Editorial: ‘Deficits? Nonsense. Tax cuts will be so great, it’ll never happen.’
The U.S. Treasury Department announced this week that the federal deficit jumped a whopping 17 percent this past year, posting a deficit of $779 billion. That’s an increase of $113 billion over the $666 billion recorded in 2017, and it puts the deficit on pace to top $1 trillion annually before the next presidential election. Such a pronouncement used to shock Republicans out of their wits.
The Treasury’s own analysis suggest the rapid rise in the deficit has been caused by the $1.5 trillion tax cuts passed by Trump and the Republican Congress.
Trump and Senate Majority Leader Mitch McConnell, R-Kentucky, have quickly tried to shift the blame elsewhere, suggesting that the tax cuts aren’t the culprit at all. Rather, they blame large government spending programs — that is, Social Security, Medicare and Medicaid. Only by cutting spending on those programs —McConnell recently said— would they be able to reduce the out-of-control deficit.
No surprise. They lie about everything else, what’s one more?
Treasury Secretary Seven Mnuchin also tried to camoflauge the ballooning deficts by saying it was due to increased military and domestic spending approved by Trump and Congress, not by the tax cuts, which would soon spark more growth.
That’s more empty rhetoric. The Treasury’s numbers — facts provided by Trump’s own team — tell a different story.
While federal spending rose, federal revenues only rose by .04 percent in fiscal year 2018 from fiscal year 2017 despite the added economic stimulus. That was a slowdown in revenue compared to previous years. Federal revenues rose 1.5 percent between fiscal years 2016 and 2017 — during a period in which economic growth was much slower than the past year — and 0.5 percent between 2015-16. Between 2014-15 federal revenues rose by 7.5 percent. (As a reminder, Trump’s first fiscal year was 2017, even though it seems like he’s been in ther White House much longer.)
The Treasury also reported that as a share of the economy, revenues fell to 16.5 percent in fiscal year 2018, from 17.2 percent the year prior. Revenues, as a percentage of the economy the Treasury said, are now nearly a percentage point lower than their average for the past 40 years.
That drop did not come from a reduction in personal tax revenues, which rose slightly over the past year, but rather from an enormous drop from businesses. Corporate tax revenue dropped 33 percent from the comparable period a year ago — a loss of $92 billion, from $297 billion in fiscal year 2017 to $205 billion in fiscal year 2018. That’s a direct consequence of the tax cuts that reduced corporate taxes from 35 percent to 21 percent.
These huge deficits run counter to what Republicans said would happen when they championed the tax cuts last year. During the run-up to the tax cuts, Republicans, Trump and Mr. Mnuchin, said the tax cuts would pay for themselves by spurring economic growth. Democrats and outside analysts were more realistic, saying that the huge tax cuts would lead to huge corresponding deficits. They were right.
During those debates a year ago, the congressional Joint Committee on Taxation projected the tax cuts would reduce revenues by $1 trillion, even when accounting for additional growth due to the stimulus. That estimate also seems to be on target.
Trump’s team did deliver, to a small degree, on his promise to pay down the defict with the tariffs (taxes) he imposed on foreign steel and aluminum as well as $250 billion worth of Chinese exports. For all Trump’s bluster about how his trade wars would balance the deficit, those taxes have brought in about $41.3 billion in 2018 — up just $7 billion from $34.6 billion in 2017, which was before the bulk of his tariffs were imposed. That increase in tariffs, of course, makes consumer goods more expensive and is another form of taxation on Americans.
And, yet, facts be damned, just watch: McConnel and Republicans in Congress will be on the warpath these next few weeks ahead of the midterm election blaming the huge deficits on government spending — not tax cuts to corporations and the wealthy — and hiding their intent to cut Social Security, Medicare and Medicaid, if they maintain their control of Congress.
Cutting taxes to the rich and reducing government spending, after all, has been the Republican economic agenda all along. They accomplished the first half of that goal last year. Give them a chance, and they’ll cut the three most needed programs in America over the next two years, while also continuing to disenfranchise voters to stay in power. It’s a bold power grab that Republicans, under Trump, no longer hide. They have depended on a complacent and not-so-smart electorate to embrace the culture wars and Trump’s cult of personality over either their own financial interests or the long-term good of the country — and, so far, it’s working for them.