Republicans are better than Democrats at managing the nation's pocketbook, right? Not necessarily. The federal budget deficit swelled to $779 billion in Donald Trump's first full fiscal year as president. That's the biggest gap since 2012, when the nation was still recovering from the Great Recession, and it's the byproduct of unnecessary tax cuts and higher spending under Republican control of Congress and the White House. That combination is dangerous and unsustainable amid the global economic insecurities.
The budget gap rose 17 percent from the same 12-month period a year earlier, as spending increased 3.2 percent and federal revenues rose by only 0.4 percent from fiscal year 2017. While the administration blamed the higher deficit to greater spending, Treasury Department figures suggest the $1.5 trillion tax cut played a much larger role. Though spending increased, a faster-growing economy meant that outlays fell as a share of the overall economy. Yet the increase in revenues was markedly down from the previous year. Revenues are now nearly a percentage point lower than their 40-year average. The biggest drop came from business, as corporate tax receipts fell a third from the previous year, to $205 billion from $297 billion in fiscal year 2017. That's a direct result of last year's tax law, which reduced the top corporate tax rate to 21 percent from 35 percent. And despite the promise by Republicans, the tax cuts are not paying for themselves. Two congressional forecasts estimate spending will outweigh revenue by $1 trillion or more annually in the coming years - a level of federal debt the nonpartisan Congressional Budget Office says is on track to becoming the highest in the nation's history.
The growing deficit undermines the Republican narrative that the GOP is more fiscally responsible. The twin pressures of tax cuts and increased spending are not only a budgetary problem; they hasten the day and make it harder for Congress and the White House to balance the budget through either spending cuts or tax increases - or a combination of the two. Higher spending on the military is especially difficult to control, as major weapons systems require financial commitments over years if not decades. That's also true for some domestic spending, especially on entitlements and infrastructure. On the revenue side, voters tend to reward tax cuts less than they punish tax increases. And increasing these fiscal strains at a time the economy is near full-employment leaves the federal government with little room to manage a new recession.
Raising taxes and cutting popular spending programs are always difficult enough. But Trump's ongoing feuds with America's major economic partners and threats of open trade wars could seriously hurt the U.S. economy, as producers lose access to markets and supply chains and as U.S. consumers face shockingly high prices for basic household and other goods. Longer term, Americans face several major challenges, from the rising costs of health care to retirement security. With income growth slowing, even in a tight labor market, what room does the nation have to address these concerns? Reducing the nation's debt load is critical. Both political parties must end their addiction to credit and spending. Voters should insist on real priorities and representation in Washington that responsibly funds them.