The Federal government’s annual budget and trade deficits continue to grow. Does this mean that the overall Trump economic policy has failed?
WASHINGTON. We recently learned that the Federal government’s annual budget deficit continues to grow. In addition, the trade deficit continues to ballooon. Does this mean that the overall Trump economic policy has failed? And for that matter, his trade policies as well? Partisan critics eagerly cite the president’s claim that his policies would reduce both the budget and trade deficits. What’s going on?
In 2018, the annual Federal budget deficit increased by more than 16% from 2017 to $ 779 billion. That means that the public debt, which is the accumulation of all deficits, increased to more than $22 trillion. The Democrats and their mainstream media (MSM) acolytes quickly pounced on this news to criticize Trump for what they call his “failed economic policies.” They heap their greatest criticism and scorn on the Trump-GOP tax cuts.
The Republican tax cuts, however, did not add one dollar to the deficit. That’s because in fiscal 2018, with the tax cut in effect, the Treasury actually collected slightly more revenue than in it did in fiscal 2017. The increase in the deficit was due to increased government spending, mostly for the military. Contrary to the constant Democrat misrepresentation, the GOP tax cut likely helped keep the deficit down. That’s because those cuts increased annual economic growth from 2% to about 3%.
The Congressional Budget Office (CBO) forecasts annual deficits will get even larger over the next few years. However, the CBO does not have a good record for forecasting deficits, so using their forecasts may yield inaccuracies.
That said, the CBO does point out that reducing the Federal deficit will be extremely difficult. That’s because more than 60% of government spending is for “entitlements.” These entitlements include Social Security, Medicare and Medicaid. Most politicians won’t even talk about cuts to those programs. They regard entitlements as the third rail of 21st century politics.
Now, add in defense spending and interest on the public debt.
