U.S. Budget Deficit

Remember the budget deficit? U.S. politicians once loudly and frequently decried all the red ink. The complaints faded as the country’s creditors showed no signs that they were worried about the government’s ability to pay its bills and the shortfall melted like ice cream on a summer’s day. The deficit shrank as a share of the economy for six straight years, narrowing to 2.4 percent of gross domestic product in the fiscal year that ended in September 2015. But the gap started widening again, to 3.2 percent of GDP in fiscal 2016 and 3.5 percent in 2017. Congressional Republicans, members of a party once known for fighting against too much government spending, backed tax cuts in late 2017 that have added to the deficit. Get ready to hear a lot about Washington living beyond its means.

On Feb. 9, after months of using short-term budget measures to keep the government running, the Republican-controlled Congress passed a two-year budget deal that would raise spending by almost $300 billion. This followed a rewrite of the tax code in December 2017 that’s estimated to reduce federal revenue by almost $1.5 trillion over the coming decade, before accounting for any economic growth that might result. Then the projections included in the 2019 fiscal year budget proposed by President Donald Trump on Feb. 12 broke from a longstanding Republican goal of balancing the budget in 10 years. Not all Republicans are happy with their party’s turnabout on deficits. Members of the House Freedom Caucus, which champions limited government and is against big spending, opposed February’s budget agreement and its additional spending. Some fiscal conservatives are warily watching the bottom line: The U.S. Treasury Department reported that the budget deficit for the 2018 fiscal year rose to a six-year high of $779 billion. That was equivalent to 3.9 percent of GDP in Trump’s first full fiscal year as president.