AMNA NAWAZ: Numbers out this
week show the federal budget
deficit taking a big jump over
the last spending year, despite
significant economic growth.
John Yang takes a
look behind the data.
JOHN YANG: Amna, the government
reported it just ended the
fiscal year with a deficit
of $779 billion.
That's a 17 percent
jump from 2017.
The number is getting
close scrutiny because
most of President
Trump's $1.5 trillion tax
cut took effect in
January, just three months
into the spending year.
Here to walk us through
all this, the "NewsHour"'s
correspondent Lisa
Desjardins, and David Wessel,
director of the Hutchins Center
on Fiscal and Monetary Policy
at the Brookings Institution.
Lisa, let me start with you.
How does this number for 2018,
the 2018 fiscal year, how does
that fit into historical trends?
LISA DESJARDINS: This
is a dramatic increase
in recent years.
Let's look at some numbers.
You go back just three
years ago, 2015, the
number of the deficit that
year was $439 billion.
Look at that.
This is almost double
what it was then.
And it's going to continue to
rise, John, many people know.
Look, in just two years, it's
going to be right around $1
trillion, according to the
Congressional Budget Office.
And that curve, John, continues
to get even steeper as we
continue to go forward.
Now, what's interesting here
is, this still is not as high
as the deficits were in 2009
and 2010.
Those were historic highs
in relatively recent terms.
However, those were years
in which we had a recession.
We're talking about these
deficits now in times of
growth and a good economy.
And that is different.
JOHN YANG: And, of course, those
projections are if current law
stays into effect, if nothing
were to change.
Now, what's driving
the 2018 deficit?
LISA DESJARDINS: That's right.
So if you look deep into the
numbers that the Treasury
Department put out, you find
some very interesting things.
First of all, in this year,
talking about taxes, we look
at these numbers, you see that
actual tax revenue
stayed about flat.
It rose about half-a-percent,
a little bit less.
But spending is what has
changed most dramatically.
So you have got flat revenues,
and you have got a lot more
spending, less -- not money
coming in, a lot of money
going out, you get a deficit.
Where was the bigger -- where
were the bigger increases?
Defense spending -- $65 billion
increase just in the past year.
And look at that
interest on the debt.
We saw an increase of
$62 billion in what we're
spending to pay off this debt.
Now, of course, defense
wasn't the only place
we saw an increase, but
that -- also non-defense,
but it shows Congress
spent a lot more and we
have a larger deficit.
JOHN YANG: So, David,
the -- Lisa says that the
revenue is remaining flat.
So what does that tell
us about the effect of
President Trump's tax cuts?
DAVID WESSEL, Brookings
Institution: Well, the economy,
as Lisa said, is very strong.
And so without a tax
cut, we would have seen
increasing revenues.
We also see, if you look at
the numbers, corporate tax
receipts fell 30 percent.
And that's largely the result
of the president's tax cut.
So what we're seeing -- you
would expect at a time like
this revenues rising faster than
spending, because the economy
is strong, more people working,
paying taxes, fewer people
collecting unemployment
benefits and such, and
the deficit would shrink.
We see the opposite, and that's
largely because of the tax cut.
JOHN YANG: Now, David, Senate
Majority Leader Mitch McConnell
says it's entitlements.
He said Social Security,
Medicare, Medicaid,
that's what's driving
these deficit forecasts.
Is he right?
DAVID WESSEL: Well, look, if
you look at what happened last
year, it's not Social Security,
Medicare and Medicaid.
It's taxes.
The size of the tax cut was
about in -- according to
CBO, was about $165 billion.
The deficit increased
by $113 billion.
Do the arithmetic.
If you look ahead, though, and
you look at the projections,
the reason the deficit is
rising is because we
are spending more on
Social Security, Medicare
and Medicaid, largely
because the population is aging.
If you look at CBO's
10-year projections,
spending on benefits,
particularly for elderly
people, are going up.
Interest on the
debt is going up.
And everything else is
holding or going down.
JOHN YANG: Lisa, the deficit
had stopped being a hot-button
issue for a long time.
Now it's sort of -- it's
back on the front pages.
Is Congress, do you think,
going to do anything about this?
LISA DESJARDINS: No.
JOHN YANG: Short answer.
LISA DESJARDINS: My
short answer, no.
You have an entire caucus of
conservatives, the Freedom
Caucus, who have led with this
issue in the past, but they are
the ones who ended up voting
and passing some of these
larger spending bills in
a deal with Democrats.
Republicans wanted
more money for defense.
Democrats wanted more
money for non-defense.
They all came together.
I spoke to Senate Leader Mitch
McConnell about this yesterday.
He agreed that, for now,
it looks like the spending
increases are on the rise.
But they have got some real
problems ahead, because first
they have got to keep government
funded starting in December.
And then, next year, they
have got new budget caps
they have got to work around.
But, right now, all the
momentum is towards spending.
JOHN YANG: David, you
mentioned that the
economy's in good shape, the
unemployment rate is low,
growth is pretty strong.
Is there a reason for concern
about these deficits, if
everything seems to be going
so well?
DAVID WESSEL: Well, there's
clearly no reason to worry about
today's deficits, as you say,
50-year low in unemployment,
inflation stable.
I think that's why the
politicians don't seem to feel
the need to deal with this.
And there's certainly not very
much pressure from the public.
The problem is in the future.
If something is unsustainable,
it can't go on forever.
And every year, we're borrowing
more and more money because we
have promised to pay benefits
to people that the current
tax code will not cover.
And at some point, we're
going to have to do something.
Some people think we
will have a crisis.
I'm not sympathetic to that
view, because people have been
predicting crises since you
and I started covering this
stuff in the early '90s.
And the crisis doesn't arrive.
But we know, from economics,
that eventually this will
erode the amount of -- the rate
of growth, and we will have
lower living standards.
And will be spending more and
more of our tax money to pay
interest on the debt, a good
chunk of which will
go to foreigners.
JOHN YANG: But, David, as you
say, we have - - you and I have
been covering this for almost
30 years now.
And we have sat and reported all
those 30 years that something
has to be done eventually.
When -- what's going to
be the pressure point?
You say, you don't think it's
going to be a crisis, but
what's it going to take to get
the political incentive
to do something?
DAVID WESSEL: I think that's
the $4 trillion question, John.
Look, I think the politics
will change when people think
the deficit is hurting them.
One reason in the past Congress
has had to deal with this is
because interest rates have
gone up a lot.
So if the Fed keeps raising
interest rates, if mortgage
rates go up, if the Fed chair
does, as Alan Greenspan
used to, or Paul Volcker,
lecture Congress that
it's your fault because
you're not dealing
with the deficit, that
could change things.
And the second thing is, we
could -- and I don't see it on
the horizon -- have some kind
of leadership, where some
president would say, look, this
isn't a problem today, it's
a problem for your kids, and
I want to do something about
it, and would be able to sell
the American people on a little
belt-tightening now, so we have
a better life in the future.
JOHN YANG: Lisa, what
are the chances of that?
LISA DESJARDINS: Well, we
have got a presidential
election coming up.
And so far, none of the
Democrats running are
running on the deficit.
President Trump occasionally
talks about it, but he's made no
indication that he's interested
in changing it.
There are hard
political choices.
And we have got leadership
questions for many issues.
This is maybe toward the bottom
of that very difficult stack.
JOHN YANG: Lisa
Desjardins, David Wessel,
thank you very much.
DAVID WESSEL: You're welcome.