$779 billion deficit has GOP stamped all over it
The federal government’s massive annual borrowing was a big deal for Republicans when Barack Obama was president. Now, not so much.
Like free trade, limited government, the rule of law and presidents who set a proper moral example, deficits apparently matter just when there is some political advantage to be had.
That’s the only possible conclusion from two recent developments. The first is that federal borrowing surged 17 percent, to $779 billion, in the fiscal year ending Sept. 30, and is projected in the range of $1 trillion in the fiscal year that just began. The second is that President Donald Trump has responded by proposing an election-eve tax cut, one that would be magically enacted somehow even though Congress is not in session.
Trillion dollar deficits are nothing new. They occurred in four straight years during the Great Recession and its aftermath. But they always surge during economic downturns.
During times of strong growth, they should shrink or disappear. The last time unemployment was below 4 percent, as it is now, was 2000, when the government ran a $236 billion surplus.
After this latest budget news, Washington finger-pointing has begun, with Democrats blaming Republican fiscal policy for the surging deficit, and Republicans blaming entitlements such as Medicare and Social Security for the red ink.
The Republicans are right that entitlements do need to be addressed. Regardless of what has happened in the past two years, programs like Medicare, Medicaid and Social Security are pushing the government over a fiscal cliff. Even so, the main reason that the deficit jumped so dramatically last year was the enactment of new laws.
The nonpartisan Committee for a Responsible Federal Budget estimates that this year’s deficit would have fallen by about 23 percent to $515 billion were it not for spending hikes and tax cuts. The biggest of these was the GOP tax relief enacted in December, which increased the deficit by $164 billion. Other legislation, including a bipartisan spending bill, added $100 billion.
The takeaway here is that faced with an already troubling fiscal outlook, Congress and the president decided that the most prudent course of action was to — make matters worse.
Most economists said the tax cuts would not stimulate the economy enough to pay for themselves. But Republicans forged ahead, pitching hypergrowth fantasies. What’s more, they chose to stimulate a strong economy after attacking a smaller Obama stimulus measure enacted in 2009 to target the worst economic downturn since the Great Depression.
The fallout is far reaching. On the positive side, the tax cuts are behind a modest bump in economic growth. On the downside, the federal government is digging itself deeper into a fiscal hole.
For Republicans, the surging deficit makes them look hypocritical. What are they going to say in the future when a Democratic administration fails in its fiscal obligations?