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Republicans Are Bleeding Our Government Dry

Republicans Are Bleeding Our Government Dry

Reprinted with permission from DCReport.

 

No…The federal budget deficit definitely is not a spending problem.

In its just-released monthly budget review, the Congressional Budget Office estimated that the federal deficit for fiscal 2018, which ended a week ago on Sept. 30, was $782 billion, a $116 billion increase over the $666 billion deficit recorded in 2017. CBO said that revenues grew by just $13 billion and so were essentially flat compared with what the government collected in 2017. Spending grew by $129 billion, a 3.2 percent increase over 2017.

It would be easy — but very very wrong — to conclude that the increased spending was the reason the budget deficit rose from 2017 to 2018. After all, revenues were about the same both years while spending was higher.

But this overly simple explanation only works if you compare revenues and outlays to what was actually collected and spent the previous year. The explanation is the exact opposite when the substantively correct comparison — to what was expected in 2018 if all tax and spending laws had remained the same — is used.

In June 2017, CBO issued its updated “Budget and Economic Outlook: 2017-2027″ report that showed federal revenues rising in 2018 under current law to $3.5 trillion (Take a look at Table 13). That means the tax bill reduced revenues this past year by about $200 billion compared with what they would have been had it not been enacted.

In that same report, outlays in 2018 were projected to be $16 billion less under current law than the amount CBO now says was actually spent last year.

In other words, the real reason the budget deficit grew from 2017 to 2018 was because revenues were substantially less than what they would have been without the tax bill. Had it not been enacted, the deficit would have dropped below $600 billion instead of rising to close to $800 billion

This is not the spin anti-federal spending activists will use. Indeed, as I’ve posted about previously, even before the tax bill and its projected $1.5 trillion revenue loss was adopted, so-called conservative interest groups such as the Heritage Foundation were pushing the narrative that higher spending was the only reason for the deficit and revenues had nothing to do with it.

The two CBO reports cited above decisively show that’s just not true.

 

Trump And GOP Congress Dig $900 Billion Budget Hole

Trump And GOP Congress Dig $900 Billion Budget Hole

Reprinted with permission from DCReport.

The first of two official government reports that will be released this month showing that the federal budget deficit is soaring was issued on Monday when the Congressional Budget Office published it’s Monthly Budget Review for August.

According to CBO, the deficit through the first 11 months of fiscal 2018 was $895 billion, a $222 billion (32.8%) increase over the same period in 2017.

Some of the increase was the result of timing shifts, that is, spending that was made at the end of August because the first two days of September were on weekend. The deficit for the 11-month period would have been only $154 billion larger than 2017 had it not been for that.

The federal government typically runs a budget surplus in September so the final deficit for 2018 may be somewhat lower than the results through August. CBO said that the total deficit for the year will be close to the $793 billion estimate it made in its analysis of the Trump 2019 budget that it updated last month. That would make the year-over-year increase only 19.3%.

But put the number crunching wonkery aside and look at the big picture. Donald Trump, who as a candidate virtually guaranteed he would eliminate not just the budget deficit but the national debt, is doing neither.

It’s anything but fake news to say that just the opposite is true. Trump’s own Office of Management and Budget, whose primary responsibility is to protect the president’s behind on budget issues, agrees with CBO that the deficit will come close to or exceed $1 trillion a year through at least 2022.

Keep in mind that this doesn’t include spending for a space force, an infrastructure plan or a wall between the United States and Mexico. It also doesn’t include the projected $200 billion a year revenue loss from the new GOP tax bill the House will debate before the election or the additional spending that will be needed because of Hurricane Florence. And it certainly doesn’t include the lower revenues and higher spending that will happen if the economy slows below current expectations.

A combination of these things could easily cause the U.S. deficit to approach $2 trillion annually.

The next Trump deficit shoe to drop will occur next week when Trump’s own Treasury issues its own monthly report that is expected to agree with and confirm what CBO said this week.

 

Trump May Provoke Government Shutdown Just Before Midterm

Trump May Provoke Government Shutdown Just Before Midterm

Reprinted with permission from DCReport.

 

Trump has added another reason he might cause a government shutdown a month from now: no pay raise for federal employees of domestic federal agencies and departments.

Trump notified House Speaker Paul Ryan (R-Wis.) on Thursday that he was canceling the pay raise for the majority of federal civilian workers. (There was nothing to indicate that he was also canceling the planned 2.6% increase for the military.)

Congress can, and in my estimation probably will, reject this. The House and Senate will likely put language that mandates the civilian pay raise in the continuing resolution that will be needed by Oct. 1 to keep the government open.

The question then is how will Trump react with a continuing resolution that very openly defies him.

Vetoing the continuing resolution and shutting down the government is a real possibility.

The Senate has already approved a pay raise for federal civilian employees. The House is more than likely to go along with the Senate provision because not doing so would put Republican incumbents from districts with large numbers of federal employees in critical jeopardy of not being re-elected.

Rep. Barbara Comstock (R-Va.), who represents Northern Virginia, immediately comes to mind as a GOPer who would be in serious trouble if civilian employees were denied pay raises. Not surprisingly, Comstock issued a statement opposing Trump’s freeze earlier today.

In an election where a Democratic takeover of the House is considered a definite possibility, making Republicans more vulnerable makes absolutely no political sense.

In an election where a Democratic takeover of at least the House is considered a definite possibility, making Comstock and several other Republicans more vulnerable and putting the GOP majority in further doubt makes absolutely no political sense.

There are two reasons Trump would veto the continuing resolution and shut down the government over this issue.

First, the continuing resolution would be abject defiance, something we know Trump doesn’t handle well or rationally.

Second, the pay raise is the kind of emotional issue that will appeal to Trump voters and, given Mueller et. al., Trump is likely to be eager to show his base that he’s more than willing to punish the federal government/deep state for all its sins.

That puts the civilian federal pay raise almost on the same level as the billions of dollars Trump is demanding to build a wall between the U.S. and Mexico as a possible reason for a government shutdown this year. They’re both anything-but-substantive issues that Trump can use to remind his voters why they voted for him in the first place.

That means both that there are now two potential shutdown issues and that a Trump-induced government shutdown a month from today is even more likely than it was before.

Debt Piled On Your Children And Their Children: Thanks Trump!

Debt Piled On Your Children And Their Children: Thanks Trump!

Reprinted with permission from DCReport.

 

The headline above is not partisan hyperbole or a rhetorical flourish: The $1 trillion-plus annual Trump budget deficits that are about to start will soon create huge policy challenges for future generations of Americans.

While presidents submit and Congress adopts one-year budgets (when they bother to do a budget at all, that is), the spending and taxing policies put in place in those budgets are more or less permanent.

This is certainly true with federal spending because most of it is “mandatory”‘ and will continue until Congress and the president change it. Given that most mandatory spending (Social Security, Medicare and many veterans benefits, for example) are growing in popularity, reductions aren’t likely any time soon…and maybe not at all.

A second category of mandatory spending — interest on the debt — is only going to increase as interest rates rise from their recent lows and the national debt increases precipitously.

But mandatory spending (which, depending on whose numbers you use, is between two-thirds and three-quarters of that side of the budget) isn’t the only federal spending that’s ongoing. Everything else may officially be classified as “discretionary” and require an annual appropriation to be spent, but Congress and the president seldom make more than incremental reductions in some of these programs. Overall, this spending goes up continuously.

If anything, the Trump deficits will be larger than estimated.

The permanent nature of the federal budget is also true with revenues. The tax code essentially operates as mandatory spending because most of it continues until a change is enacted. Even when some provisions are set to expire (such as the individual tax cuts included in last year’s bill in 2025), the expectation is that, like annual appropriations, they will be extended.

All of this means that we’re not going to grow out of this. Unlike the trillion-dollar deficits in the early years of the Obama administration that occurred because of an economic downturn (you still remember the Great Recession, right?) and temporary tax reductions and spending increases, the Trump deficits are the result of permanent changes in taxes and spending when the economy is doing well.

If anything, the Trump deficits will be larger rather than smaller than estimated as (1) the U.S. economy worsens, (2) there are military or natural disasters that require federal involvement and (3) additional spending and tax breaks are adopted. An annual budget deficit and national debt increase of $2 trillion is very possible.

This underlying budget situation — permanent trillion-dollar-plus deficits every year of the Trump administration and beyond — will force U.S. politics and politicians to face challenges that they’ve never had to face before. Consider just these five.

  1. How will the federal government respond to the next economic downturn? Will Americans, who throughout U.S. history have expressed great anger about Washington’s red ink, decide that a deficit that approaches or exceeds $2 trillion is acceptable? Will policymakers have to limit their response to a downturn to show obeisance to the old limit-or-reduce-the-deficit mantra as they did in 2009 when the Obama stimulus was developed? Does this mean that the next economic downturn will be deeper and last longer than we’ve come to expect?
  2. Is the same thing true of future military contingencies? How will the U.S. respond if there’s less tolerance for even higher deficits?
  3. What will the need to finance a national debt that’s increasing by $1 trillion or more each year do to interest rates in the United States? How vulnerable will that make the American economy to the big foreign lenders like the Chinese?
  4. How will the U.S. be able to respond to the needs of the next generations of Americans such as infrastructure, retirement and healthcare?
  5. How will Congress ever agree to another budget if voting for deficits that are less than $1 trillion is politically unpalatable? Are threatened or actual government shutdowns even more likely now than they’ve been recently?
As Budget Crunch Approaches, House Republicans Are In Total Chaos

As Budget Crunch Approaches, House Republicans Are In Total Chaos

Reprinted with permission from DCReport.

 

Consider all of the following now that the House of Representatives has left Washington until after Labor Day:

Paul Ryan (R-Wis.) is a lame duck speaker who no longer seems to care about supporting Trump or Trump’s legislative agenda.

Ryan has no heir-apparent who, as Ryan increasingly checks out, has the authority to take over what was an already very unruly House Republican caucus.

There are three candidates to replace Ryan who are openly campaigning for the job and dividing the GOP caucus. This competition will likely get worse when the House reconvenes.

One of the three speaker candidates is Jim Jordan (R-Ohio), the former chairman of the House Freedom Caucus. But the caucus, which had been so influential in determining the House legislative agenda this decade, now seems to be on its last legs. And Jordan has been accused by dozens of people of knowing about but not reporting sexual abuse when he was an assistant wrestling coach at Ohio State University.

That means Jordan may not be in the best position to become speaker (or minority leader if there’s a Democratic majority) in the next Congress but, if he can hold the Freedom Caucus together, he may be able to determine who does.

House Republicans seem to be content to do things that are totally symbolic and remarkably unimpressive.

More House Republicans are not running for re-election for one reason or another than in any other recent election. Retiring members or those defeated in their primaries tend not to be as responsive to their constituents, their party or the White House toward the end of their terms. They also can’t be counted on to vote as reliably as might have been the case before.

The most recent generic polls show Democrats with a big lead over Republicans on who should control the House in the next Congress. The biggest reason for the Democratic lead is a strong desire for there to be a check on Trump, and he isn’t going away anytime soon.

The House only has 11 legislative days left before the start of fiscal 2019 but doesn’t seem to have any agreed-upon plan on how to avoid a government shutdown on Oct. 1, except to hope that Trump doesn’t veto the continuing resolution that will be needed to prevent it.

While the shutdown clock continues to run, House Republicans seem to be content to do things that are totally symbolic and remarkably unimpressive.

The most purely symbolic gesture last week was the weak version of a resolution to impeach Deputy Attorney General Rod Rosenstein that Ryan completely shot down less than 24 hours after it was introduced by Jordan and current House Freedom Caucus Chairman Mark Meadows (R-N.C.). The resolution never had a chance in the House and the GOP controlled Senate had no interest in it. It was never going to happen.

When the House reconvenes, the GOP plans to devote a significant amount of the limited time it has left before fiscal 2019 begins to three tax cut bills that have no chance of being enacted any time soon because…wait for it…the Republican-controlled Senate has already said it’s not interested.

And none of this even begins to anticipate what the House Republicans who are running for re-election and think they will need to energize the Trump base will do in September as the Manafort trial and Cohen investigations continue and as the Mueller probe moves forward.

In other words, this year’s legislative crunch time is about to get very real but House Republicans have little leadership, no plan, a very divided caucus, are very likely to be distracted and are relying on a notoriously unreliable Trump to do the right thing.

This is almost a textbook definition of political and legislative chaos.

Stan Collender is an expert on the federal budget, federal spending and revenues, the deficit, the national debt and the congressional budget process. He writes thebudgetguy.blog, where this article first appeared, and you can follow him on Twitter @thebudgetguy.