The Star reports that the proposed federal budget for next fiscal year includes growth in the deficit of more than $1 trillion. (Aug. 22, 9A, “Budget deficit set to exceed $1 trillion under Trump”) To put that in perspective, if you spend a million dollars an hour, every hour, it would take just more than 114 years to spend a trillion.
What we’ve seen
This year’s deficit is projected to exceed $1 trillion. This is about $400 billion more than the deficit inherited from President Barack Obama, which was already too high. The question arises: Was the greater cause lagging revenue or increased spending?
A review of governmental publications clearly shows that the main driver of the deficit increase is lagging revenue resulting from income tax cuts. This year, income tax revenue as a percentage of gross domestic product is projected to be about 9% below the 2016 level. Spending as a percentage of GDP will increase by about 2%.
This is nothing new. Income tax revenues as a percentage of GDP fell by double-digit percentages and the deficit soared after the tax cuts enacted during the administrations of Presidents Ronald Reagan and George W. Bush.
So, OK, tax cuts help stimulate the economy, at least temporarily, but it is pure fantasy to argue they eventually pay for themselves.
If we care at all about the burden we are placing on future generations, we need to start soon relying more on common sense and historical experience and less on discredited economic theories and fanciful projections.