The 40% increase in the federal deficit this fiscal year is a real problem, since the large tax cuts (part of the Tax Cut and Jobs Act) were not accompanied by a reduction in federal spending.
(Remember, just yesterday I reported that the deficit for February 2019 alone exceeded $ 234 billion!)
And, since the CBO (Congressional Budget Office) has been right on the money about this change in our tax system and tax policies, we should note that it projects our deficit will exceed $ 1 trillion pretty soon- which means it will be about 4.4% of our GDP! (Until the Great Recession, the deficit was about 2.9% of our GDP- and that percentage obtained for about 50 years!)
These supply-siders keep promising that growth will solve the problem. That’s simply magical thinking as our problems escalate. (I won’t detail how and why yet, but there are a slew of Democratic Party operatives who have their own version of magical thinking- “modern monetary theory”. [Unlimited deficit spending is financed by the Federal Reserve.] I’ll get to that soon enough.)
It seems that ½ of us (OK, 52%) are unworried about ballooning deficit. (Pew Research, January 2019). Even TheDonald is less worried about the deficit, now that he is in charge. (He railed against it when Obama was President.) His ‘plan’ is to reduce the deficit to zero in 15 years. (Anyone else remember that TheDonald campaigned on a platform to reduce the deficit to zero very quickly? Anyone consider 15 years quick?)
How is he going to do this? By appropriating some $ 8.6 billion for his wall, raising defense spending by about $ 50 billion (from $ 650 billion) and cutting most of the rest of the budget (termed discretionary spending) by at least 9%, to about $ 545 billion.
This reality (plus the burgeoning wealth inequality that is pervasive in the USA) is why all sorts of proposals are coming from the Democratic Party members. From taxing wealth (a bad idea, we’ll discuss Elizabeth Warren’s concept soon, too), to taxing estates (top rate of 77%) [Bernie Sanders], or a tax rate of 70% for those whose adjusted gross income is $ 10 million or more [Alexandria Ocasio-Cortez].
Until there is a tax increase, it’s pretty clear that our deficit will keep rising. I wonder what will happen when there needs to be a vote on raising the federal deficit level? (Will there be yet another federal shutdown? Stay tuned!)
A government that can not govern, and now, while we play the “no new taxes” game, our country’s infrastructure disintegrates and the ACA has a good chance of being destroyed while we obsess over whether there was collusion or not. The Democrats have their own version of magical thinking if they can give everyone free college tuition and health care. I’ve just about given up on both parties. Bring it on, Roy – we need a reality check badly.
Alana recently posted..Don’t Let Time Slip Away The Conclusion
I swore I answered this already, Alana. But, it looks like the reindexing of the site might have removed its confirmation.
What I said is that these are real problems- not just relegated to one party, but at least to both spectra- with a smattering of those in the middle. We need to employ sound financial principles!