The Congressional Budget Office is sounding alarms, but it’s unclear whether anyone is listening. This year, the budget deficit will likely hit $960 billion dollars — nearly a trillion. Over the next decade, the deficit is projected to break that amount each year.
Let’s be clear about what the deficit is, and what it’s not. Put simply, it’s the yearly gap between the United States’ tax collections and its spending. That amount is then added to the overall national debt (currently more than $22 trillion).
Deficits have ballooned in the age of President Trump for a simple reason. Legislators cut taxes dramatically. A government starved of revenue is one that will run deficits, as we’ve seen in Kansas. And as everyone here knows all too well, promises that economic expansion will cover the cost of tax cuts is nonsense. The gaps turn into chasms, and government falters.
But there’s an important — and critical — difference between Kansas and the United States.
Our state is required to run a balanced budget, which meant that former Gov. Sam Brownback and his administration were forced into ever-more-elaborate contortions to cover the yawning deficits. There were cuts, yes, but there was also money moved between state accounts and other less-than-totally-transparent moves.
That requirement also meant that the tax experiment couldn’t be sustained. Eventually, in 2017, legislators threw in the towel because the numbers simply didn’t add up. The promised growth hadn’t materialized, and services had to be funded.
Nationally, the story is different. There is no national balanced budget requirement, which is why we have deficits in the first place. We are able, as the world’s reserve currency, to literally print our own money. That’s actually a good thing in some situations, such as recessions, when government spending has a critical role to play in supporting those hit hardest. But in this case, we have cut revenue and increased spending during a time of economic growth — an equation that’s all but guaranteed to increase the deficit.
Unfortunately, that means that when the next recession comes, our federal government will be ill-equipped to respond. Interest rates are quite low, and it’s unclear if further reductions will boost the economy much. Giant tax cuts have been made and spending has been boosted already — how much additional deficit spending will lawmakers be willing to add?
Given the national economic winds, we have little time to figure out the right answers. But our national leaders should be thinking about it right now.