“We can balance the budget very quickly … I think over a five year period,” said Donald Trump to Sean Hannity on January 21, 2016.
Trump made even more ambitious claims during the 2016 campaign, including a promise to eliminate the national debt, which stood at 19 trillion dollars, telling reporter Bob Woodward that it might take eight years to accomplish this. When pressed on how he would do so, Trump and his allies offered a familiar recipe of solutions: eliminating government agencies, cutting wasteful spending, and, most importantly, instituting big tax cuts that would theoretically kick the economy into high gear. This, they said, would lead to increased tax revenues and the debt would eventually disappear.
But Republicans made the same arguments to justify tax cuts during the first few years of the administration of George W. Bush. They said the cuts would lead to increases in GDP and in tax revenues, neither of which happened. GDP averaged about 1.7% during the Bush years and a budget surplus of 236 billion dollars in 2000 became a deficit of 412 billion by 2004. Because of the tax cuts revenue from individual income taxes plummeted by 20% during that period. This is when the foundation was laid for our current budget woes. Yes, deficits grew sharply in the first years of the Obama administration, but Obama was faced with one of the only situations when deficit spending is helpful, in this case the deepest recession this country had experienced since the 1930s.
Trump, on the other hand, faced no such dire situation. He not only inherited a growing economy and the longest period of sustained job growth in history, but the yearly budget deficit was on a steady downward trajectory. If Trump had any intention of delivering on his promise of a balanced budget he would have proposed some reasonable spending cuts along with modest tax increases. Instead, he aggressively pursued the one thing that would virtually guarantee an eventual fiscal crisis: tax cuts for corporations and individual tax cuts that would mainly benefit the wealthiest Americans. No spending cuts were enacted to go along with the tax cuts. Then came the budget agreement signed into law by Trump in February, 2018,which called for an increase in discretionary spending of 12% in each of the next two years. When the country desperately needed to slim down, Trump fed it a belt-busting hot fudge sundae. And at every step along this reckless path he was aided and abetted by many of the same Republicans who had expressed horror at deficits during Obama's presidency.
We're already reaping the consequences of Trump's profligacy. Since he took office the yearly deficit, which stood at 585 billion in 2016, has swelled dramatically. The Treasury Department's latest figures put the 2018 deficit at 898 billion with a month left in the fiscal year. As for 2019, the Committee for a Responsible Federal Budget (CRFB) is projecting a deficit of 1.2 trillion dollars. Over the longer term, the Congressional Budget Office (CBO) has predicted that the overall national debt would rise from 20 trillion dollars over the next ten years to 33 trillion dollars, 6 trillion more than was projected before the tax cuts were enacted. So much for the fantasy that economic growth would wipe out the annual deficits or the national debt.
Economists see other Trump initiatives making things even worse. His proposals to drastically reduce legal immigration threaten to slow the very growth he believes will bail him out. “There's no more direct way to cut growth than restricting immigration,”says Doug Duncan, chief economist at Fannie Mae.There is also broad consensus that Trump's use of tariffs in a growing trade war will further tamp down investment and growth.
Meanwhile, our burgeoning debt no longer appears on Trump's ever changing radar screen. In this year's state of the union address, he didn't even mention the deficit or debt. He recently acknowledged,however, that he is considering a proposal to further cut capital gains taxes by indexing them for inflation. Which suggests that he is comfortable with a debt policy that any objective observer would describe as reckless.
“This is almost like climate change,” says Mark Zandi, chief economist at Moody's Analytics. “It doesn't do you in this year, or next year,but you'll see the ill effects in a day of reckoning.” Given Trump's lack of concern about our mounting debt,that day may come sooner than anyone could have predicted.
This story is edited from its original version to change a reference to “deficits” to the “national debt.” Thanks for helpful comments.