Even as lawmakers and President Trump continued to argue over spending plans for the current fiscal year, the federal deficit grew in the first quarter of the year by $317 billion, according to estimates from the Congressional Budget Office (CBO).
That figure is $92 billion more than the deficit recorded during the same period in the previous year. The new borrowing pushed the federal debt close to the $22 trillion mark.
The deficit estimate for the first quarter of Fiscal 2019 — October through December — dwarfs the $5.7 billion border wall funding dispute that has received far more attention and led to the partial government shutdown.
The rapid deficit growth underscores the warning from Concord Coalition Executive Director Robert L. Bixby that once the border wall issue is eventually settled, elected officials in Washington will still have far bigger fiscal challenges to address.
The government now faces the prospect of trillion-dollar annual deficits even with a strong economy — an economy that would normally call for Washington to borrow less rather than more.
On Thursday Federal Reserve Chairman Jerome Powell described himself as “very worried” about the ballooning federal debt.
“It’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face,” he said.
The CBO’s Monthly Budget Review for December details the irresponsible flood of red ink in the opening months of Fiscal 2019.
If not for timing shifts in certain payments, the difference between deficits for the first quarters of Fiscal 2018 and the current year would have been $47 billion rather than $92 billion. Either figure, however, points toward a growing gap between spending increases and stagnant government revenue.
Despite the strong economy, total government receipts in the first quarter of this fiscal year were up by less than 1 percent from the same period in the previous year.
Largely because of new tariffs the administration has imposed, customs duties in the first quarter increased by 83 percent over the same period the previous year. This was not enough, however, to make up for lost revenue elsewhere.
Corporate income taxes dropped by nearly 15 percent, CBO said, largely reflecting changes made by the 2017 tax legislation. Individual income tax receipts fell by more than 4 percent.
This argues against the Trump administration’s claims that the 2017 tax cuts will “pay for themselves.”
Meanwhile, the government is spending more, notably for three of its largest programs: Social Security, Medicare and Medicaid.
CBO estimates that Social Security benefits in the first quarter, for example, rose by 5 percent compared to the previous year “because of increases both in the number of beneficiaries and in the average benefit payment.”
Spending rose by 6 percent for defense programs, an area where many lawmakers and President Trump want to put even more additional resources.
A particularly troubling statistic in the CBO report: Interest on the public debt rose in the first quarter by well above 19 percent over the same period in the previous year.
The fundamental reasons for this, however, are no surprise: Interest rates have gone up and the government continues to borrow more money.
The budget office has warned that interest payments on the debt will likely be the fastest-rising part of the federal budget in the years ahead. That obviously signals an unsustainable path.
Although elected officials are still struggling to complete work on the budget for the current year, they should soon be starting work on plans for Fiscal 2020.
In doing so, they should focus on the need for the federal government to take advantage of the current economic situation to start getting its fiscal house in order. Procrastinating until the next recession hits could have disastrous consequences.