After the Great Recession ended, it seemed as if trillion-dollar deficits were a thing of the past. As the Wall Street Journal reported late yesterday, pointing to new data from the Treasury Department, we've again passed the threshold -- and it's worth understanding why.
A strong economy typically leads to narrower deficits, as rising household income and corporate profits help boost tax collections, while spending on safety-net programs such as unemployment insurance tends to decline.
The U.S. economy has been growing for 10 years as of July, the longest economic expansion on record. Yet annual U.S. deficits are on track to exceed $1 trillion starting this year, due in part to the 2017 tax law, which constrained federal revenue collection last year, and a 2018 budget deal that busted spending caps enacted in 2011.
I should emphasize that there's still another month remaining in the fiscal year, which will likely affect the overall deficit for the 12-month period. That said, it's a safe bet that the deficit will still exceed $1 trillion.
These aren't exactly the fiscal results Donald Trump promised the electorate before his election. As regular readers may recall, in February 2016, the future president appeared on Fox News and assured viewers that, if he were president, he could start paying off the national debt “so easily.” The Republican argued at the time that it would simply be a matter of looking at the country as “a profit-making corporation” instead of “a losing corporation.”
A month later, in March 2016, Trump declared at a debate that he could cut trillions of dollars in spending by eliminating “waste, fraud, and abuse.” Asked for a specific example, he said, “We’re cutting Common Core.” (Common Core is an education curriculum. It costs the federal government almost nothing.)
A month after that, in April 2016, Trump declared that he was confident that he could “get rid of” the entire multi-trillion-dollar debt “fairly quickly.” Pressed to be more specific, the future president replied, “Well, I would say over a period of eight years.”
By July 2016, he boasted that once his economic agenda was in place, “we’ll start paying off that debt like water.”
As Catherine Rampbell recently explained, "Federal deficits have widened immensely under Trump's leadership. This is striking not only because he promised fiscal responsibility – at one time even pledging to eliminate the national debt within eight years – but also because it's a historical anomaly.... Trump's own policies are to blame for this aberration."