Tuesday, October 8, 2019

Congrats Trump/GOP! You kept the deficit under $1 trillion for FY 2019!

The Congressional Budget Office released its year-end estimate of the US budget deficit, coinciding with the end of the 2019 Fiscal Year on September 30.

This $984 billion is slightly above the $960 billion that the CBO predicted 2 months ago we would end up at, and that August figure was revised up from $896 million in May.

But hey, at least it’s less than $1 trillion (this year)! We’re not supposed to break that until next year…and that’s with the CBO figuring 2% GDP growth for the next 12 months instead of a recession. Ruh roh.

For revenues, they were up a bit from the previous fiscal year. But before you claim that the GOP Tax Scam “paid for itself” in FY 2019, you need to know that more than half of the increase was from payroll taxes that go to programs like Social Security and Medicare, which wasn’t part of the tax cuts.

Change in revenues, FY 2019 (prelim)
Income tax +$34 billion (+2.0%)
Payroll taxes +$73 billion (+6.2%)
Corporate taxes +$25 billion (+12.4%)
Other receipts +$1 billion (+0.3%)
TOTAL CHANGE REVENUES +$133 billion (+4.0%)

But no, this does not mean the Tax Scam "paid for itself." And not just because of this revealing editorial from Sunday's New York Times from David Leonhardt titled " “The Rich Really do Pay Lower Taxes than You.”
For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data.

The overall tax rate on the richest 400 households last year was only 23 percent, meaning that their combined tax payments equaled less than one quarter of their total income. This overall rate was 70 percent in 1950 and 47 percent in 1980.

For middle-class and poor families, the picture is different. Federal income taxes have also declined modestly for these families, but they haven’t benefited much if at all from the decline in the corporate tax or estate tax. And they now pay more in payroll taxes (which finance Medicare and Social Security) than in the past. Over all, their taxes have remained fairly flat.

The combined result is that over the last 75 years the United States tax system has become radically less progressive….

So if there's an increase in collected income taxes, I bet it didn't come from the superrich. And despite the 2019 increase in corporate tax receipts, that year’s total is still $67 billion below the FY 2017 total, the year before the Tax Scam took effect.

In addition, another sizable chunk of increased revenue came from another Trump Administration decision that a lot of people aren’t exactly enamored of.
Customs duties increased by $29 billion (or 71 percent), primarily because of tariffs imposed by the Administration during the past year on certain imports from China.
And that $29 billion has been almost entirely offset by the $28 billion in farm subsidies that the Trump Administration has handed out over the last year. So….winning?

On the expense side, the CBO says the overwhelming amount of the $295 billion (adjusted) increase in spending vs FY 2018 was concentrated into five areas.

Among the “Other” numbers, I fund these to be interesting standouts.
Outlays for the Department of Veterans Affairs (also included in “Other”) increased by $15 billion (or 8 percent) because the number of people receiving disability compensation rose, average disability benefits increased, and spending rose for a program that allows veterans to receive treatment in facilities other than those operated by the department.

■ 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.
Both of those increases relate to decisions that come from the Trump Administration, particularly the replacement of the “Veterans Choice” program with more private health care options, and the increase in the Child Tax Credit is also a Tax Scam provision.

I also noticed this reduction.
Outlays for the Department of Homeland Security decreased by $11 billion (or 17 percent), primarily because spending for disaster relief was unusually high at the beginning of fiscal year 2018.
So because there was no catastrophe on the level of Hurricane Harvey for the last year, we got a spending cut! Huzzah!

So far, the rising deficit hasn’t actually constrained the economy, and may have boosted it through the sugar of tax cuts and increased government spending (over 25% of our job growth in the last 3 months is in government, by the way). Interest rates have actually gone down significantly, with the benchmark 10-year note plummeting more than 100 basis points since April, and overall inflation is softer now than it was last year. That wouldn’t be happening if the US couldn’t get anyone to finance their debt.

But it’s still a problem that the US budget deficit keeps growing, mostly because it doesn’t allow for much further flexibility if the economy falls apart and the Fed is out of weapons because interest rates are already low. And the Trump Administration can’t be liking the idea of 2020’s year-end deficit busting through $1 trillion in the month before the elections, which will crystalize another GOP failure at a time when casual voters start to pay a lot more attention to such things.

1 comment:

  1. "Democrats have outperformed Republicans for a century. Even Tyler Cowen, director of the Koch-brothers-funded libertarian/conservative Mercatus Center, stipulates to that fact without demur."