This isn’t meant to be a political post, and I’m assuming it has a straightforward factual answer.
On the surface, the answer seems easy. The tax cuts decreased revenue.
But if you look at federal tax revenues, they didn’t really change after the GOP tax cuts.
They didn’t go down, but they didn’t really go up from 2015-2019. Meanwhile the deficit has gone from 438 billion in 2015 to 1 trillion in 2019.
According to the 2nd link, defense spending went up by 220 billion (from 736 billion to 956 billion). But thats still only 1/3 of the growth in the deficit from 2015-2019.
Where did the other 2/3 come from? Would tax revenue have grown more if not for the GOP tax cuts? Are other domestic spending areas seeing growth?
Medicare spending went up by 115 billion over that period, but I’m not sure how much was public vs private seeing how 1/3 of medical bills for medicare recipients are paid by the individuals, 2/3 by the medicare system.
The Baby Boom generation is in the process of retiring: that means more Social Security and Medicare spending as well as them having less income and paying fewer taxes. This is different from previous generations retiring where there were a lot more people in the workforce for each retired person. And note the retired generation is dying at older ages. When you add this with the income tax cuts and the massive defense increases you get the vastly increased deficit.
In 2015 SS brought in 913b and spent 887. By 2018 it brought in 988 and spent 992. Thats about a 30 billion change from +26b to -4b. Not nearly enough to explain a deficit jump of 600 billion.
For some reason, when the taxes are lowered for the people most capable of paying taxes, government revenue recedes and deficits rise even on those rare occasions where expenditures do not increase. This was demonstrated under Reagan and under Bush II but the law was passed, anyway.
The same basic argument was put forth in 2017 as in the two previous tax rollbacks: that reducing tax burdens would spur the economy to recompense the treasury. In each of the previous occasions, taxes had to be raised, again, to recover from the bad legislation.
Yeah but as I mentioned, tax revenues didn’t really decline from 2015-2019. They didn’t grow much either but they didn’t decline.
However, who knows what they would’ve been w/o the tax cuts. Does anyone know? If the US raises 3.44 trillion in 2019 after the tax cuts, what would we have raised if the tax cuts hadn’t happened? If tax revenues under the old tax code would’ve been 3.8 trillion or so in 2019, then thats the answer to why the deficit grew.
It is not. That is a Paul Ryan/Mitch McConnell lie that they were trying to tie to the tax law for their next goal of destroying Social Security.
Social Security is self funding and only shows up because Congress keeps “borrowing” against it. The reality is that the 2017 law simply cut the feet out of the government’s ability to collect enough money to pay its bills. For example, corporations had their rates reduced from 35% to 21%.
That would imply corporate taxes were 294 billion in 2016, so a decline of almost 80 billion from 2016 to 2019.
According to this, which is from 2013 and based on estimates, by 2018, income taxes should have raised 1.977 trillion and corporate taxes raise 450 billion.
In 2019 we only raised 1.698 and 216 billion respectively.
But I’d like a more up to date chart rather than predictions from 2013 because that also implies corporate taxes should’ve been 400 billion in 2016, and they weren’t.
Are these constant dollars (i.e. adjusted for inflation)?
And GDP grew by 2.9% from 2017 to 2018 (after adjusting for inflation), so if the effective tax rate remained the same, tax revenue should have increased by 2.9% in constant dollars.
I’ve not checked the numbers specifically, but interest on the debt is often missing from subtotals. (It’s neither “discretionary” nor “mandatory.”) Annual interest already exceeds $300 billion or thereabouts and has been growing rapidly, as debt and interest rates rise. Could this account for some of the “missing” money?
Interest on the debt has also gone up: the Wikicite I have only has up until the year 2017 for $50 billion of the deficit increase per year, but the principal has gone up and the interest rate has either stayed the same or gone up.
Yep, interest on the debt has indeed gone up, and it’s only going to get worse once the tax cuts begin taking their full effect.
There are three factors causing the deficit to grow to 3.9%, which is over the 40-year average of 3.2%.
An increase in defense spending (wars are expensive)
Increased social security (more people retiring)
Increased interest on the debt (we either pay it or go into default)
The budget is going to become increasingly a contest of priorities. Conservatives will insist that we pay for # 1, the military, and not #2, social security (and other social services). Progressives will insist that we fund more of #2 and less of #1. The Conservatives will use #3 to hold everyone hostage.
You know how Trump has basically tried to create an immigration “crisis”? That’s what Republicans want to do with the budget. They want a manufactured crisis so that they can say “See, we tried to tell you we can’t afford social security, medicare, and medicaid. And now the Democrats want to take money away from our men and women in the military and give it to lazy bums and alcoholic losers because they hate the military and they hate this country. Might be time to throw some liberals in jail”
Then add a
site:*.gov
or
site:fred.stlouisfed.org
to your searches.
This will be easier if we wait until all the 2018 numbers are released, unless you just want to do a 2017 vs 2016 comparison. Although CBO has projections.
Interest payments are mandatory spending, are are included in any table that includes overall government outlays.
As to the OP, one difficulty here is that if someone is going to ask specific questions, it helps to use a consistent source of numbers. Mixing and matching OMB, CBO, and thinktank numbers aren’t going to make things add up, because each source of numbers is going to use some different assumptions for calculating mandatory spending and tax revenues. (For example, the President’s OMB tends to rely on optimistic economic growth numbers, whereas CBO is typically more conservative.)
Overall, the deficit is expected to grow by about $120 billion from 2018 to 2019. Of this amount, there’s about $300 billion growth in spending, and $180 billion growth in revenue. (page 7)
Growth in revenue is attributable primarily to the strong economy in spite of tax cuts (page 87).
Growth in spending is due to three major factors: $60 billion more in interest payments (and this category of spending is expected to grow sharply in upcoming years) due to rising deficits and interest rates; $135 billion more in social programs like Social Security and Medicare, driven by the aging population which will draw more of these benefits over the next decade-plus, as well as retirements from the workforce that limit greater collections of payroll taxes associated with these programs); and an increase in discretionary spending of $67 billion due to the budget deal that increased spending on defense and all other discretionary programs. (page 7-8).
It is of course possible to analyze what-if scenarios, like if the tax cuts had not have passed, revenue growth with the strong economy would have been even stronger; etc.
I’d say that pretty much shows the trend there. You have a combination of tax cuts and increased spending. In addition, contrary to what Trump said (I know…that should go without saying), his various trade wars have also impacted revenue even with the increase in tariffs. Also, the flood of jobs back to the US hasn’t happened (to the surprise of no one). Trump was counting on tax cuts and tariffs to boost local US business and increase GDP and revenue to make up for increases in budget spending, and this hasn’t really happened.
I think we’re in agreement that those payments are mandatory; the question is whether or not they are “mandatory.” The CBO site is, like all-too many government sites, almost unusable, but this Wikipedia summary shows Interest as a THIRD category of spending distinct from Mandatory and Discretionary.
Because the interest payments are not firmly quantified in advance and are … well, too mandatory to be “mandatory” they are omitted from budgets and might get overlooked. Did OP’s source overlook them? I don’t know — I was suggesting that as a possibility.
