Biden's Budget Cuts Trillions From Deficit - GOP Plan Doesn't

The Republicans in Congress love to whine about the deficit. But their plan for new tax cuts for the rich will just increase the deficit. President Biden has revealed his budget plan. It's a plan that will accomplish some needed things and will cut over $3 trillion from the deficit over the next 10 years.

Here's what Jennifer Rubin says about Biden's budget (and the GOP's lack of one) in The Washington Post:

President Biden’s budget, like all administrations’ budget proposals, will not become law. But it achieves two important goals: It makes several policy proposals whose times have come. And it reveals GOP hypocrisy on deficit control.

A favorite Biden expression is, “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.” And that certainly applies here. In particular, his tax proposals evince a commitment to narrowing income inequality. He also advances several innovative programs to address the housing crisis.

For starters, Biden’s tax proposals seek to bolster the working poor. “The President’s Budget would restore the expanded Child Tax Credit, lifting 3 million children out of poverty and cutting taxes by an average of $2,600 for 39 million low- and middle-income families that include 66 million children,” the administration’s fact sheet explains. “This includes 18 million children in low-income families who would be newly eligible for the full credit, and 2 million children living with a caregiver who is at least 60 years old.”

At the other end of the spectrum, Biden tackles one of the most regressive aspects of our tax system: the cap on earnings subject to Medicare taxes. His plan would lift the cap on earnings subject to these payroll taxes and hike the rate to 5 percent on those with incomes over $400,000. It would also end the payroll tax exemption for some earnings from “pass-through businesses.”

The proposal comes at the point in the calendar in which people who make $1 million a year have already capped out on payroll taxes. “Most Americans can expect to pay Social Security payroll taxes throughout 2024,” CNBC reported. “But for top earners with gross annual wage income of $1 million, March 2 marks the date at which they will stop paying into the program, according to the Center for Economic and Policy Research.” With the income cap presently set at $168,600, they’ll enjoy the rest of the year without payroll tax deductions.

Frankly, there is no policy reason not to simply lift the $168,600 cap for everyone. However, Biden is sticking with his promise not to raise taxes on anyone making less than $400,000. That means his new proposal would create a sort of “doughnut” where earnings between $168,600 and $400,000 still are not subject to Medicare taxes, but those above $400,000 start paying more. Despite the awkward nod to politics, the concept remains strong. So long as the very well-to-do continue to draw Social Security paid for through the earnings of much less affluent taxpayers, the wealthy can and should pay more.

With a House Republican majority, Biden’s Medicare tax proposal will go nowhere. But it should begin a robust discussion. Why is there a cap? And why not lift the cap for Social Security as well as Medicare taxes?

Coupled with a refusal to renew the costly Donald Trump tax cuts for the richest Americans and increases in the corporate tax rate, the Biden tax proposals fulfill his promise of making the tax code more progressive while giving a specific boost to poor parents. Those changes allow Biden to lay claim to cutting $3.3 trillion from the deficit over 10 years. . . .

In response to this array of proposals, Republicans will holler that tax hikes will crash the economy and spending will balloon the debt. But Biden’s budget, which cuts the deficit, now stands as a challenge: What is their plan?

We already know Republicans want to extend the Trump tax cuts, expanding the pool of red ink. Trump’s incoherent rambling about entitlements suggests … well … we don’t know exactly what he meant. But it sure sounds like he is open to cutting Social Security and Medicare. (“There is a lot you can do in terms of entitlements in terms of cutting and in terms of also the theft and the bad management of entitlements, tremendous bad management of entitlements. There’s tremendous amounts of things and numbers of things you can do.”If such a word salad came out of Biden’s mouth, the press would be apoplectic.) Forcing the Republicans to explain what spending they want to cut and whose taxes they want to lower should be part of Biden’s budget rollout.

Republicans talk a good game, but so far we have seen nothing of their “economic populism” or any realistic deficit-cutting plan, even one acceptable to their own House and Senate members. Biden has showed his hand. Now it’s time for them show theirs.

GOP Is Lying - The BBB Bill Would NOT Raise Debt/Inflation

The Build Back Better Bill is currently stuck in the Senate. Not a single Republican is willing to support the bill -- because it helps ordinary Americans instead of corporations and the rich. And sadly, the media is treating the GOP lies about the Build Back Better Bill as though they had some substance. They don't!

Here is part of what economist Paul Krugman has to say about the BBB bashing: 

I guess reporting conventions require that journalists pretend to believe that Republicans have good-faith objections to the Biden plan — that they’re worried about deficits, or the effect on incentives, or something. But we all know that their main objection is simply the fact that it’s a Democratic initiative, which means that it must fail.

Also, it would tax the rich and help the poor.

Actually, can anyone even remember the last time leading figures in the G.O.P. seriously engaged with real policy concerns? The most recent important example I can think of is the enactment of the Children’s Health Insurance Program in 1997. It has been bad faith ever since.

While the most important source of opposition to Build Back Better is simply the desire to see Biden fail while keeping the rich as rich as possible, there may be some sincere concern that the bill would increase budget deficits. Actually, it wouldn’t have a significant deficit impact — the Congressional Budget Office says that the spending is almost completely paid for, and attempts to claim otherwise aren’t credible. But even if the deficit did rise, why would that be such a bad thing?. . .

Again, most of the proposed spending would consist of highly productive investments.

Finally, there’s a lot of talk about how Build Back Better might worsen inflation — talk that mainly seems to involve failure to do the math, for example, by confusing decades with single years and failing to divide by gross domestic product.

It’s true that the bill’s $1.75 trillion price tag is, on the surface, a lot of money. But that’s spending over 10 years, which means that annual outlays would be far smaller than the $1.9 trillion rescue plan passed this year or, for that matter, the $768 billion annual defense bill the House passed last week.

Also, much of the spending would be paid for with new taxes. Furthermore, you should never cite a big-sounding budget number without putting it in context. Remember, the U.S. economy is enormous. The budget office estimates that in its first year Build Back Better would expand the deficit by 0.6 percent of gross domestic product, a number that would shrink over time.

I’m not aware of any economic model suggesting that spending on that scale would make much of a difference to inflation. And because much of the spending would expand the economy’s productive capacity, it would probably reduce inflation over time.

Is Build Back Better perfect? Of course not. But it’s the best legislation we’re likely to get for years to come. And claims that we should let this opportunity pass out of concern over fiscal responsibility or inflation are uninformed at best, dishonest at worst.

Republicans Are NOT The Fiscally Responsible Party

The chart above shows the federal government's budget deficit in each year for the last seven presidents -- four Republicans and three Democrats. Note that the budget deficit rose during the presidencies of Reagan, Bush I, Bush II, and Trump -- all Republicans. The deficit went down under the presidencies of Clinton, Obama, and Biden -- all Democrats.

The Republicans love to claim they are the fiscally responsible party. This chart shows that is simply not true. The budget deficit (and the economy in general) does better when a Democrat is in the White House. 

The Phony Republican Deficit Hawks Are Back

When Barack Obama was president, the congressional Republicans cried and whined about the deficit -- and used that as an excuse to try and block everything President Obama tried to do.

But those same congressional "deficit hawks" had an amazing transformation once Donald Trump was sworn in as president. They passed a trillion dollar tax cut for the rich and corporations without worrying about what it would do to the deficit (or national debt).

Then they passed a pandemic bailout of trillions of dollars, because they wanted to look good with an election coming up (even though it mainly helped large businesses).

Currently, they are agreeing to another pandemic bailout, but this one is smaller. They want Georgia to vote Republican.

But we are starting to see the return of the GOP deficit hawks. They kept the latest bailout below a trillion dollars, and are already making noises about treating Joe Biden the way they treated Obama -- whining that the deficit won't allow them to do anything Biden wants.

Here is part of what Nobel Prize-winning economist Paul Krugman had to say about this:

While Republicans have made the political calculation that they must cough up some money while control of the Senate is still in doubt, they’re clearly getting ready to invoke fear of budget deficits as a reason to block anything and everything Biden proposes once he’s finally sworn in. 

It should go without saying that the coming G.O.P. pivot to deficit hawkery will be completely insincere. Republicans had no problem with rising deficits during the pre-pandemic Trump years; they cheerfully passed a $1.9 trillion tax cut, mainly for corporations and the wealthy.

But the hypocrisy isn’t the main issue here. More important, shortchanging relief in the name of fiscal prudence would mean vast, unnecessary hardship for millions of Americans. I’m an optimist about prospects for economic recovery once we achieve widespread vaccination. But that won’t happen until well into 2021, and even a rapid recovery will take months after that to bring us back to something like full employment. Making a deal that only provides enhanced benefits for 10 weeks is like building a bridge that goes only a quarter of the way across a chasm.

And the case for more spending won’t end with short-term economic recovery. We’ll still need huge investments in infrastructure, child care, clean energy and more.

Republicans will try to stop all of this, claiming that it’s because they’re worried about debt. They’ll be lying, and we shouldn’t be afraid to say so.

The Deficit "Peacocks" And "Vultures"

 Republicans are famous for moaning about the deficit of the federal government -- when Democrats are in power. But they don't mind running up trillions in deficit spending when its time to give to their rich friends and corporations.

They are hypocrites, who only object to spending that might help the poor, the working class, children, or seniors -- basically the bottom 90% of Americans.

Paul Krugman (Nobel Prize economist) divides them into two camps -- Deficit Peacocks and Deficit Vultures. Here is how he describes it in his New York Times column:

The term “deficit peacocks” was coined by the Center for American Progress for people who preen and posture about fighting deficits without offering realistic policy proposals. I’d broaden the term to include what I used to call Very Serious People — those who inveigh against the evils of debt not because they’ve done a careful analysis but because they imagine that it makes them sound earnest and tough-minded.

The glory days of deficit peacocks were the early teens, an era in which people like Alan Simpson and Erskine Bowles were lionized by the news media. As Vox’s Ezra Klein noted at the time, for some reason “the usual rules of reportorial neutrality don’t apply when it comes to the deficit”; the wisdom and virtue of deficit warriors were simply taken for granted.

We haven’t heard much from the deficit peacocks in recent years, even though the budget deficit, which declined sharply during the Obama years, soared again under Donald Trump. Funny how that works. But you can be sure they’ll be back in force if Joe Biden wins this November.

What about deficit vultures? That’s the term I’ve been using for politicians who exploit real or imagined fiscal distress to feed a reactionary policy agenda.

After the last crisis, conservatives used deficits as an excuse to cut social programs — for example, a number of states made it much harder to collect unemployment benefits. This time around, McConnell and Trump are trying to exploit deficit fears to force state governments to downsize, undermine (and possibly privatize) the post office and more.

It goes almost without saying that the deficit vultures are hypocrites. After all, Trump and McConnell rammed through a $2 trillion tax cut in 2017, with no apparent concern about the effects on the deficit. Nor have I heard any Republican complaints about Trump’s huge bailouts for farmers, whose distress is largely the result of his own policies. . . .

Still, hypocrisy aside, should we be worried about the effects of Covid-19 on debt? No.

It’s true that we’re headed for some eye-popping numbers. Last week the Congressional Budget Office released preliminary economic and budget projections for the next two years, which were both shocking and unsurprising.

That is, the numbers were grim but more or less in line with what many independent economists have been predicting. In particular, the budget office expects the Covid-19 crisis to drive the unemployment rate to 16 percent in a few months, which might even be on the low side.

Soaring unemployment will cause federal revenues to plunge, and also lead to a surge in spending on safety-net programs like unemployment insurance, Medicaid and food stamps. Add in the large relief packages Congress has passed, and the budget office projects a deficit that will temporarily rise to levels we haven’t seen since World War II, and it expects federal debt to rise to 108 percent from 79 percent of G.D.P., which sounds scary.

But the government will be able to borrow that money at incredibly low interest rates. In fact, real interest rates — rates on government bonds protected against inflation — are negative. So the burden of the additional debt as measured by the rise in federal interest payments will be negligible. And no, we don’t have to worry about paying off the debt; we never will, and that’s OK.

The bottom line is that right now, the only thing we have to fear from deficits is deficit fear itself. Pay no attention to the peacocks and vultures: In this time of pandemic, we can and should spend whatever it takes to limit the damage.

The GOP Continues To Tell Lies About Social Security

I have written about this several times before, and I will continue to do so. That's because the elected officials of the Republican Party continue to lie about Social Security.

Why do they lie about it so much? Because they hate the program. They voted against it when it was passed decades ago, and since then, they have done their best to eliminate it. They know the program is among the most popular federal programs (because it works to keep millions of seniors out of poverty), so they have to lie about the program to try and get people to support their efforts to destroy it.

The latest lie, and perhaps the biggest, is that Social Security eats up too much of the federal budget -- and to reduce the deficit and national debt, Social Security must be cut. That is simply not true.

The deficit and national debt concerns the discretionary budget -- the budget that Congress controls, and is paid for with income and other taxes. Social Security is NOT part of the discretionary budget. It is wholly paid for from FICA payroll deductions which go into the Social Security Trust Fund. That trust fund has funded every bit of Social Security benefits paid. Social Security has NEVER added a single penny to the federal deficit or national debt (and cutting benefits, or doing away with the program altogether, would not lower the deficit or the national debt).

Another lie the GOP loves to tell is that Social Security is going bankrupt. It's not. It will be able to fully fund all benefits until about 2035, and would be able to continue funding about 80% after that date. The is something that could easily be fixed without cutting benefits. Simply raise the cap on income subject to the FICA deduction to about $250,000 (or eliminate that cap completely). Doing either would fully fund Social Security benefits for many decades, and it would do it without most workers having to pay any more or suffer a benefit cut.

Let me address also, the way politicians and the media talk about Social Security. They love to use the word "entitlements". This infers that seniors are getting something for free that they have not earned. The truth is that Social Security is retirement insurance, which all workers pay for their entire working lives -- and they have a right to receive benefits after retiring. Don't let any Republican tell you otherwise.

We do have a problem with a huge federal deficit which now adds about a trillion dollars a year the national debt -- but this has nothing to do with Social Security! It's because of huge tax cuts for the rich and corporations and a bloated military budget. Don't let the GOP use Social Security as a scapegoat for their own fiscal irresponsibility!

It's A GOP Lie That Social Security/Medicare Causing Deficit

Republicans have ballooned the federal deficit to about a trillion dollars a year, and they want you to believe it is Social Security and Medicare that is causing that deficit.

That is an outrageous LIE! Social Security has never added a penny to the deficit or national debt, and Medicare has added very little.

The real cause of the ballooning deficit is twofold -- the enormous tax cuts for corporations and the rich, and a huge increase in the military budget (which was already bloated). But Republicans only care about the rich and corporations (including the corporations in the military-industrial complex). They never liked Social Security and Medicare (or Medicaid), even though those programs have been very successful and enormously popular, so they are now trying to use the deficit they created to damage those programs.

Here is how former Labor Secretary Robert Reich describes this GOP malfeasance:

When asked about America’s soaring debt and deficits, Senate Majority Leader Mitch McConnell lamented  “It’s disappointing, but it’s not a Republican problem,” and he blames Social Security, Medicare and Medicaid.

Rubbish. It’s not social spending that’s causing the federal deficit to soar. It’s Republican tax cuts, especially on corporations and the wealthy. 

Look at the evidence. Of all 35 advanced economies, America’s spending on social programs like Medicare, Social Security, and Medicaid is among the lowest, as you can see.

Also, Americans pay into Social Security and Medicare throughout their entire working lives. 

The biggest reason America has the highest deficit relative to our total economy among all 35 advanced economies is because of a shortage of tax revenue. Of all these countries, we’re bringing in the fifth-lowest total revenue as a share of GDP.

And why is that? Mainly because of Republican tax cuts on corporations and the wealthy. The big Trump Republican tax cut is already breaking the bank. It will cost us 1.9 trillion dollars over the next decade. Let me repeat that: 1.9 trillion dollars. 

Remember, Trump and Republicans in Congress claimed that their tax cuts for the wealthy and corporations would pay for themselves by boosting economic growth. It’s the same trickle-down fairy tale they’ve been telling for decades. But according to the Congressional Budget Office, they haven’t paid for themselves, and the deficit continues to balloon. 

If there’s one area where America spends too much, it’s the military. Since taking office, Trump has increased military spending by more than $200 billion a year, straining the federal budget even further. The United States already spends more on the military than the next 10 nations combined. 

Mitch McConnell, Donald Trump, and other Republicans in Washington want to cut Social Security, Medicare, and Medicaid. That’s been the Republican goal for decades. And they want to use the deficit to justify these cuts.

They also argue that we can’t afford a comprehensive healthcare system that the rest of the advanced world has figured out how to afford. 

Baloney. If the rich and corporations pay their fair share and we rein in defense spending, America can afford what we need. 

Know the truth. Spread the truth about the deficit.

Another Broken Promise - 2018 Trade Deficit At Record Level

Donald Trump promised to lower the trade deficit between the U.S. and other countries, saying it showed that those countries were taking advantage of the United States. To do that, he instituted a series of tariffs on imported goods.

Those tariffs are bringing in 91% more revenue than at this time last year. Trump would like us to think this is money other countries are paying the U.S., but that is not true. What the tariffs really amount to is a new tax on American consumers.

But have the tariffs lowered the trade deficit (their purpose according to Trump)? NO! The trade deficit has risen for the last two years -- and in 2018 was at the highest level in United States history!

Here's part of how The Washington Post reported it:

The Commerce Department said Wednesday that — despite more than two years of President Trump’s “America First” policies — the United States last year posted a $891.2 billion merchandise trade deficit, the largest in the nation’s 243-year history.

The trade gap with China also hit a record $419 billion, underscoring the stakes for the president’s bid to reach a deal with Chinese President Xi Jinping as soon as this month.

The department’s final 2018 trade report, which was delayed by the partial government shutdown, showed that the United States bought far more in foreign goods than it sold to customers in Africa, Asia, Europe and North America. The shortfall topped the 2006 record of $838.3 billion, set as the housing bubble was peaking, and marked the third consecutive year of rising deficits. . . .

It has been evident for months that Trump was not shrinking a trade gap that he calls “unsustainable” and that he says represents a major transfer of wealth from Americans to foreigners. Over the past year, even as he imposed tariffs on foreign-made solar panels, washing machines, steel, aluminum and assorted goods from China, imports roared ahead of exports.

The president thus begins his reelection drive with a core campaign promise unfulfilled — and with a recent flurry of economic research showing that his embrace of tariffs is damaging the U.S. economy.

Economists say the trade deficit is swelling because of broad economic forces, including a chronic shortfall in national savings that was exacerbated by last year’s $1.5 trillion corporate and personal income tax cut. As cash-flush businesses and consumers increased their spending, purchases of imported goods rose while the overvalued dollar weighed on exports.

“Macroeconomics end up ruling. You can’t wish it away. You can’t tariff it away,” said William Reinsch, a former Commerce Department official now at the Center for Strategic and International Studies.

Public Says NO To GOP Plans To Reduce The Deficit

A few months ago, the Republicans passed some tax reforms. They called it a "middle class tax cut" but that was disingenuous. It was a massive tax cut for the richest Americans, and no one else. That tax cut for the rich blew a huge hole in the federal deficit -- increasing it by nearly $900 million this last year, and by over a trillion a year in coming years.

Now congressional Republicans say they can fix the deficit. How? They want to cut Social Security (which added nothing to that deficit), Medicare (which added very little to it), and Medicaid (which is desperately needed by poor Americans).

Fortunately, the American people aren't as stupid as Republicans thought they were. And they don't like the GOP tax reform -- or their plan to cut Social Security, Medicare, and Medicaid. That's what this poll showed. Overwhelming majorities say it would be better to repeal the GOP tax reforms than to cut Social Security, Medicare, and Medicaid. That was the opinion of all demographic groups -- even a plurality of Republicans.

The survey was the NPR / PBS NewsHour / Marist Poll done between October 21st and 23rd of a national sample of 935 adults (including 738 registered voters). The margin of error was 3.9 points for adults and 4.4 points for registered voters.

Social Security Does Not (And Cannot) Add To The Deficit

The Republicans have made it clear that if they keep their congressional majorities, they are planning to cut Social Security. This would hurt millions of American seniors who depend on their Social Security check to keep them out of poverty and provide for their basic needs.

The Republicans would like for you to believe that Social Security is one of the main reasons for the ballooning federal deficit -- which rose by 17% last year, and is projected to add $1 trillion a year to the national debt starting this year.

That is an outrageous LIE! Social Security has never added a penny to the deficit or national debt in its history. In fact, it cannot by law. The reason the deficit (and debt) is ballooning is because of the massive tax cut for the rich and corporations passed by the Republicans. They created the mess by passing those cuts, and now they want to pay for that giveaway to the rich by taking from the seniors who depend on Social Security.

Here is the truth from economics professor Teresa Ghilirducci at Forbes.com (certainly no liberal publication):

This is not a political column, it’s a push back on the political distortion of legal and math facts about Social Security. Recently political leaders, such as the Senate leader Mitch McConnell, as Michael Hiltzik writes in the LA Times, are gunning to cut Social Security benefits to reduce the federal deficit.

But Social Security can’t, by law, add to the federal deficit. Medicare and Medicaid can, but not Social Security. Social Security is self-funded.

It is correct to say that Congress added to the deficit, not Social Security. The deficit rose substantially because of the 2017 tax cut, which reduced total revenue by 5% and revenue from corporate taxes by 35%.

And because it must balance its books Social Security is prudently funded. It collects revenue and saves for expected costs. Currently, Social Security has a $2.8 trillion trust fund built up by the boomer generation paying more in taxes than needed to pay current benefits. The trust fund is a vital way workers save for retirement. With tax revenues and earnings and principal from the trust fund Social Security is estimated to be solvent until 2034. After that, if it doesn’t get more revenue Social Security will only pay 77% of promised benefits.  Social Security can't add to the deficit because it pays for itself. If revenue falls short, benefits are cut.

And if you are wondering if the trust fund is real, here are facts to judge yourself. Workers do two things with their FICA taxes – we pay current benefits and we save by buying U.S. treasury bonds like many wealthy people, endowments, pension funds, foreign countries, and foreign investors buy U.S. treasury bonds. U.S. treasury bonds are highly sought after by savers all round the world.  For many reasons the U.S. enjoys an exorbitant privilege of all countries considering dollars the safest currency.

When we, through Social Security, invest in government bonds, the government creates intragovernmental debt. When the Yale endowment buys the bonds the government creates external debt. And just like all trust funds when the Social Security Administration draws on the trust fund to pay its bills it sells the bonds.

The U.S. can’t practically decide to default on Social Security’s bonds or anyone else’s U.S. treasury bonds. Defaulting would "save" money for the government, but countries, like Argentina, default, not the U.S.  It is hardly correct to say Social Security is "adding" to the deficit any more than any other holder of a Treasury bond. I disagree with the view that the Social Security indirectly contributes to the on-budget deficit because the interest payments it receives from the general fund are on the unified budget and receives funding from income tax revenue on Social Security benefits, which is technically on-budget.

The money you pay for Social Security through the FICA contribution is not the money you get out, you are paying mostly for the benefits of people receiving Social Security today. But for decades since 1983 workers were putting money in a "savings account” - the Social Security trust fund.

Republicans Poised To Go After Social Security & Medicare

The Republicans have caused a massive 17% increase in the federal government deficit of about 17% in the last year. And if nothing is done, the nation will start adding $1 trillion a year to that deficit beginning next year. Now they want to fix that by going after what they cal "entitlements" (known to you and I as Social Security and Medicare).

They want Americans to believe that the huge deficit is caused mainly by Social Security and Medicare. IT IS AN OUTRAGEOUS LIE. The deficit is the shortfall between revenues and spending in the discretionary budget. None of Social Security and only a portion of Medicare is paid for in the discretionary budget.

Social Security is now, and always has been, paid for completely with a payroll tax dedicated specifically for that purpose. It has never added a single penny to the federal deficit (or the national debt). You could completely eliminate Social Security, and it would not reduce the deficit or the national debt at all!

Part of Medicare (about 41%) is paid out of the discretionary budget, while 59% is paid with payroll taxes, interest income, beneficiary premiums, state payments, and taxing Social Security benefits. It only contributes a tiny amount to the deficit.

The real reason we have a ballooning deficit is because of the Republican tax cuts for the rich. They gave massive tax cuts to corporations and the rich, while increasing federal spending (especially for the military). Now they want to pay for that giveaway to corporations and the rich by cutting Social Security and Medicare (which millions of seniors need just to stay out of poverty).

It is immoral to take money from seniors to give more to the rich, but that is what the Republicans want to do. It's one more important reason why they must be voted out of office in November (and out of the White House in 2020).

The Annual Federal Deficit To Reach $1 Trillion This Year

(Cartoon image on government spending is from 02varvara.wordpress.com.)

We knew the Republican tax reform (giveaway to the rich) was going to balloon the deficit and the national debt, but it's happening much faster than predicted. The Congressional Budget Office (CBO) had originally predicted that the annual budget deficits would reach $1 trillion a year starting in 2020. They now admit they were wrong, and it will happen this year.

Through the first 11 months of this fiscal year (10/17 through 8/18), the budget deficit was $895 billion. That's $222 billion more than through the first 11 months of last year. And the huge increase can't be blamed on spending. Spending only rose by 7%, while the deficit rose by 33%. The biggest reason, by far, is the cut in taxes for the rich and the corporations. When September (the 12th month of this fiscal year) is figured in, the CBO expects the deficit for this year to reach $1 trillion dollars -- and continue to be above a trillion dollars for every year after that.

The Republicans, if they remain in power, will now try to gut all the programs that help ordinary Americans to pay for their giveaway to the rich -- and we can expect that to include Social Security and Medicare (along with food stamps, housing assistance, education, etc.).

This makes it very important to vote them out of power this November. It's only the Democrats who can protect social program spending and fix the GOP's tax reform mess.

New GOP Norm Is Trillion Dollar A Year Federal Deficits

The chart above (from MarketWatch) shows the federal debt projected by the CBO before the Republicans passed their massive tax cuts for the rich and corporations. Thanks to those cuts, the areas in red on the chart above will be much larger.

The Republicans have always claimed to be the party of fiscal responsibility. That wasn't actually true. They just wanted to do their spending on the military instead of programs to help most Americans. But their new tax cut, coupled with their profligate spending, means they have tossed fiscal responsibility out of the window.

They have ushered in a new era of yearly minimum deficits of at least a trillion dollars a year, which will balloon the federal debt far faster and bigger than ever before.

The following is just part of an article by Stan Collender at Forbes.com:

The new U.S. normal of $1 trillion or more annual federal budget deficits will officially begin this week when the Congressional Budget Office releases its economic and budget outlook report showing that the deficit will be at least that high every year Donald Trump is president.

Although there have been private sector projections for months (including my post from last October) that the government's red ink will hit and exceed a trillion dollars for years to come, this will be the first report by Congress's official budget watchdog since last year's big tax cut and this year's spending deal were enacted that will show the deficit rising precipitously and staying at that very high level through the next 10 years.

The official CBO projections are likely to be lower than the budget deficits that actually occur. CBO's report is based on current law and makes no political judgements about what Congress and the president will do in the future. That means the deficit projections will be based on the presumption that the tax cuts enacted last year that currently phase out will in fact end. That means the CBO forecast will assume that future revenues will be higher and the deficit lower compared to what is likely to occur.

The same is true for spending. For this report, the Congressional Budget Office doesn't presume that any of the reductions proposed in the Trump 2019 budget will be enacted. That will increase the deficit outlook compared to what the White House will say it will be.

For the record (and before the trolls come out to play), there were indeed four consecutive trillion dollar federal deficits during the Obama administration from fiscal 2009-2012. Those deficits were primarily caused by the Great Recession and were temporary. By contrast, the trillion dollar Trump deficits are permanent changes to the federal budget outlook caused by enacted reductions in revenues and increases in spending.

The Trump deficits assume a relatively high-level of economic growth. If the economic outlook doesn't turn out to be as rosy as the White House is promising, the very high Trump era federal budget deficits will be even higher.

Republicans Are Lying - They Don't Care About Deficits/Debt

Republicans have loudly proclaimed for quite a while now that they oppose this nation running large deficits and increasing the national debt. It is simply not true, as they recently showed by the "tax cuts for the rich" law they recently passed -- which will require trillions in new borrowing and explode the national debt.

Here is some of what Nobel Prize-winning economist Paul Krugman (pictured) had to say about this in his New York Times column:

There have been many “news analysis” pieces asking why Republicans have changed their views on deficit spending. But let’s be serious: Their views haven’t changed at all. They never really cared about debt and deficits; it was a fraud all along. All that has changed is the fact that a Republican now sits in the White House.

How do we know Republicans were never sincere about the deficit? It was obvious, even at the time, to anyone who looked at their fiscal proposals. These proposals always involved giant tax cuts for the wealthy — funny how that worked — offset by savage cuts in social benefits. Even so, assertions that deficits would go down depended entirely on assuming lots of revenue from closing unspecified loopholes and huge savings from cutting unspecified government programs. In other words, even at the peak of their deficit-hawk posturing, all Republicans really had to offer was redistribution from the poor to the rich.

However, pretending to care about the deficit served several useful political purposes. It was a way to push for cuts in social programs. It was also a way to hobble Obama’s presidency.

And I don’t think it’s unfair to suggest that there was an element of deliberate economic sabotage. After all, Republicans weren’t just vehemently opposed to fiscal stimulus; they were also vehemently opposed to monetary stimulus. Basically, they were against anything that might help the economy on President Obama’s watch.

Now Obama is gone, and suddenly deficits don’t matter.

But let me not just bash Republicans. Let me also bash their enablers — all those who were duped into believing their claims to be deficit hawks, or pretended to believe them in order to appear balanced and bipartisan. Such people did America a great disservice.

And they will continue to do a great disservice if they obscure what’s happening now. Please, let’s not talk about the wrongheadedness of fiscal policy — about imposing austerity in a depressed economy, then running up the deficit when we’re already near full employment — as a problem of “political dysfunction,” or assert that both parties are to blame. Democrats didn’t block stimulus when the economy needed it, or push a tax cut that will worsen inequality and explode the national debt.

No, this is all about Republican bad faith. Everything they said about budgets, every step of the way, was fraudulent. And nobody should believe anything they say now.

Will The New Trump/Republican Tax Cut Pay For Itself ?

The new Trump/Republican tax plan is now law. They have told us that those cuts (which go mainly to the rich and the corporations) will not increase the national debt, but will pay for themselves by massively increasing economic growth. They say this growth, by producing more taxable profits from business and more workers employed and paying taxes, will actually negate the amount of revenue lost by cutting taxes (or magically increase government revenues).

This is not the first time we've heard this from the Republican. It's just the old "trickle-down" argument they have been trying to sell for decades. We were told the same thing when Reagan made large tax cuts, and again when Bush II made large tax cuts -- both of which mainly benefitted the rich.

It didn't work. Note in the chart above, the Reagan and Bush II administrations had the largest increases in the national debt of any presidents since World War II. Both administrations more than doubled the national debt -- Reagan increasing it by 186%, and Bush II increasing it by 101%. They were the only presidents increasing the debt by a triple figure percentage.

Tax cuts can stimulate the economy if done correctly -- aimed at lower income workers who will spend that money. But it's just silly to say that tax cuts in general, especially those aimed mainly at the rich and corporations, will increase government revenue or be revenue neutral. That was not true in the past, and it is not true today. Tax cuts do NOT pay for themselves.

Don't be fooled by this same old lie now that it's being told by Donald Trump and the current crop of congressional Republicans. This new tax cut law will decrease government revenue, and combined with their wish to spend more for an already bloated defense budget, will increase the national debt massively.

And the increase under Trump is likely to be the largest increase we have seen. Thanks to the loss of revenue from those cuts, the government will be borrowing an additional trillion dollars this year -- an 84% increase over last year.

It's amazing to me that when a Democrat is in the White House, the Republicans scream long and loud about budget deficits and the national debt. But when a Republican is in the White House, spending more money and increasing both the deficit and national debt is of no concern to them. It is hypocrisy on steroids.

GOP Is Planning To Attack Social Security And Medicare

(Cartoon image is by Steve Greenberg at steve@greenberg-art.com.)

From the blog of former Labor Secretary Robert Reich:

Fresh off passing massive tax cuts for corporations and the wealthy, Trump and congressional Republicans want to use the deficit they’ve created to justify huge cuts to Social Security, Medicare, and Medicaid.

As House Speaker Paul Ryan says “We’re going to have to get… at entitlement reform, which is how you tackle the debt and the deficit.” 

Don’t let them get away with it.  

Social Security and Medicare are critical safety-nets for working and middle-class families. 

Before they existed, Americans faced grim prospects. In 1935, the year Social Security was enacted, roughly half of America’s seniors lived in poverty.  By the 1960s poverty among seniors had dropped significantly, but medical costs were still a major financial burden and only half of Americans aged 65 and over had health insurance. Medicare fixed that, guaranteeing health care for older Americans. 

Today less than 10 percent of seniors live in poverty and almost all have access to health care. According to an analysis of census data, Social Security payments keep an estimated 22 million Americans from slipping into poverty. 

Medicaid is also a vital lifeline for America’s elderly and the poor. Yet the Trump administration has already started whittling it away by encouraging states to impose work requirements on Medicaid recipients.  

Republicans like to call these programs “entitlements,” as if they’re some kind of giveaway.  But Americans pay into Social Security and Medicare throughout their entire working lives. It’s Americans’ own money they’re getting back through these programs. 

These vital safety nets should be strengthened, not weakened. How? 

1. Lift the ceiling on income subject to the Social Security tax. Currently, top earners only pay Social Security taxes on the first $120,000 of their yearly income. So the rich end up, in effect,  paying a lower Social Security tax rate than everyone else. Lifting the ceiling on what wealthy Americans contribute would help pay for the Baby Boomers retirements and leave Social Security in good shape for Millennials. 

2. Allow Medicare to negotiate with drug companies for lower prescription drug prices. As the nation’s largest insurer, Medicare has tremendous bargaining power. Why should Americans pay far more for drugs than people in any other country?

3. Finally, reduce overall health costs and create a stronger workforce by making Medicare available to all. There’s no excuse for the richest nation in the world to have 28 million Americans still uninsured. 

We need to not just secure, but revitalize Social Security and these other programs for our children, and for our children’s children.  Millennials just overtook Baby Boomers as our nation’s largest demographic.  For them — for all of us — we need to say loud and clear to all of our members of congress:  Hands off Medicare, Medicaid, and Social Security. Expand and improve these programs: don’t cut them.