2 trillion is acceptable? Will policymakers have to limit their response to a downturn to show obeisance to the old limit-or-reduce-the-deficit mantra as they did in 2009 when the Obama stimulus was developed? Does this mean that the next economic downturn will be deeper and last longer than we’ve come to expect?

2. Is the same thing true of future military contingencies? How will the U.S. respond if there’s less tolerance for even higher deficits?

3. What will the need to finance a national debt that’s increasing by $1 trillion or more each year do to interest rates in the United States? How vulnerable will that make the American economy to the big foreign lenders like the Chinese?

4. How will the U.S. be able to respond to the needs of the next generations of Americans such as infrastructure, retirement and healthcare.

5. How will Congress ever agree to another budget if voting for deficits that are less than $1 trillion is politically unpalatable? Are threatened or actual government shutdowns even more likely now than they’ve been recently?

Follow Stan Collender on Twitter @thebudgetguy

Don’t Leave Just Yet…There’s so much more here:
Here’s What I Told NPR This Morning About The Deficit (Spoiler Alert: It’s Not Pretty)
Trump’s Economic Lies, Damn Lies And Statistics Revealed For All To See
Ryan And McConnell: Lock’em Up 
Today Marks The Demise Of The House Freedom Caucus
This Is Why Trump Will Shut Down The Government
Raising The Chances Of A Government Shutdown This Fall To 60%
OMB Director Mick Mulvaney Says CBO Was Right After All
Yes…Trump Will Shut Down The Government This Fall
You’ve Been Warned: Trump’s Trillion Dollar Budget Deficits Are Here To Stay