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BUSINESS Monday 28 october 2019
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US deficit hits nearly $1 trillion. When will it matter?

By MARTIN CRUTSINGER of reckoning is still coming
Associated Press but isn't here yet. Most ana-
WASHINGTON (AP) — The lysts think any real solution
Trump administration re- will involve a combination
ported a river of red ink Fri- of higher taxes and cost
day. savings in the government's
The federal deficit for the huge benefit programs of
2019 budget year surged Social Security and Medi-
26% from 2018 to $984.4 care.
billion — its highest point ___
in seven years. The gap is ANY SIGN THAT WASHING-
widely expected to top $1 TON MAY TAKE THE POLITI-
trillion in the current bud- CALLY PAINFUL STEPS TO
get year and likely remain CUT THE DEFICIT?
there for the next decade. In short, no. There has been
The year-over-year widen- a major change since
ing in the deficit reflected the first round of trillion-
such factors as revenue lost dollar deficits prompted
from the 2017 Trump tax cut the Tea Party revolt. This
and a budget deal that shift brought Republicans
added billions in spending This Sept. 18, 2019, photo shows the view of the U.S. Capitol building from the Washington Monu- back into power in the
for military and domestic ment in Washington. House and incited a round
programs. Associated Press of fighting between GOP
Forecasts by the Trump ad- congressional leaders and
ministration and the Con- never seems to happen, omy or elevate the inter- threat, at some point they the Obama administration.
gressional Budget Office and the government just est rates we pay on credit will become a big problem. A result was government
project that the deficit will keeps on spending. cards, mortgages and car They will crowd out borrow- shutdowns and near-de-
top $1 trillion in the 2020 There have been numer- loans. And in fact, the huge ing by consumers and busi- faults on the national debt.
budget year, which began ous attempts by presidents deficits are coinciding with nesses and elevate interest But once Trump took of-
Oct. 1. And the CBO esti- after Reagan to con- a period of ultra-low rates rates to levels that ignite a fice, things changed: The
mates that the deficit will trol spending. President rather than the surging bor- recession. president focused on his
stay above $1 trillion over George H.W. Bush actually rowing costs that econo- What's more, the interest biggest legislative achieve-
the next decade. agreed to a tax increase mists had warned would payments on the deficits ment, the $1.5 trillion tax
Those projections stand in to control deficits when he likely occur if government become part of a mount- cut passed in 2017. This
contrast to President Don- was in office, breaking his deficits got this high. ing government debt that appeared to satisfy Re-
ald Trump's campaign "Read my lips" pledge not There is even a new school must be repaid and could publican lawmakers and
promises that even with to raise taxes. of economic theory known depress economic growth quelled concerns about ris-
revenue lost initially from his And a standoff between as the "modern monetary in coming years. In fact, ing deficits.
tax cuts, he could eliminate President Bill Clinton and theory." It argues that such even with low rates this Democratic presidential
the budget deficit with cuts House Speaker Newt Gin- major economies as the year, the government's candidates have for the
in spending and increased grich did produce a rare United States and Japan interest payments on the most part pledged to roll
growth generated by the string of four years of bud- don't need to worry about debt were one of the fast- back Trump's tax cuts for
tax cuts. get surpluses from 1998 running deficits because est growing items in the corporations and wealthy
Here are some questions through 2001. In fact, the their central banks can budget, rising nearly 16% to individuals. But they would
and answers about the budget picture was so print as much money as $375.6 billion. use the money not to low-
current state of the govern- bright when George W. they need. ___ er the deficits but for in-
ment's finances. Bush took office in 2001 that Yet this remains a distinctly HAVEN'T ECONOMISTS BEEN creased spending on ex-
___ the Congressional Budget minority view among econ- MAKING THESE WARNING pensive programs such as
WHAT HAPPENED? Office projected that the omists. Most still believe FOR DECADES? Medicare for All.q
The deficit has been ris- government would run sur- that while the huge defi- Federal Reserve Chairman
ing every year for the past pluses of $5.6 trillion over cits are not an immediate Jerome Powell says the day
four years. It's a stretch of the next decade.
widening deficits not seen That didn't happen. The
since the early 1980s, when economy slid into a mild
the deficit exploded with recession, Bush pushed
President Ronald Reagan's through a big tax cut and
big tax cut. the war on terrorism sent
For 2019, revenues grew 4%. military spending surging.
But spending jumped at Then the 2008 financial cri-
twice that rate, reflecting sis erupted and triggered
a deal that Trump reached a devastating recession.
with Congress in early 2018 The downturn produced
to boost spending. the economy's first round of
___ trillion-dollar deficits under
WHY DOESN'T WASHING- President Barack Obama
TON DO SOMETHING ABOUT and is expected to do so
IT? again under Trump.
Fiscal hawks have long ___
warned of the economic SHOULD WE WORRY?
dangers of running big As far as most of us can
government deficits. Yet tell, the huge deficits don't
the apocalypse they fear seem to threaten the econ-