When Republicans passed the tax cut bill in 2017, Democrats charged that it would explode the deficit. And the latest Treasury monthly report on the government’s finances seems to verify that.
So far this fiscal year, which started last October, the federal government has racked up $531 billion in deficits. That compares with $385 billion over the same seven months the year before.
Worse, Treasury says the deficit is on track to top $1.1 trillion this year, up from $779 billion last year.
For the government to be running deficits this high — and climbing — while the economy is chugging along at a brisk pace and the country isn’t at war is virtually unprecedented.
Clearly, it must be the fault of those tax cuts.
Except it isn’t.
The federal government collected more than $2 trillion in the first seven months of this fiscal year, according to the latest monthly report from the Treasury Department.
That’s up almost 2 percent from the same time last year, and up 6 percent from fiscal 2017, which was before the Trump tax cuts went into effect.
This fiscal year, Treasury figures that federal revenues will top $3.4 trillion. That’s $100 billion more — a 3 percent gain — than last year.
It is true that corporate tax revenues have declined since the tax bill went into effect. They’re down almost 30 percent compared with the same months in fiscal 2017.
But individual income tax revenues — which account for far more revenues than corporate taxes — are running 12 percent higher this year than in 2017. Payroll taxes are up by nearly 8 percent.
What that suggests is that the Trump tax cuts are doing just what they’re supposed to do: boost growth, create more jobs, raise wages and, as a result, at least partially offset the “cost” of the tax cuts.
Lo and behold, since the tax cuts went into effect, the economy has consistently outperformed economists’ expectations. In fact, the year before the GOP tax cuts kicked in, the Congressional Budget Office was forecasting growth for 2018 would be a mere 2 percent, and just 1.7 percent for this year. It projected an unemployment rate of 4.5 percent for 2019, and climbing.
The actual result for 2018 was 2.9 percent GDP growth, and it was 3.2 percent in the first quarter of this year. Unemployment, meanwhile, is now down to 3.6 percent — and falling.
Yet every Democrat running for the White House is promising to repeal some, if not all, of the Trump tax cuts to finance a laundry list of massive new government entitlement programs.
What they aren’t explaining to voters, however, is that it’s out-of-control spending that’s driving the deficit upward today.
While federal revenues are $35 billion higher so far this year than last, spending is up by $181 billion.
And while revenues for the entire year will climb $109 billion, that won’t be nearly enough to keep pace with the $421 billion hike in spending, according to current Treasury forecasts.
There’s plenty of blame to go around for the spending orgy. Politicians on both sides of the aisle like nothing more than boosting federal spending — particularly when it appears to come at no cost to taxpayers. That’s why talk of the Trump administration cutting a deal with Democrats on a $2 trillion infrastructure spending spree is so troubling.
The last thing we need is to add still more fuel to the spending fire. Particularly when it’s tax cuts that will take all the blame for the explosion in the deficit.
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