The federal government is projected to borrow a total of $1.3 trillion this year, more than double the amount borrowed last year and the largest annual borrowing figure since 2010, according to new estimates released by the Treasury Department.
The debt binge is extraordinary by historical standards. In only two years has the government borrowed more money, in nominal terms — 2009 and 2010, when the country was grappling with the effects of the Great Recession.
The increased borrowing is also notable for coming at a time of rising interest rates. That makes each dollar borrowed more costly than dollars borrowed in previous years when interest rates were lower.
The increase in projected spending is necessary, in large part, to finance the $1.5 trillion in tax cuts passed late last year Republicans in Congress and signed by President Trump. Earlier this year the Congressional Budget Office warned that the bill was causing the government to burn through cash more quickly as a result of reduced tax revenue.
The Treasury’s projections of its borrowing needs have increased significantly this year, a sign that authorities are still coming to terms with the total effect of the tax cut bill on the nation’s balance sheet. In February, for instance, the Treasury expected that borrowing for fiscal 2018 would cap out at about $955 billion. The $1.3 trillion projected now reflects a 36 percent increase over that borrowing estimate in a span of seven months.
Supporters of the tax cut legislation, including Trump, promised that it would reduce the federal debt, despite the fact that deficits rose after tax cuts passed by Presidents Ronald Reagan and George W. Bush. Although it’s still too early to fully assess the effects of the bill on the economy, the latest Treasury figures suggest that history may be repeating itself.