Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – Thanks to the Republican Party’s Tax Cuts and Jobs Act of 2017, the U.S. federal budget deficit will balloon to $1 trillion by the end of the fiscal year this month, according to the non-partisan Congressional Budget Office (CBO).
Previous estimates by CBO reckoned the deficit to hit this demoralizing milestone in 2020. CBO credited the surge to the new Republican tax law and increased government spending. Federal expenditures rose by 7% while tax revenue inched upward by only 1%.
CBO also reported that federal spending rose by $222 billion, or 32 percent, in the first 11 months of fiscal 2018 compared to the same period in 2017. In August, the deficit soared 32% year-on-year to reach $895 billion.
As expected, corporate taxes plummeted, but by an unexpectedly massive 30% this fiscal year. CBO said this was due to the lower corporate tax rates championed by the GOP.
The government is now relying on individual income taxes to keep it afloat. Individual income and payroll taxes climbed 4% as rising wages – mostly due to more people having jobs — offset a lower withholding rate. This means ordinary workers and employees are doing more to prop up government finances than billion dollar corporations.
The deficit in August alone came to $211 billion, nearly double the gap year-on-year. The deficit would have grown by 19% adjusted for shifts in the timing of payments that otherwise would have occurred on a weekend of holiday. CBO reported that government expenses grew 8% in August.
It said the main causes for the burgeoning deficit were the 25% jump the net interest on public debt; the 10% hike in defense spending; a 7% increase in Medicare benefits and a 5% rise in Social Security. On the other hand, federal receipts fell by 3%, with corporate taxes dropping by $5 billion. Revenues from income and payroll taxes rose marginally.
CBO said the budget deficit is widening massively. In the first 11 months of the fiscal year ending August, the deficit was $895 billion, which is $222 billion more than the previous year.
Spending on Social Security and Medicare rose 4% as more Baby Boomers retire. Outlays on net interest on the debt jumped 19% due to a higher rate of inflation triggering more payments to inflation-protected securities holders.
Democrats, who have repeatedly warned the GOP tax cuts would explode the decifit, were angered by the ballooning deficit and warned Donald Trump and the Republicans from cutting Social Security and Medicare to balance the budget.
“We knew tax cuts for the wealthy would explode the deficit. And now they have. Still, Trump & Ryan argue for massive cuts to Medicare & Social Security, saying we don’t have the money. Not a chance,” tweeted Rep. Adam Schiff (D-CA).
The exploding deficit also belied Republican claims the massive corporate tax cuts are paying for themselves.
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