WEBVTT 00:02.033 --> 00:04.233 align:left position:10%,start line:77% size:80% AMNA NAWAZ: Numbers out this week show the federal budget deficit taking a big jump over 00:04.233 --> 00:07.833 align:left position:10%,start line:83% size:80% the last spending year, despite significant economic growth. 00:07.833 --> 00:09.900 align:left position:20%,start line:83% size:70% John Yang takes a look behind the data. 00:09.900 --> 00:14.466 align:left position:10%,start line:77% size:80% JOHN YANG: Amna, the government reported it just ended the fiscal year with a deficit 00:14.466 --> 00:18.366 align:left position:30%,start line:89% size:60% of $779 billion. 00:18.366 --> 00:21.666 align:left position:20%,start line:83% size:70% That's a 17 percent jump from 2017. 00:21.666 --> 00:26.666 align:left position:10%,start line:71% size:80% The number is getting close scrutiny because most of President Trump's $1.5 trillion tax 00:28.566 --> 00:31.000 align:left position:10%,start line:77% size:80% cut took effect in January, just three months into the spending year. 00:31.000 --> 00:36.000 align:left position:10%,start line:71% size:80% Here to walk us through all this, the "NewsHour"'s correspondent Lisa Desjardins, and David Wessel, 00:38.033 --> 00:41.100 align:left position:10%,start line:77% size:80% director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. 00:41.100 --> 00:43.200 align:left position:10%,start line:89% size:80% Lisa, let me start with you. 00:43.200 --> 00:47.966 align:left position:10%,start line:77% size:80% How does this number for 2018, the 2018 fiscal year, how does that fit into historical trends? 00:49.566 --> 00:52.066 align:left position:20%,start line:77% size:70% LISA DESJARDINS: This is a dramatic increase in recent years. 00:52.066 --> 00:54.600 align:left position:10%,start line:89% size:80% Let's look at some numbers. 00:54.600 --> 00:58.366 align:left position:10%,start line:71% size:80% You go back just three years ago, 2015, the number of the deficit that year was $439 billion. 01:00.100 --> 01:01.300 align:left position:30%,start line:89% size:60% Look at that. 01:01.300 --> 01:03.466 align:left position:20%,start line:83% size:70% This is almost double what it was then. 01:03.466 --> 01:06.000 align:left position:10%,start line:83% size:80% And it's going to continue to rise, John, many people know. 01:06.000 --> 01:10.066 align:left position:10%,start line:77% size:80% Look, in just two years, it's going to be right around $1 trillion, according to the 01:10.066 --> 01:11.966 align:left position:10%,start line:89% size:80% Congressional Budget Office. 01:11.966 --> 01:16.266 align:left position:10%,start line:77% size:80% And that curve, John, continues to get even steeper as we continue to go forward. 01:16.266 --> 01:20.733 align:left position:10%,start line:77% size:80% Now, what's interesting here is, this still is not as high as the deficits were in 2009 01:20.733 --> 01:22.233 align:left position:30%,start line:89% size:60% and 2010. 01:22.233 --> 01:25.300 align:left position:10%,start line:83% size:80% Those were historic highs in relatively recent terms. 01:25.300 --> 01:28.433 align:left position:10%,start line:83% size:80% However, those were years in which we had a recession. 01:28.433 --> 01:31.833 align:left position:10%,start line:77% size:80% We're talking about these deficits now in times of growth and a good economy. 01:31.833 --> 01:33.900 align:left position:20%,start line:89% size:70% And that is different. 01:33.900 --> 01:36.400 align:left position:10%,start line:77% size:80% JOHN YANG: And, of course, those projections are if current law stays into effect, if nothing 01:36.400 --> 01:37.633 align:left position:30%,start line:89% size:60% were to change. 01:37.633 --> 01:38.900 align:left position:20%,start line:83% size:70% Now, what's driving the 2018 deficit? 01:38.900 --> 01:41.033 align:left position:10%,start line:89% size:80% LISA DESJARDINS: That's right. 01:41.033 --> 01:43.500 align:left position:10%,start line:77% size:80% So if you look deep into the numbers that the Treasury Department put out, you find 01:43.500 --> 01:45.600 align:left position:10%,start line:89% size:80% some very interesting things. 01:45.600 --> 01:49.233 align:left position:10%,start line:77% size:80% First of all, in this year, talking about taxes, we look at these numbers, you see that 01:49.233 --> 01:51.933 align:left position:20%,start line:83% size:70% actual tax revenue stayed about flat. 01:51.933 --> 01:54.966 align:left position:10%,start line:83% size:80% It rose about half-a-percent, a little bit less. 01:54.966 --> 01:57.533 align:left position:10%,start line:83% size:80% But spending is what has changed most dramatically. 01:57.533 --> 02:01.600 align:left position:10%,start line:77% size:80% So you have got flat revenues, and you have got a lot more spending, less -- not money 02:01.600 --> 02:04.666 align:left position:10%,start line:83% size:80% coming in, a lot of money going out, you get a deficit. 02:04.666 --> 02:07.466 align:left position:10%,start line:83% size:80% Where was the bigger -- where were the bigger increases? 02:07.466 --> 02:11.100 align:left position:10%,start line:83% size:80% Defense spending -- $65 billion increase just in the past year. 02:11.100 --> 02:13.100 align:left position:20%,start line:83% size:70% And look at that interest on the debt. 02:13.100 --> 02:17.866 align:left position:10%,start line:77% size:80% We saw an increase of $62 billion in what we're spending to pay off this debt. 02:17.866 --> 02:22.033 align:left position:10%,start line:71% size:80% Now, of course, defense wasn't the only place we saw an increase, but that -- also non-defense, 02:22.033 --> 02:25.933 align:left position:20%,start line:77% size:70% but it shows Congress spent a lot more and we have a larger deficit. 02:25.933 --> 02:30.300 align:left position:10%,start line:77% size:80% JOHN YANG: So, David, the -- Lisa says that the revenue is remaining flat. 02:30.300 --> 02:33.766 align:left position:10%,start line:77% size:80% So what does that tell us about the effect of President Trump's tax cuts? 02:33.766 --> 02:38.266 align:left position:10%,start line:77% size:80% DAVID WESSEL, Brookings Institution: Well, the economy, as Lisa said, is very strong. 02:38.266 --> 02:42.133 align:left position:20%,start line:77% size:70% And so without a tax cut, we would have seen increasing revenues. 02:42.133 --> 02:47.166 align:left position:10%,start line:77% size:80% We also see, if you look at the numbers, corporate tax receipts fell 30 percent. 02:47.166 --> 02:50.133 align:left position:10%,start line:83% size:80% And that's largely the result of the president's tax cut. 02:50.133 --> 02:55.100 align:left position:10%,start line:77% size:80% So what we're seeing -- you would expect at a time like this revenues rising faster than 02:57.066 --> 02:59.833 align:left position:10%,start line:77% size:80% spending, because the economy is strong, more people working, paying taxes, fewer people 02:59.833 --> 03:03.633 align:left position:10%,start line:77% size:80% collecting unemployment benefits and such, and the deficit would shrink. 03:03.633 --> 03:06.300 align:left position:10%,start line:83% size:80% We see the opposite, and that's largely because of the tax cut. 03:06.300 --> 03:09.866 align:left position:10%,start line:77% size:80% JOHN YANG: Now, David, Senate Majority Leader Mitch McConnell says it's entitlements. 03:09.866 --> 03:14.866 align:left position:20%,start line:71% size:70% He said Social Security, Medicare, Medicaid, that's what's driving these deficit forecasts. 03:15.566 --> 03:17.600 align:left position:30%,start line:89% size:60% Is he right? 03:17.600 --> 03:20.900 align:left position:10%,start line:77% size:80% DAVID WESSEL: Well, look, if you look at what happened last year, it's not Social Security, 03:20.900 --> 03:22.166 align:left position:20%,start line:89% size:70% Medicare and Medicaid. 03:22.166 --> 03:24.233 align:left position:30%,start line:89% size:60% It's taxes. 03:24.233 --> 03:28.200 align:left position:10%,start line:77% size:80% The size of the tax cut was about in -- according to CBO, was about $165 billion. 03:29.533 --> 03:32.400 align:left position:20%,start line:83% size:70% The deficit increased by $113 billion. 03:32.400 --> 03:34.433 align:left position:20%,start line:89% size:70% Do the arithmetic. 03:34.433 --> 03:38.633 align:left position:10%,start line:77% size:80% If you look ahead, though, and you look at the projections, the reason the deficit is 03:41.033 --> 03:43.633 align:left position:10%,start line:71% size:80% rising is because we are spending more on Social Security, Medicare and Medicaid, largely 03:44.500 --> 03:46.533 align:left position:10%,start line:89% size:80% because the population is aging. 03:46.533 --> 03:51.200 align:left position:20%,start line:71% size:70% If you look at CBO's 10-year projections, spending on benefits, particularly for elderly 03:51.200 --> 03:52.833 align:left position:20%,start line:89% size:70% people, are going up. 03:52.833 --> 03:54.300 align:left position:20%,start line:83% size:70% Interest on the debt is going up. 03:54.300 --> 03:56.500 align:left position:20%,start line:83% size:70% And everything else is holding or going down. 03:56.500 --> 04:01.466 align:left position:10%,start line:77% size:80% JOHN YANG: Lisa, the deficit had stopped being a hot-button issue for a long time. 04:02.666 --> 04:04.266 align:left position:20%,start line:83% size:70% Now it's sort of -- it's back on the front pages. 04:04.266 --> 04:06.300 align:left position:10%,start line:83% size:80% Is Congress, do you think, going to do anything about this? 04:06.300 --> 04:07.366 align:left position:20%,start line:89% size:70% LISA DESJARDINS: No. 04:07.366 --> 04:08.600 align:left position:20%,start line:89% size:70% JOHN YANG: Short answer. 04:08.600 --> 04:10.633 align:left position:20%,start line:83% size:70% LISA DESJARDINS: My short answer, no. 04:10.633 --> 04:13.566 align:left position:10%,start line:77% size:80% You have an entire caucus of conservatives, the Freedom Caucus, who have led with this 04:13.566 --> 04:18.000 align:left position:10%,start line:77% size:80% issue in the past, but they are the ones who ended up voting and passing some of these 04:18.000 --> 04:21.000 align:left position:20%,start line:83% size:70% larger spending bills in a deal with Democrats. 04:21.000 --> 04:22.933 align:left position:20%,start line:83% size:70% Republicans wanted more money for defense. 04:22.933 --> 04:25.166 align:left position:20%,start line:83% size:70% Democrats wanted more money for non-defense. 04:25.166 --> 04:26.666 align:left position:20%,start line:89% size:70% They all came together. 04:26.666 --> 04:29.200 align:left position:10%,start line:83% size:80% I spoke to Senate Leader Mitch McConnell about this yesterday. 04:29.200 --> 04:32.333 align:left position:10%,start line:77% size:80% He agreed that, for now, it looks like the spending increases are on the rise. 04:32.333 --> 04:35.500 align:left position:10%,start line:77% size:80% But they have got some real problems ahead, because first they have got to keep government 04:35.500 --> 04:37.466 align:left position:10%,start line:89% size:80% funded starting in December. 04:37.466 --> 04:40.600 align:left position:10%,start line:77% size:80% And then, next year, they have got new budget caps they have got to work around. 04:40.600 --> 04:43.033 align:left position:10%,start line:83% size:80% But, right now, all the momentum is towards spending. 04:43.033 --> 04:47.933 align:left position:10%,start line:71% size:80% JOHN YANG: David, you mentioned that the economy's in good shape, the unemployment rate is low, 04:48.666 --> 04:51.566 align:left position:20%,start line:89% size:70% growth is pretty strong. 04:51.566 --> 04:55.366 align:left position:10%,start line:77% size:80% Is there a reason for concern about these deficits, if everything seems to be going 04:55.366 --> 04:57.400 align:left position:40%,start line:89% size:50% so well? 04:57.400 --> 05:01.366 align:left position:10%,start line:77% size:80% DAVID WESSEL: Well, there's clearly no reason to worry about today's deficits, as you say, 05:02.666 --> 05:04.633 align:left position:10%,start line:83% size:80% 50-year low in unemployment, inflation stable. 05:04.633 --> 05:08.266 align:left position:10%,start line:77% size:80% I think that's why the politicians don't seem to feel the need to deal with this. 05:08.266 --> 05:10.700 align:left position:10%,start line:83% size:80% And there's certainly not very much pressure from the public. 05:10.700 --> 05:12.333 align:left position:10%,start line:89% size:80% The problem is in the future. 05:12.333 --> 05:15.366 align:left position:10%,start line:83% size:80% If something is unsustainable, it can't go on forever. 05:15.366 --> 05:19.600 align:left position:10%,start line:77% size:80% And every year, we're borrowing more and more money because we have promised to pay benefits 05:19.600 --> 05:23.433 align:left position:10%,start line:83% size:80% to people that the current tax code will not cover. 05:23.433 --> 05:25.833 align:left position:10%,start line:83% size:80% And at some point, we're going to have to do something. 05:25.833 --> 05:27.900 align:left position:20%,start line:83% size:70% Some people think we will have a crisis. 05:27.900 --> 05:32.400 align:left position:10%,start line:77% size:80% I'm not sympathetic to that view, because people have been predicting crises since you 05:32.400 --> 05:34.633 align:left position:10%,start line:83% size:80% and I started covering this stuff in the early '90s. 05:34.633 --> 05:36.833 align:left position:10%,start line:89% size:80% And the crisis doesn't arrive. 05:36.833 --> 05:40.666 align:left position:10%,start line:77% size:80% But we know, from economics, that eventually this will erode the amount of -- the rate 05:40.666 --> 05:43.000 align:left position:10%,start line:83% size:80% of growth, and we will have lower living standards. 05:43.000 --> 05:46.833 align:left position:10%,start line:77% size:80% And will be spending more and more of our tax money to pay interest on the debt, a good 05:46.833 --> 05:48.900 align:left position:20%,start line:83% size:70% chunk of which will go to foreigners. 05:48.900 --> 05:52.500 align:left position:10%,start line:77% size:80% JOHN YANG: But, David, as you say, we have - - you and I have been covering this for almost 05:52.500 --> 05:54.500 align:left position:30%,start line:89% size:60% 30 years now. 05:54.500 --> 05:59.300 align:left position:10%,start line:77% size:80% And we have sat and reported all those 30 years that something has to be done eventually. 05:59.300 --> 06:02.400 align:left position:20%,start line:83% size:70% When -- what's going to be the pressure point? 06:02.400 --> 06:05.733 align:left position:10%,start line:77% size:80% You say, you don't think it's going to be a crisis, but what's it going to take to get 06:05.733 --> 06:07.800 align:left position:20%,start line:83% size:70% the political incentive to do something? 06:07.800 --> 06:11.666 align:left position:10%,start line:83% size:80% DAVID WESSEL: I think that's the $4 trillion question, John. 06:11.666 --> 06:16.666 align:left position:10%,start line:77% size:80% Look, I think the politics will change when people think the deficit is hurting them. 06:18.600 --> 06:22.033 align:left position:10%,start line:77% size:80% One reason in the past Congress has had to deal with this is because interest rates have 06:22.033 --> 06:24.100 align:left position:30%,start line:89% size:60% gone up a lot. 06:24.100 --> 06:28.266 align:left position:10%,start line:77% size:80% So if the Fed keeps raising interest rates, if mortgage rates go up, if the Fed chair 06:30.800 --> 06:32.966 align:left position:10%,start line:71% size:80% does, as Alan Greenspan used to, or Paul Volcker, lecture Congress that it's your fault because 06:32.966 --> 06:36.033 align:left position:20%,start line:77% size:70% you're not dealing with the deficit, that could change things. 06:36.033 --> 06:40.366 align:left position:10%,start line:77% size:80% And the second thing is, we could -- and I don't see it on the horizon -- have some kind 06:40.366 --> 06:44.833 align:left position:10%,start line:77% size:80% of leadership, where some president would say, look, this isn't a problem today, it's 06:44.833 --> 06:48.900 align:left position:10%,start line:77% size:80% a problem for your kids, and I want to do something about it, and would be able to sell 06:48.900 --> 06:53.100 align:left position:10%,start line:77% size:80% the American people on a little belt-tightening now, so we have a better life in the future. 06:53.100 --> 06:55.100 align:left position:20%,start line:83% size:70% JOHN YANG: Lisa, what are the chances of that? 06:55.100 --> 06:57.166 align:left position:10%,start line:77% size:80% LISA DESJARDINS: Well, we have got a presidential election coming up. 06:57.166 --> 07:01.000 align:left position:20%,start line:77% size:70% And so far, none of the Democrats running are running on the deficit. 07:01.000 --> 07:04.833 align:left position:10%,start line:77% size:80% President Trump occasionally talks about it, but he's made no indication that he's interested 07:04.833 --> 07:06.033 align:left position:30%,start line:89% size:60% in changing it. 07:06.033 --> 07:07.566 align:left position:20%,start line:83% size:70% There are hard political choices. 07:07.566 --> 07:10.200 align:left position:10%,start line:83% size:80% And we have got leadership questions for many issues. 07:10.200 --> 07:13.266 align:left position:10%,start line:83% size:80% This is maybe toward the bottom of that very difficult stack. 07:13.266 --> 07:15.766 align:left position:10%,start line:77% size:80% JOHN YANG: Lisa Desjardins, David Wessel, thank you very much. 07:15.766 --> 07:15.900 align:left position:10%,start line:89% size:80% DAVID WESSEL: You're welcome.