Tuesday, September 10, 2019

Deficit blows past $1 trillion. So why not hold up the budget this month?

I warned you about this last month, but we got confirmation on this today.
The Congressional Budget Office has estimated that the current fiscal year deficit by the federal government has exceeded the $1 trillion level.

In its budget review published Monday afternoon, the CBO said the deficit for the first 11 months of the fiscal year was $1.07 trillion, up $168 billion from last year.

Outlays have climbed by 7%, on rises in both the number and amount of Social Security and Medicare claims, which both rose 6%. Medicaid outlays rose 5%.

Interest payments on the national debt rose 14%, and defense spending climbed 8%.

While spending increased, revenue rose more slowly, up just 3%. Individual income taxes rose a slender 1% and corporate income taxes increased by 5%.
In fairness, the CBO still projects the year-end deficit to be “only” $960 billion, as September features many quarterly tax payments. But that would still be up 16.6% from last year’s adjusted base of $823 billion, and as the CBO revealed, deficits are expected to keep growing after July’s debt ceiling and budget deal between Congress and President Trump.

It's all relative, right?

“But Jake, if revenue is rising, aren’t the GOP’s tax cuts paying for themselves?” Not really, if you look at the actual CBO report. As the news report hinted, income taxes are rising by a rate smaller than the 1.8% inflation that the country has had for the last 12 months. And even that doesn’t tell the full story.
Amounts withheld from workers’ paychecks rose by $55 billion (or 2 percent). That change largely reflects increases in wages and salaries that were partly offset by a decline in the share of income withheld for taxes. The Internal Revenue Service issued new withholding tables in January 2018 to reflect changes made by the 2017 tax act (Public Law 115-97). All employers were required to begin using the new tables by February 15, 2018. Those new withholding rates were in effect during the first 11 months of this fiscal year but for only six and a half months of the same period last year.

o Nonwithheld payments of income and payroll taxes rose by $9 billion (or 1 percent)

o Income tax refunds were down by $23 billion (or 9 percent), further boosting net receipts.
The last two items come directly from the Tax Scam, as many people didn’t withhold enough after the Trump Administration and Congressional GOP moved the tax tables in early 2018, and were never warned otherwise. That resulted in more people having to write checks to the IRS this fall and/or have smaller refunds in early 2019, which “increased” income taxes for this year.

Likewise, many people didn’t want to write another check to the IRS after 2019, which helps to explain a part of the $55 billion in higher withholdings. So we’ll see how that sorts out in early 2020, and if tax refunds bounce back to what people got before the Tax Scam took effect.

In addition, this part of the Tax Scam also raises our deficit, but is not listed as a cut to overall taxes.
Outlays for the refundable portion of the earned income and child tax credits (also included in “Other”) rose by $11 billion (or 14 percent). That increase reflects an expansion of the child tax credit, including the refundable portion, made by the 2017 tax act.
And that 5% increase in corporate tax revenue vs 2018? It’s still $63 billion below what Uncle Sam had taken in for corporate taxes after August 2017. So not even close to “paying for itself” there.

The CBO says biggest increase in tax revenues for FY 2019 so far has come from the money you pay in to Social Security, Medicare and other payroll taxes (+$69 billion), and that number is more than made up via the increase in spending for those two programs.

Combine that with the bump in added interest on the debt and a sizable increase in military spending, and you have a most of the increase in US spending accounted for.

Increases in outlays through August of FY 2019
Social Security +$51 billion
Medicare +$36 billion
Interest on the debt +$48 billion
Military +$44 billion
Everything else +$67 billion

Given that we still have yet to finalize spending totals for FY 2020, can you explain why House Democrats aren’t putting GOPs on the spot for the fiscal mess we are in? GOPs should be embarrassed by their fiscal mismanagement, and Dems should be the ones dishing out the humiliation. With the deficit growing by the day, explain to me why Dems shouldn’t threaten a government shutdown in 3 weeks to make Moscow Mitch have to act on common-sense gun and election security bills that are sitting on the floor of the Senate?

Or make a dollar-for-dollar rollback of the stupid Tax Scam to pay for the increase in government spending that Trump and the GOPs desperately need to keep the economy growing? Either tactic works for me.

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