The United Stated Treasury Department reported this week that the budget deficit for this fiscal year has already surpassed last year’s full-year figure.
Bloomberg reported on Monday that the gap grew to $866.8 billion in the first 10 months of the fiscal year, up 27% from the same period a year earlier. That’s wider than last fiscal year’s shortfall of $779 billion — which was the largest federal deficit since 2012.
Gordon Gray, director of fiscal policy at the center-right think tank American Action Forum, told Yahoo Finance’s The Ticker that we’re seeing a growing deficit due to a “number of issues.”
“We have a structural budgetary problem,” Gray stated. “We’ve made large commitments to the retirement and health care of an aging population. We have a pretty big commitment at the federal level to health care in general. Those costs are going up. We’ve got tax cuts. They don’t pay for themselves. We’ve also got a number of budget deals that have raised spending. So you add all that together, and we end up with what I think is probably going to be a trillion-dollar deficit next year.”
In the midst of a growing deficit, the U.S. government is also increasing its spending. Earler this month, Congress passed a two-year budget deal to increase spending and greenlight additional borrowing.
In July, Washington spent $53 billion on defense programs, and $66 billion on Medicare. Both of those numbers are up from last year.
“My own view is that this is going to get worse,” Gray stated. “The two-year budget deal that Congress just enacted — it was essentially compromise in that everybody gets what they want. What that looks like is higher debt. The president has not made fiscal responsibility a commitment on his campaign. He said we didn’t have to touch the major drivers of our debt.”
The impact of Trump’s tax cuts
The biggest contributor to America’s national debt between 2017 and 2019 is President Donald Trump’s Tax Cuts and Jobs Act. This tax cut legislation signed by Trump in 2017 increased the debt by $1.8 trillion, according to the Center for a Responsible Federal Budget.
And while Gray agrees the tax cuts contributed greatly to the deficit, he pointed out we won’t have to worry about them forever.
“We have structural budgetary problems that are much bigger than tax cuts. Keep in mind that tax cuts expire largely by 2025. So it has made the deficit challenge worse. But it is not at the root of our problem.”