The Days of Trillion Dollar Deficits Are Returning

During the Obama years, deficits of a trillion dollars were not uncommon (example).  You may think that the economy is fundamentally different today, and that annual deficits are shrinking.  Despite that fact that Trump's tax cuts led to record tax revenues, it looks like we'll be close to a $1Trillion deficit for this fiscal year.  Maybe over that.  We'll hit the trillion dollar limit if the next four months of 2019 transpire along the same average spending per month as the first eight months did.

The gap between the amount the government takes in and spends came in at $207.8 billion last month, the Treasury Department said (pdf) Wednesday, nearly 42% higher than a year earlier. The increase happened in part because of June 1 falling on a Saturday, a non-business day, meaning some benefit payments were made earlier than usual.

Lawmakers typically try to reduce the deficit when the economy is strong, but recent legislation has taken it in the opposite direction. In the first eight months of the fiscal year, the deficit increased about 39% from a year earlier to $738.6 billion.

Let me show my work.   Eight months is 8/12 or 2/3 of the year.  Multiply the deficit through eight months by the reciprocal of 2/3 (3/2) to extrapolate the same spending rate to the year and your calculator tells you $1.1 Trillion deficit this year.  It's not a great way to determine the deficit for the year because each month doesn't necessarily have the same spending as every other month - but it gets you "close enough".

As a matter of interest, while looking for some background information on this topic, I ran into a piece I posted in February of '18, "Ron Paul Was Right" that offered a prediction for this year's deficit that's remarkably close to what I just derived.  The article started with a quote from Senator Paul saying that the government spends closer to $2 Million/minute.

The Committee for a Responsible Federal Budget (CRFB), an independent think tank, projects that the deficit for FY '19 will balloon to $1.2 trillion in FY 2019, or $2.3 million per minute.

I don't know exactly whom to pin this deficit spending on.  The House starts spending, and they're all Nancy's little babbling numb nuts.  The Senate is in Stupid Party control, where spending bills can be modified, and President Tariff keeps talking about adding a trillion dollars of spending on infrastructure - although there are no real details to relay to you. 

In the end, it probably doesn't matter who did it because the pattern over the years is that the party out of power complains about deficits and spending until they get power, and then the roles switch.  Now the party out of power has economists telling them it doesn't matter and they can spend whatever they want.  They can't run out of dollars like the football stadium can't run out of points.  When they eventually get power back, it's going to be a fun experiment to watch.  From another planet. 

I tend to believe that things that can't go on forever won't go on forever and that all bubbles pop.  Eventually "political reality" collides with real reality.  There is a real world, with real consequences.  It's not all in our minds.  Economic collapses happen around the world all the time.  I've been predicting one for nine years, now.  So don't look at me. 

One thing is certain.  With record tax revenues, that's a vivid demonstration that it's not that we don't tax enough -- "It's the spending, stupid!!"

(I have to admit the way I report on economics isn't as ... interesting to read as John Wilder, who puts his economic plots on pictures of girls in bikinis)