The DC shutdown soaps broke into livings rooms across America this week as President Trump and Speaker Pelosi and Minority Leader Schumer made their cases for and against a border wall, or slats, or whatever the latest iteration is. While that was grabbing all the headlines, you probably missed a report that got a lot less coverage but is of way more importance in the long run. The Congressional Budget Office (CBO) released its quarterly update on our nation’s fiscal picture. The report’s findings were about what was expected, which is to say abysmal.
To help contextualize the dispute that has rendered Washington DC useless versus the major budget issues our country faces, we will put the CBO update in terms of the $5.7 billion funding request for the Trump Wall.
During the last three months of 2018 the federal government ran a 65 Trump Walls deficit ($317 billion). That is 16 additional Trump Walls ($92 billion) more than last year’s quartererly deficit, though if not for timing shifts it would only be 8 Trump Walls ($47 billion) bigger. Either way, the federal government is on pace to hit the 175 Trump Walls ($1 trillion) annual deficit mark in 2019. That is despite a much better economy and many more jobs. It is actually a historical anomaly to have booming economic growth and booming deficits. This is the first time we will ever have consecutive deficit expansions outside of a recession.
Looking further into the numbers, the data point that stands out the most is the major uptick in interest expenses – money that comes from taxpayers to pay for the financing of payments and projects that were not paid for in the past. Last quarter alone, we paid 18 Trump Walls ($102 billion) in net interest on our 3,675 Trump Walls ($21 trillion) national debt. The 19% increase ($16 billion) in quarterly interest expenses over last year is a product of the growth in federal debt and the rise in interest rates. Interest costs are expected to eat a continually larger share of our budgets into the foreseeable future.
The CBO report also showed a 15 percent drop in corporate tax revenues and basically the same level of individual income revenues as last year. Republicans will likely boast about the latter – claiming that their tax cuts pay for themselves. But a) a growing economy means revenues should be going up not remaining flat; and b) they need to sustain this for longer than the first year. Time will tell.
Tariff revenues are up 83 percent ($8 billion) because trade wars are easy to win and we are getting money from China and Mexico in the process. Wait, none of that is true. The tariffs have hurt American industries and the importers, i.e. American companies, pay the tariffs on imported goods and typically pass those costs onto the customers, i.e. us. Hooray tariffs!
On the spending side, spending is way up on Social Security and Defense. Defense spending was up 5 percent compared to the last quarter of 2017, as we racked up 30 Trump Walls ($173 billion) in defense expenses. In related news, an audit found that the DoD could not spend all the funds it received even before recent funding boosts. The DoD let 5 Trump Walls ($28 billion) in appropriations expire without being used.
In the last quarter, we spent 44 Trump Walls ($250 billion) on Social Security – a 2 Trump Wall ($12 billion) increase from last year. Expect Social Security costs, along with Medicare, to continue to rise as more and more members of the Boomer generation retire – outstripping the resources dedicated to the programs (or at least done so through accounting properties). But you will not hear anything about that from the 300 Democrats running for President.
CBO also reported that in December alone, the federal government ran a 6 Trump Wall ($36 billion) deficit on top of the 36 Trump Wall ($202 billion) deficit in November. That’s a lot of unpaid for slat equivalents.
Once Washington DC figures out how they want to address any gaps along the southern border, they should get back to work filling in the much bigger gaps in our federal budget. That’s where the real crisis is.
