The Committee for a Responsible Federal Budget joined in condemning Republicans’ fiscal irresponsibility:
The Treasury Department today released a fiscal year-end report showing that the deficit for FY 2018 increased to $779 billion, a $113 billion (or 17 percent) increase from FY 2017. The deficit is 3.9 percent of GDP, also up from 3.5 percent in 2017. Not surprisingly, recent legislation plays a large role in the deficit increase.The $113 billion increase in the deficit comes from largely flat revenue coupled with increasing spending. Revenue was up only $14 billion, or 0.4 percent. This revenue growth rate is the eighth lowest in the past 50 years, and the seven lower years either coincided with a recession or tax cuts/expiring tax increases enacted shortly after a recession. As we have noted, though, even this slight revenue growth understates how much the 2017 tax law is reducing revenue since the fiscal year totals include revenue raised from the pre-tax law code. Accounting for inflation or as a share of the economy, revenues were down 4 to 9 percent over the tax year.
The notion that the tax cuts “paid for themselves” was patently false, as we noted at the time. The Congressional Budget Office “estimated that the tax law would cost $164 billion in FY 2018, which would account for more than the entire deficit increase. . . . The tax bill and the spending deal are expected to cost more next fiscal year ($228 billion and $185 billion, respectively) as the deficit is expected to reach nearly $1 trillion.”
The annual deficit continues a pattern of fiscal recklessness that Trump and Republicans have established since they took office in January 2017. USA Today’s fact check reported, “The federal debt held by the public stood at nearly $15.8 trillion at the last count on Oct. 10 — nearly $1.4 trillion higher than when he took office. That’s a 9.4 percent increase under Trump. And that figure will go up even more quickly in coming years unless Trump and Congress impose massive spending cuts, or reverse course and increase taxes.”
Whatever temporary bump we got from a massive tax cut for the rich, the debt will eventually drag down growth. As the Federal Reserve raises interest rates, the housing market will face “headwinds” and the tax cut-induced sugar high will end. The stock market hit the skids last week precisely because investors got spooked by interest rate hikes and their ensuing impact on growth.
Trump blamed the Fed for sparking the stock market pullback, but, as Jared Bernstein wrote, “If he wants to see one big reason rates are up, both at the Fed and elsewhere, he should look in the mirror. When you add this much fiscal stimulus to an economy already closing in on full employment, you’re playing with, if not fire, then at least heat.” He added, “In this regard, his Fed rants are his just usual operating procedure of finding someone to blame in case what he did goes wrong.”
When the next economic downturn hits, we will face it with a mound of debt and relatively low interest rates, meaning that we will have fewer fiscal and monetary tools at our disposal to dig ourselves out of a recession. And we will have a downturn — at some point. (“What if the Fed overreacts to the heat and moves from brake tapping to brake slamming? What if the trade war escalates? At least, that what they were worried about,” Bernstein wrote.)
Republicans used to worry about debt — as recently as 2016, when President Barack Obama was in office. Too bad we don’t have a responsible center-right party to demand that we stop passing on huge debt to our kids.