WASHINGTON – The U.S. budget deficit is reaching levels that are abnormally high for a robust economy, and lawmakers from both parties are proposing ideas to make the deficit swell even more.
The government spent $895 billion more than it brought in from taxes and other revenue sources during the past 11 months, the Congressional Budget Office said this week, a 33 percent hike from last year.
Typically, the deficit shrinks during strong economic times because the need for costly government support wanes and tax revenue rises. In 2000, the last time the jobless rate was at its current level of 3.9 percent, the government ran a surplus, meaning tax revenue eclipsed all spending.
The dynamic is much different now.
Corporate tax receipts fell 30 percent in the past 11 months, the CBO said, precipitated by the large reduction in rates from the massive tax bill passed last year. Spending levels have risen sharply as a result of a bipartisan deal to shed budget caps to maintain fiscal discipline and pour more money into both military and domestic programs.
“It’s not just irresponsible, it’s wildly irresponsible,” said retired Sen. Kent Conrad, D-N.D., who added that lawmakers are pushing the deficit higher because of political expediency.
“If you are seeking elective office, the hardest thing in the world is to say, ‘I’m going to raise your taxes or cut spending on popular programs,’ ” said Conrad, who has served as chairman of the Senate Budget Committee.
Among Republicans, the loudest voices recently have come from outside Congress.
“With a booming economy, full employment, a soaring stock market and record asset values, we should be shrinking the deficit, not growing it,” Mitt Romney, a Senate candidate in Utah, wrote on his campaign website Monday. He said other conservatives have largely been “silent” on the issue since President Donald Trump took office.
Yet there are signs the borrowing binge has only begun.
Leading House Republicans proposed an additional $646 billion in tax cuts this week — a number that could grow to roughly $2 trillion over a decade — and a growing number of Democrats have proposed expanding access to government-sponsored health care, which could add trillions.
A number of congressional Republicans have defended the tax law’s effect on the debt, saying they believe cutting taxes will ultimately lead to so much economic growth that it more than compensates for the loss in revenue.
“I think it’s a very modest investment in a dramatically better economy where, a lot of people in our country who really lost hope in finding a good-paying job, now have hope and are actively seeking those jobs,” House Ways and Means Committee Chairman Kevin Brady, R-Texas, told reporters last week. “It’s an investment that is paying off.”
As the government borrows to plug the hole between revenue and spending — the deficit — it adds to the national debt by borrowing money. Lawmakers from both parties have said this saddles future generations of Americans with huge fiscal burdens, and it could also make it extremely difficult to respond to a shock, such as a financial crisis, a natural disaster or a terrorist attack. And when the U.S. government borrows, it often must turn to countries such as China, at times complicating already tense relationships.
And then, there’s the interest
The government has $21.5 trillion in debt, up from $12.8 trillion in 2010, when a fiscal commission led by Alan Simpson and Erskine Bowles sought ways to reduce the deficit. And the cost of maintaining this debt is driven higher not just by spending but also by rising interest rates.
The government is projected to spend $390 billion on interest payments alone next year, an amount nearly equivalent to its entire $401 billion budget for Medicaid, according to the CBO.
Congressional Republicans spent much of the Obama administration decrying deficits and forcing restrictions on spending. They largely abandoned those sentiments when Trump took office.
Trump has prioritized ways to temporarily jolt economic growth as part of his agenda, arguing it will create more jobs. And there are signs the economy has picked up steam, with consumer and business sentiment reaching much higher levels.
But the deficit is also reaching much higher levels. Taken together, the tax cuts and new spending levels are expected to add more than $5 trillion to the debt over the next decade, according to the Committee for a Responsible Federal Budget, a nonpartisan organization that advocates for budget discipline.
“It is amazing that things are so much worse and yet people care so much less,” said Maya MacGuineas, president of the group.