Reality Check: After Huge Tax Cuts, Revenues Increased. The Deficit is Spiking Because of Overspending.

|
|
Posted: Nov 08, 2019 11:05 AM
Reality Check: After Huge Tax Cuts, Revenues Increased. The Deficit is Spiking Because of Overspending.

We're revisiting this point, based on new information, because it further exposes a dishonest political talking point that refuses to die.  We'll start with a frustrating dichotomy: Many Republicans in Washington only seem to take deficit and debt issues seriously when they're out of power, turning in their fiscal hawk cards once their party is back in control.  Many Democrats, meanwhile, only feign concern about deficits and debt in the context of opposing tax cuts.  They'll back inexorably exploding federal spending to the hilt, arguing that even a decrease in the rate of spending increase amounts to a "cut."  But when their opponents decide to let families, workers and businesses keep more of the money they earn, we're treated to lectures about fiscal prudence.  

The way the tale goes, the GOP-backed tax cuts are for "the rich," and they're blowing giant holes in the budget, depriving needy people of critical government services.  This is anti-factual nonsense.  The tax reform law passed in 2017 cut taxes for every income group of Americans, disproportionately benefiting the middle class.  The vast, vast, majority of taxpayers received a tax cut, an empirical fact confirmed by every nonpartisan analysis.  We've written previously that the tax cuts are not responsible for the federal government's red ink, including a post about increased tax revenues, in spite of -- or perhaps more accurately because of -- the lower rates, which helped fuel a strong economy.  We now have updated data, and the numbers speak for themselves:

Federal tax revenues rose during the 2019 fiscal year as the economy grew, but spending increased by over $200 billion more, which is why the country ended up running a deficit approaching $1 trillion, according to Congressional Budget Office data released Thursday...Specifically, in the 2019 fiscal year, which ended Sept. 30, federal revenues increased by $133 billion (or 4%), but spending spiked by $339 billion (or 8%), driving up the deficit by $205 billion to $984 billion. Spending was driven by a $115 billion spike in the cost of Medicare, Medicaid, and Social Security, an additional $52 billion in interest payments on the national debt, and a $48 billion spike in defense spending.

To put a finer point on this, federal tax revenues increased by four percent in 2019, reaching the highest level in American history. Republicans cut taxes (every single Democrat voted no), the economy grew, employment soared, and the federal government is now collecting more money in tax revenues than ever before. And yet, that same federal government is running a growing deficit, with the debt mushrooming, all in a period of prosperity and relative peace. Why? It's manifestly not because of the tax cuts. It's because Uncle Sam is spending way too much, with the top drivers of the debt being...unsustainable and ballooning entitlement programs, and interest payments on the debt. This is basic stuff to people who pay attention to our worsening fiscal mess, but it's diametrically opposed to the rhetoric of leading Democrats. 

The poster child for this recklessness is Elizabeth Warren, who is proposing to double a federal budget that is already facing a $1 trillion annual hole.  She wants to add more than $4 trillion of new spending every year on top of what we already spend (and can't afford), while lying shamelessly about tax increases.  The centerpiece of her spending spree agenda is a government takeover of the healthcare system, which is unpopular generally, unpopular among swing voters, and apparently unpopular with some of her own economists:


In light of this and this, I'll leave you with this depressingly accurate statement: