It
was another crazy news week, so it's understandable if you missed a
small but important announcement from the Treasury Department: The
federal government is on track to borrow nearly $1 trillion this
fiscal year — Trump's first full year in charge of the budget.
That's
almost double what the government borrowed in fiscal year 2017. Here
are the exact figures: The U.S. Treasury expects to borrow $955
billion this fiscal year, according to a documents
release Wednesday. It's the highest amount of borrowing in six years,
and a big jump from the $519 billion the federal government borrowed
last year.
Treasury
mainly attributed the increase to the “fiscal outlook.” The
Congressional Budget Office was more blunt. In a report this week,
the CBO said tax receipts are going
to be lower because of the new tax law.
The uptick in borrowing is yet another complication in the heated
debates in Congress over whether to spend more money on
infrastructure, the military, disaster relief and other domestic
programs. The deficit is already up significantly, even before
Congress allots more money to any of these areas. “We're addicted
to debt,” says Marc Goldwein, senior policy director at Committee
for a Responsible Federal Budget. He blames both parties for the
situation.
What's
particularly jarring is this is the first time borrowing has jumped
this much (as a share of GDP) in a non-recession time since Ronald
Reagan was president, says Ernie Tedeschi, a former senior adviser to
the U.S. Treasury who is now head of fiscal analysis at Evercore ISI.
Under Reagan, borrowing spiked because of a buildup
in the military,
something Trump is advocating again. Trump
didn't mention the debt or the ongoing budget deficits
in his State of the Union address. The absence of any mention of the
national debt was frustrating for Goldwein and others who warn that
America has a major economic problem looming. “It is terrible.
Those deficits and the debt that keeps rising is a serious problem,
not only in the long run, but right now,” Harvard economist Martin
Feldstein, a former Reagan adviser, told
Bloomberg.
The
White House got a taste of just how problematic this debt situation
could get this week. Investors are concerned about all the additional
borrowing and the likelihood of higher inflation, which is why the
interest rates on U.S. government bonds hit the highest level
since 2014. That, in turn, partly drove the worst weekly sell-off
in the stock market in two years. The belief in Washington and on
Wall Street has long been that the U.S. government could just keep
issuing debt because people around the world are eager to buy up this
safe-haven asset. But there may be a limit to how much the market
wants, especially if inflation starts rising and investors prefer
to ditch bonds for higher-returning stocks.
Fiscal
policy is just out of control,” says Peter Davis, a former tax
economist in Congress who now runs Davis Capital Investment Ideas.
The
Federal Reserve was also buying a lot of U.S. Treasury debt since
the crisis, helping to beef up demand. But the Fed recently decided
to
stop doing that now
that the economy has improved. It's another wrinkle as Treasury
has to look for new buyers.
Tedeschi, the former Treasury adviser to the Obama administration,
calls it “concerning, but not a crisis.” Still, he says it's a
“big risk” to plan on borrowing so much in the coming years.
Trump's Treasury forecasts borrowing over $1 trillion in 2019 and
over $1.1 trillion in 2020. Before taking office, Trump
described himself as
the “king
of debt,”
although he campaigned on reducing the national debt.
The
Committee for a Responsible Federal Budget
predicts the U.S. deficit will hit $1 trillion by 2019 and stay there
for a while. The latest borrowing figure — $955 billion —
released this week was determined from a survey of bond market
participants, who tend to be even faster to react to the changing
policy landscape and change their forecasts. Both parties claim they
want to be “fiscally responsible,” but Goldwein says they both
pass legislation that adds to the debt. Politicians argue this is the
last time they'll pass a bill that makes the deficit worse, but so
far, they just keep going.
The
latest example of largesse is the GOP tax bill. It's expected to add
$1 trillion
or more to the debt, according to nonpartisan analysis from the Joint
Committee on Taxation (and yes, that's after accounting for some
increased economic growth). But even before that, Goldwein points to
the 2015 extension
of many tax cuts
and the 2014 delays
in Medicare reimbursement cuts.
“Every time you feed your addiction, you grow your addiction,”
says Goldwein. There doesn't seem to be any appetite for budgetary
restraint in Washington, but the market may force Congress' hand.
OUR
NATIONAL DEBT
$20,538,648,349,072
YOUR
family share $242, 553
THE
NATIONAL DEBT CLOCK
REFERENCE:
The Washington Post (article quoted in
its entirety)
U.S.
Government debt- is
the total outstanding borrowing of a central government,
comprising of internal debt
(owing
to national
creditors)
and external debt
(owing
to foreign creditors), incurred in financing its expenditure.
U.S.
Government deficit- The amount by which a
government's expenditures exceed its tax revenues.
The difference is made up for by borrowing from the public through
the issuance of debt. also called Federal
Debt.
COMMENTARY:
The $1.5 trillion dollar “tax cut” means that amount of revenue
will not be used to pay government expenditures; which means that the
amount will be added to the federal deficit. Either the government
will have to slash government expenditures (which is highly unlikely)
or have to borrow the money by selling government securities to
“buyers” (Federal Reserve, foreign investors/central banks, etc.)
to pay its bills. It is curious that president Trump hasn't said
anything about the national debt or the deficit; nor have any members
of Congress-why??
Robert
Randle
776
Commerce St Apt 701
Tacoma,
WA 98402
February
2, 2018
