Deficit balloons to $779 billion in Trump’s second year

Deficit balloons to $779 billion in Trump’s second year

CBO said this was due to the lower corporate tax rates championed by the GOP. But just the opposite happened.

Corporate tax collections in the US fell 22 percent, or $76 billion, in the fiscal year, which ended September 30.

According to the Congressional Budget Office, the American public can expect the federal deficit to surpass $1 trillion by 2020 - comparable to the total around the time of the US' 2007 to 2008 financial crisis. It reported that federal spending rose by $222 billion, or 32 percent, in the first 11 months of fiscal 2018 year-on-year. Almost half of the tax cuts go to the richest 5 percent, and the law slashed the corporate tax rate by 40 percent from 35 to 21 percent. However, despite the strong economy, federal revenue only rose by $14 billion.

Republicans had spent much of the Obama administration complaining about the deficit and demanding spending cuts and fiscal restraint, but they have abandoned many of their pledges since Trump took office. Excise taxes jumped 13%.

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Lower-income people, for example, are more likely to spend any extra disposable income they might get from a tax cut than rich people, who are probably already meeting all their needs.

Overall, federal revenues came in slightly higher in FY 2018 - up 0.5%.
But that drop was more than offset by increased revenues from individual and self-employment taxes. But spending on other programs, including homeland security, expires in less than two months, and he has threatened a partial government shutdown if he doesn't secure more money for a border wall.

Government spending was up $127 billion in fiscal 2018. If it was still at roughly 20 percent of GDP (it topped out at 19.75 percent in 2000), the deficit would have been less than $100 billion.

Economists generally view the corporate and individual tax cuts passed by the Trump administration late previous year and an increase in government spending agreed in early February as likely to balloon the nation's deficit. In fact, a Republican-led House and Senate are heading toward a 3.1 percent increase in nondefense discretionary spending for this year, compared to fiscal 2018 levels. Analysts estimate the tax cuts will cost the federal government more than $2.3 trillion over 10 years. Had Trump not succeeded in getting his pro-growth tax cuts across the finish line, it's possible we'd have seen a year like Obama's last one.

The government has also expanded military spending, though the Trump Administration has promised to pull back spending in other areas. Now the deficit has ballooned, and Trump has proposed to take an axe to social programs such as student loan forgiveness, food stamps, welfare and disability benefits.

So, the question is: Would it have been better to have kept taxes high, and sacrificed economic, job and wage gains we've been enjoying, so that the government could have collected a little bit more in taxes?

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