Three-Fifths of This Year's Deficit is Policymakers' Fault
The budget deficit will be almost $900 billion this year according to projections from the Congressional Budget Office (CBO). By our estimates, 60 percent of this year's deficit is the result of legislation passed since 2015 and signed by Presidents Trump and Obama.
While an aging population and rising health costs are responsible for most of the growth in the long-term deficit, high near-term deficits are primarily driven by new tax cuts and spending hikes enacted by the previous two Congresses. Absent this legislation, this year's budget deficit would have totaled about $360 billion (1.7 percent of Gross Domestic Product) – the lowest since 2007 – rather than $897 billion (4.2 percent of GDP) as CBO projects.
In other words, recent spending hikes and tax cuts are responsible for $540 billion – or 60 percent – of this year's budget deficit.
The two largest contributors to the budget deficit are the December 2017 tax bill and the Bipartisan Budget Act of 2018 – which will cost $230 billion and $190 billion this year, respectively. They account for 25 and 21 percent of this year's deficit.
However, Congress began to pass budget-busting legislation back in 2015 by pursuing a permanent debt-financed doc fix followed by an even more costly tax extender bill, adding over $100 billion to 2019's deficit.
Failure to abide by the basic principle that both partisan and bipartisan legislation should be paid for has led to exploding deficits at a time when our country can least afford them. Deficits are climbing despite strong economic growth, and deficits have never been this high when the economy was this strong. With the nation’s fiscal picture already bleak, these self-inflicted wounds make solving the nation’s fiscal problems that much harder.
It's no longer enough for Congress to "do no harm" in the near term and ensure solvency of entitlement programs over the long run. Fixing our debt will now require reversing the harm that has already been done with unpaid-for tax cuts and spending increases, in addition to confronting the rising costs of Social Security and Medicare with spending changes and/or additional revenue.