Washington Post: The Federal Deficit Ballooned at Start of New Fiscal Year, Up 77 Percent from a Year Before

March 06, 2019

Article by Damian Paletta in Washington Post

The federal budget deficit ballooned rapidly in the first four months of the fiscal year amid falling tax revenue and higher spending, the Treasury Department said Tuesday, posing a new challenge for the White House and Congress as they prepare for a number of budget battles.

The deficit grew 77 percent in the first four months of fiscal 2019 compared with the same period one year before, Treasury said. The total deficit for the four-month period was $310 billion, Treasury said, up from $176 billion for the same period one year earlier.

“It’s big tax cuts combined with big increases in spending when they already had big deficits,” said former Senate Budget Committee chairman Kent Conrad (D-N.D.). “So guess what, it’s craziness!”

When Republicans seized control of the House of Representatives during the Obama administration, lawmakers and White House officials embarked on a number of strained negotiations to try to reduce the gap between spending and tax revenue. During the Trump administration, there have not been any similar discussions, and President Trump has largely enacted an agenda of tax cuts and spending increases that had grown the deficit markedly.

Tax revenue for October 2018 through January 2019 fell $19 billion, or 2 percent, Treasury said. It noted a major reduction in corporate tax payments over the first four months of the fiscal year, falling close to 25 percent, or $17 billion.

Spending, meanwhile, increased 9 percent over the same period.

The Congressional Budget Office has projected that the deficit this year will reach close to $900 billion, because the government spends so much more money than it brings in through revenue.

The ballooning deficit comes as interest rates are expected to begin rising, driving up the cost of borrowing money. The government is projected to spend $383 billion on interest payments for its debt this year, and that will rise to $581 billion in 2022, according to the CBO.

There has been a total breakdown in Washington, however, over how to address the budget deficit. Policymakers must also reach an agreement by this fall on raising or suspending the debt ceiling, as the government will no longer be able to borrow money to cover many payments if Congress doesn’t act.

The federal government is now more than $22 trillion in debt, largely representing an accumulation of all the money it has borrowed to finance programs in past years.

The U.S. economy is still the strongest in the world. But large debt levels have caused financial crises in a number of other countries and forced major economic changes that have led to recessions, a phenomenon that some have warned could happen in the United States if steps aren’t taken.

Sen. James Lankford (R-Okla.) was bemoaning debt levels Tuesday, a few hours before Treasury reported the big increase in the deficit.

“If you take 22 trillion miles, total distance, you would fly from Earth to Pluto and back 3,081 times,” Lankford said on the Senate floor. “This is a heavy debt.”

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