No, Tax Cuts Are Not Driving Deficits — It's The Spending, Stupid
S E E D E D C O N T E N T
Red Ink: Are President Trump's massive tax cuts what's driving federal deficits upward. Everyone says so. But, it's not true. It's just a way for lawmakers to distract the public while they crank up the spending machine. Just like the Senate did this week.
Earlier this week, Trump's top economic advisor, Larry Kudlow, gave a talk at the Economic Club of New York in which he said that tax cuts aren't to blame for deficits .
"People are quick to blame deficits on tax cuts, but I don't buy that," he said. "The gap is principally spending too much."
You could almost hear the jaws dropping among the Washington pundits and budget "experts."
How could Kudlow make such a ludicrous claim? Everyone knows that Trump's $1.5 trillion tax cuts are fueling the increase in deficits. What explains why this year's deficit is running higher than last year's?
If anything, Kudlow could have been more emphatic. The deficit gap isn't "principally" because the federal government is spending too much, it's entirely due to spending.
How do we know that?
Each month the Treasury Department releases its tally of federal spending and revenues. The most recent data are through the month of August. Since the federal government starts its fiscal year in October, the latest report includes all but one month of the 2018 fiscal year.
What do the data show?
Through August, the federal deficit topped $898 billion. Over the same period last year the deficit was $674 billion.
So, the deficit is running $224 billion higher this fiscal year compared with last.
But the Treasury data also show that federal revenues through August totaled $2.985 trillion. That's an increase of $19 billion over the previous year.
In other words, despite Trump's massive tax cuts, federal revenues are running higher this year than last.
The problem is that federal spending has climbed even faster. Through August, outlays totaled $3.88 trillion. That's $243 billion more than the prior fiscal year.
So, do the math.
If it weren't for the increase in revenues, the deficit would be higher than it is.
Take a closer look at the revenue side of the equation and you'll see that Trump's tax cuts are, in some cases, more than paying for themselves.
The Treasury data show that while corporate income tax receipts are down, individual income tax revenue is up by $100 billion — a 7% gain — over last year. Payroll taxes are up by $5 billion. Revenues from excise taxes and customs duties are also up.
So, while corporations are paying fewer taxes, they're hiring more workers and paying them more, which is generating additional income and payroll taxes. This is exactly what advocates of the tax cuts predicted would happen.
As Kudlow explained in his remarks, increased growth has "just about paid for two thirds of the total tax cuts."
What about the spending side? Even though Republicans control the White House and Congress, there's been no spending discipline in Washington. Almost every federal agency has seen its budget increase.
Through August, for example, the Department of Agriculture has spent $11 billion more than it did over the same period last year. The Department of Energy, $1 billion more. Homeland Security, $21 billion. Interior, $2 billion. Justice, $3 billion. State, $1 billion. Defense, $37 billion. HHS, $56 billion. Social Security, $69 billion.
Even the Office of Personnel Management has seen its budget climb by almost $3 billion.
The spending splurge continues.
This week, the Senate passed an $854 billion spending bill that boosts the National Institutes of Health budget by 5% and military pay by 2.6%, among other things
That bill passed by a 93-7 margin — proving that the only thing Democrats and Republicans have in common these days is the unquenchable desire to spend more taxpayer money.
In his remarks, Kudlow said that "If you grow rapidly you're going to have lesser deficits. Growth solves a lot of problems."
He's right about that.
But faster economic growth can't solve the deficit problem if Congress continues to spend like there's no tomorrow.
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article is bs. Putin smiles.
Increasing spending with the same tax income increases debt. Increasing spending while at the same time cutting taxes only creates debt faster, so the central claim is a lie. Trump said that he would cut the debt and then did the opposite.
Tax cuts do not create jobs because they do not create significant consumer demand for goods and services. Tax cuts do not pay for themselves, despite the GOP claim.
Sounds like an overspending problem.
At least half the "money tree" is a bit pissed off about it.
The other half just wants to add to their half with imported saplings.
Gosh....who knew that Democrats have never had "The Power" …… EVER !
Republicans have "The Power" now. They had better hurry. They have a few more weeks.
Which party hasn't.
It's grown since day one of this country. This faux outrage is ridicules. We all know the spending will never stop.
What are you wanting to happen ?
MORE TAXING to make up for it ?
If we all know the spending will never stop then it has to be the tax cuts that are driving the increases in the deficit.
Gosh.....Smart Folks still say NAY !
The yay's are still in Sleep Mode.
Don't have to hold your breath too long, relief is on the way.
Tariffs are the tax increase you're going to get to make up for it.
Then Don't buy "Made in China".
President Trump’s proposed tariffs, especially as they relate to China, will be good for Michigan.
You just don't seem to understand.
It doesn't have to say "Made in China" for you to pay the tax.
I'll give you the best example you can verify anywhere you like...go to ANY car dealer, American, Japanese, Korean...find any vehicle with a 1 as the first digit of the VIN (that means built in America) then look at the factory window sticker. It tells you the percentage of American and foreign parts. ...Say hello to the new tax you cheered for.
Ames tools of Ames Iowa...."Made in USA from foreign and domestic parts"
Again, say hello to the tax you cheered for...
a can of anything...soda, beer, vegetables...hello tax
You just handed the very government you want to drown in a bath tub countless dollars and the only one that got hurt was the people cheering and their fellow working stiffs. The offshorers aren't going to lose any sleep, Anhueser Busch will still be swilling around under some bowling shirt, paying the tax and bragging about his extra $250 he kept thanks to Trump beatin' them furriners over the head with tariffs.
Congratulations.
In simple terms, you just confirmed that companies don't pay, even if they are taxed higher.
Have you always been for taxing companies more ?
Thanks !
This too will pass.
Don't know where the hell you got that from.
What is it you don't understand about the tariffs?
The one that pays the tariff tax is US.
You said "Don't buy made in China" and I'm telling you it doesn't have to say any particular country of origin. If you buy something and it says "made in USA from domestic and global or imported parts" you're paying a tariff on that imported part or that it's made here from Canadian aluminum...you're paying the tariff.
Ball mfg. Who makes the cans for pretty much the whole beverage market has already said cans will be increasing as much as $.05 each. Sounds like nothing until you add up how many people come home and grab a beer or soda and then open a few cans of vegetables for dinner.
Wait until you buy clothes! Think about that family with kids going to school...it won't be enough incentive to make Fruit of the Loom come out of S. America...you'll just pay the tariff.
Lumber, something I buy almost weekly has jumped 20%....tariffs.
Enjoy your tax break...he's taking it back from you plus a bunch more and you can't escape it.
You'll thank him for having so much money in the treasury...that you gave him in a zombie trance willingly.
Like a kidney stone.
Here's the second half of the GOP two-step!
After voting to shovel billions of dollars to the already-rich, in the form of "tax reform"
, now de GOP is already telling us not-rich that we must pay to fill the deficit.
Is anyone stupid enough to be taken in again?
Republicans need to take first grade math again, to learn the relationship between addition and subtraction.
Exacerbated by tax cuts...
I just ran a comparison of 2017 taxes vs 2018 taxes for two incomes: the U.S. median ($59,000) and $350,000 (top 1%) using a joint filing two person household. The tax savings for the median household is $1,000 while that of the 1%er is $16,000. So someone making 6 times the median income gets 16 times the tax cut. That is the very definition of a regressive tax code.
So funny! They spew this shit and expect one not to be able to do the math.