In a recent op-ed in the New York Times, economist Paul Krugman labeled President Donald Trump the “deficit man.” It’s an interesting title and it is certainly appropriate. Even within the area of economic policy, our nation’s budget deficit doesn’t typically receive as much coverage as matters such as the trade war or the stock market. That said, this seems like an opportune time to examine it in detail.
It is important to be mindful of the difference between a nation’s budget deficit and its national debt. The former refers to the difference between the funds a country takes in from revenue streams or receipts such as taxes and what it spends. The latter is the debt that stems from a government borrowing further funds in an attempt to cover all such deficits. While the two are different, they are connected in ways that are important in a report such as this. For example, the ability to borrow money can be used to help the government finance the deficit.
August is here and with it, recess for Congress. The deadline for raising our debt ceiling is fast approaching. It was recently announced, though, that Trump’s administration has reached an agreement with Congress to address our deficit by implementing a budget deal while at the same ti e increasing the debt limit. The deal also includes a two-year budget that stands to significantly increase the federal deficit. The budget deficits it will create are estimated to be well over $1 trillion within a decade. This is the largest that deficits accumulated by the federal government during one presidential term have been expanded in the history of the U.S. economy.
In August 2018, I reviewed the increasing budget deficit under Trump and discussed its concerning elements that could pose threats to our economy. The Tax Cuts and Jobs Act had sent the budget deficit shooting up close to $1 trillion. We were also in the throws of the trade war sparked by Trump’s tariff policies. One year later, all such matters have only gotten worse. The deficit has increased by over 23%, according to CNN, and none of the factors that have caused this spike have been eliminated
During his 2016 campaign, Donald Trump boasted that if he were elected, the national debt would be eliminated. This was a highly unrealistic promise, as it would have required completely balancing the budget deficit but under Trump, we have drifted even further from such a goal than we were during Obama’s second term.. While our economy is far from the “strongest it has ever been” , as Trump claims, our budget deficit is indeed poised to become the largest in history and it is due to things Trump has done, namely tax cuts and increased military defense spending.
We have a debt ceiling for a reason but Congress seems to be completely disregarding it. Historically, it is a concept that was engineered to allow Congress to make sure the federal government did not borrow more money than made fiscal sense. It was created with the idea in mind that any Presidential administration could easily lose control of their spending and attempt to fix any potential damage by borrowing the necessary funds.
When someone has accumulated more credit card debt than they can handle, borrowing more money to start paying it back is not a long term solution. College students and first time home buyers are advised by experts not to borrow more money than is reasonable for them to pay back but Congress doesn’t seem concerned with doing the same for the Trump administration. Both branches should be striving to balance the budget but the new deal is poised to do exactly the opposite, setting us back even further than we already were. Our economy is certainly not immune to downturns or market fluctuations and if we experience another one within the next few years, as we are likely to, a historically overblown deficit is the last thing we’re going to want. Despite Trump’s claims, our economy is far from stable. Adding to the budget deficit instead of balancing it will only serve to make all matters worse.
- The Center on Budget and Policy Priorities is progressive think tank that conducts research and analysis on budget related matters.The Concord Coalition is a grassroot organization that provides information on the risk and consequences on the growing federal debt and unsustainable fiscal policies.
- The Center for Economic and Policy Research is a nonprofit research organization that conducts research and public education to promote democratic debate on economic matters including the federal budget and national debt.
Photo by Fabian Blank