Government headed for $1 trillion deficit

2018 could be the year the dam bursts on the federal deficit.

In June, the Congressional Budget Office projected that the budget deficit — government expenses exceeding revenue — would drop to $563 billion in 2018 from the $666 billion shortfall the Treasury Department declared in the 2017 fiscal year, which ended Sept. 30.

Now, budget experts outside government say the 2018 total could exceed $1 trillion because of a series of bills passed in quick succession and decisions to scrap already weak limits on spending.

The tax package Congress sent to President Trump would cut government revenue by $135 billion in 2018, a figure that would rise to $280 billion in 2019, according to the non-partisan Joint Committee on Taxation.

On top of that, Congress approved emergency disaster aid bills totaling

$15 billion in September and $36.5 billion in October. This week, lawmakers argued over adding $81 billion to address California wildfires and Hurricanes Harvey, Irma and Maria.

That spending would be added to the

2018 deficit.

Finally, CBO’s original estimate that the deficit would go down assumed the adoption of Trump’s budget proposal, a plan released in March that slashed

spending so deeply it was quickly panned by his fellow Republicans in Congress.

Spending levels for 2018 will not be settled until January, but negotiations in Congress are focused on how much to blow past caps on domestic and defense spending, not on how much to cut.

“If you add that the economy is just not going to explode positively, then it could easily be more than $1 trillion, and that assumes nothing bad happens for the rest of the year that costs more than we’re expecting,” said Stanley Collender, a former staff director for the House and Senate budget committees and author of The Guide to the Federal Budget.

Collender said interest rates would rise as a result of the tax bill, making it more expensive to pay interest on the federal debt of nearly $15 trillion. The federal debt is an accumulation of the annual deficits run up by the government.

Budgetary “pay-as-you-go” laws designed to keep spending in check require that when Congress passes bills that increase the deficit, automatic cuts are triggered in discretionary and mandatory programs.

Democrats argued for weeks that the tax bill would force cuts in January that zero out many programs and trim $25 billion from Medicare.

Those pay-as-you-go mandates can be waived by passing another law, and that is what Republican leaders in Congress are talking about doing. They mocked Democrats’ complaints about the deficit as feigned, noting the deficit topped $1 trillion for several years when Democrat Barack Obama was president.

Deficit hawks said that while the economy is growing and unemployment is down to 4.1%, this is the time the government should be more fiscally responsible.

“When we had trillion-dollar deficits the last time, it was the result of one of the worst economic downturns we’ve seen in history. This will be completely self-inflicted,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

The government will announce the final deficit number in mid-October, a few weeks before the midterm elections in 2018.

Trump brushed aside worries about the deficit, pointing to corporations that have overseas assets that he said would be repatriated and used to expand and grow businesses in the USA.

The Trump administration and many of the tax bill’s supporters argued that the CBO assumed a 1.9% average economic growth rate over the coming decade that is too low.

Sen. Bob Corker, R-Tenn., initially opposed the tax bill because of concerns about increasing the national debt. He ultimately voted for it, saying he believed on balance that changes to the corporate tax rate would make the United States more attractive for multinational corporations, and that opportunity “should not be missed.”

The danger, MacGuineas said, is if the economy tanks again. A bigger national debt will leave the government with less “fiscal firepower” to respond the way it did in 2008, she said.

“What I wish was happening is that fiscally responsible people would say, ‘Instead of waiving the rules requiring mandatory cuts, let’s replace them with responsible budget cuts or repealing part of the tax cut,’ ” she said. “Where we are in the business cycle, we should be seeing the deficit shrinking.”