A report from the nonpartisan Congressional Budget Office released Wednesday offered a stark forecast for the nation’s budget: The deficit will be about $800 billion more over the next 10 years than previously forecast.
The CBO points to two recent policy decisions as the reason for the update — the budget agreement reached this year and emergency relief to address the situation at the border. More broadly, though, what’s driving the increase in the federal deficit is the tax bill President Trump signed into law in late 2017. Not convinced? Consider the CBO’s data.
Several times a year, the CBO releases projections of where tax revenue and spending will fall in any given fiscal year. Over time, the projections for where we’ll be in a decade shift, a function of policies that are passed or other outside factors (like recessions). If we plot those projections, we can see patterns that emerge.
Here, let’s just look. Here’s an animation adding projections from January 2016 to the one released today, nine in total. The blue-shaded lines were projections under President Barack Obama. The green ones were from Trump’s first year in office. The black one is the first post-tax-bill projection and the red ones the projections since.
You noticed, I assume, the big shift once that black line appears. Income tax revenue was already projected to fall, but once that black line appears — once the tax bill is law — it’s significantly lower over the short term. You can also see when the income tax cuts sunset; the black line goes back into line with the blue- and green-line projections.
The drop in corporate tax revenue is more significant over the short term. Notice, too, that the subsequent projections of corporate tax revenue have slipped lower still. (The charts in this article don’t all use the same vertical axis scaling, to show more subtle fluctuations. Bear that in mind.)
Interestingly, payroll tax revenue is projected to be slightly above where it was expected to be during Trump’s first year in office. Of course, there were reports this week, stamped out by Trump on Wednesday, that the White House was looking at a cut to payroll taxes.
The post-tax-cut shift in revenue is obvious when looking at the overall shift in expected receipts. Eventually, things get back to where they were projected to be before Trump took office, but the gap between the blue and green lines and the black and red ones represents once expected revenue that the government won’t collect.
Meanwhile, the amount of money that the government expects to spend — its projected outlays — remains fairly steady. No gap in spending as there is in revenue.
The result? A larger deficit each year than projected before the tax cuts.
You can also see on this chart that an additional $800 billion in deficits expected under the estimate released Wednesday; it’s the difference between the darkest red line (the new estimate) and the less dark line. This gap, here:
We’ll note only in passing that this is not what Trump promised. He pledged repeatedly to address the deficit on the campaign trail.
Though I guess it’s fair to note that he did. Just not in the way one might have expected.