Monday, August 12, 2019

US deficit keeps rising while agencies are understaffed. Just in time for a budget debate!

The US Treasury Statement for July hit this afternoon, and it generated this not-surprising summary in the news.
The U.S. government’s budget deficit rose by $183 billion to $867 billion during the first 10 months of this budget year as spending grew more than twice as fast as tax collections.

The Treasury Department say the deficit for the current fiscal year through July is up 27% from the same period a year earlier. Spending rose 8% to $3.73 trillion, and tax revenue rose 3% to $2.86 trillion.
The Congressional Budget Office gives more insight to the numbers in the Treasury Statement, and it showed that the deficit is finally starting to level off compared to last year’s levels.
The federal government realized a deficit of $120 billion in July 2019, CBO estimates—$43 billion more than the shortfall in July 2018. Outlays in July 2018 were affected by a shift to the previous month of certain federal payments that otherwise would have been due on the first weekend in July. If not for that shift, the deficit in July 2018 would have been $123 billion—$3 billion more than the deficit this July.
So we’re basically at a point now where the monthly deficit is going to be in the same range as it was for that month last year.

In looking at the Treasury Statement itself, in FFY 2018, the combined August-September deficit ended up being around $95 billion. But that’s split between an August deficit of $214 billion and a September surplus of $119 billion (September is a month that features a lot of quarterly taxes being paid). If those same numbers happen in 2019, you would see the Fiscal Year deficit hit $1.08 trillion after August, but settle at the end of the year near $962 billion. That total would place it between the CBO estimates from earlier this year and the $1 trillion figure projected by the Trump Administration.

Oddly, even with a year of inflation and job growth, the amount of individual income taxes withheld from paychecks is DOWN by $15.9 billion in Fiscal Year 2019. The only reason income taxes have increased overall is because refunds are down by $22.6 billion for this year. The largest increase in receipts actually is coming for payroll taxes collected for Social Security and Medicare, which are up by $69.0 billion this year.

On the business side, corporate taxes have barely budged from the lower, post-Tax Scam levels of 2018 – a tepid 3.2% increase ($5.3 billion). The bigger increase in taxes that corporations pay comes from tariffs and other customs duties, which are up by $24.5 billion for this Fiscal Year. The problem is that this increase in tariffs isn’t being retained by the US government, but is instead going back out for farm subsidy payments to deal with plunging prices for crops due to fewer markets to send them to.

One item that has helped the government’s budget balance in recent weeks is the plummeting of longer-term interest rates. Look at how the yield on the 10-year Treasury note has fallen in the last 3 months.

That means that debt sevice costs are likely to go down, which limits one of the fastest-growing expenses in recent years. It also makes having to deal with the deficit not as urgent, since it’s not costing us that much more to add on. And it’s a good thing that those debt costs won’t be higher, because the debt ceiling deal that was agreed to in Congress and signed by Trump earlier this month allows for more spending, which would theoretically raise the deficit beyond projections that we see today.

But agreeing to caps is not the same as allotting the money. That has to be done by September 30, and it sure seems like the FY 2020 budget is an opportunity for House Dems to make Trump and the Senate GOPs have to answer for their lawlessness and refusal to hand over information. Especially in light of this issue over the weekend, where underfunding by the Trump Administration is part of this sensational story.

Perhaps the Dems could use the upcoming budget debate to ask for a dollar-for-dollar increase of corporate taxes to pay for having to adequately staff federal prisons. This is just one area that where Dems can make the GOP justify keeping the Tax Scam going in its present form as the deficits and dysfunction grows.

Given how tentative the US’s economic growth already seems due to trade concerns and a 10-year expansion that's already feels maxed out, the potential of a government shutdown at the end of September of one would likely cause a serious reaction in the stock market as well as the overall economy. And any stock market crash or recession would be a killer for the GOP’s hopes of staying in power past 2020.

So with this latest deficit news being fresh in our minds, and the annual number likely to charge past $1 trillion by early September, why not use the next few weeks to remind Americans of the fiscal mess that the GOP’s Tax Scam has put us into? Especially as we are now crunched between an overdue recession hitting now, or allowing the Bubble to be pumped up even longer, making the inevitable “POP” that much worse.

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