FACT CHECK: Are Republicans Racking Up Record Deficits?
Democratic Rep. Alan Lowenthal of California said that Republicans have racked up record-high deficits.
.@GOP has racked up record deficits with reckless tax cuts for the top 1%. They’ve attacked healthcare and support for the middle class. Now, they’re threatening entitlement cuts in the next year. Make no mistake, we MUST stop them. https://t.co/nLXuhFL7k7
— Rep. Alan Lowenthal (@RepLowenthal) September 22, 2018
“.@GOP has racked up record deficits with reckless tax cuts for the top 1%,” he tweeted Sept. 22.
The deficit is lower now than it was between 2009 and 2012. Due to a combination of tax cuts and rising spending levels, deficits are projected to reach record levels once again by 2028.
Lowenthal is referring to the federal deficit, or the amount the government spends beyond what it receives each year in revenue.
The U.S. experienced the worst deficit levels on record in the aftermath of the Great Recession, ranging from $1.1 to $1.4 trillion between 2009 and 2012. The nonpartisan Congressional Budget Office (CBO) estimated in April that the deficit level for 2018 will be $804 billion (although the preliminary deficit for the first 11 months of the fiscal year is $895 billion).
While the budget deficit has worsened since 2015, it is still lower than its peak of $1.4 trillion in 2009. The deficit ballooned by $954 billion in 2009 as a result of declining revenues, as well as government programs designed to aid the economy, including a stimulus package and bailouts for the financial sector.
While the 2018 deficit is not a record, it is predicted to grow in the coming years. The CBO projects that deficits will consistently rise until they exceed Great Recession levels in 2028. Projections by the White House’s Office of Management and Budget are significantly more optimistic, as they predict a decrease in the deficit after 2020.
Budget deficits were also higher due to the Great Recession when measured as a percentage of gross domestic product (GDP). Deficits peaked at 9.8 percent of the economy in 2009 and are projected to be 4.2 percent in 2018.
Some argue that although deficits were extremely high in the years following the Great Recession, they were in response to an economic crisis. “The country has never run this high of a deficit during good economic times,” Heather Long, an economics correspondent for The Washington Post, wrote in April. “If spending keeps up at this pace (and there is every indication that it will), President Trump and his successors are going to have less flexibility to pump up the economy during a downturn or even a crisis.”
The current deficit is being driven by several factors. The Tax Cuts and Jobs Act of 2017, passed by the GOP Congress, will add $164 billion to the deficit in 2018, according to the CBO. The impact across an 11-year window will be an estimated $1.9 trillion, a figure that includes the effects of economic growth.
That loss in federal tax revenue is a problem because Congress has not reduced spending to counterbalance it. The CBO reports higher government spending in the first 11 months of FY 2018, largely driven by a $33 billion increase in defense, $55 billion increase in interest on the national debt and $74 billion increase in entitlements (Social Security, Medicare and Medicaid).
White House chief economic adviser Larry Kudlow recently suggested that entitlements might be reformed next year to lessen the deficit. “We have to be tougher on spending,” he said.
As the government borrows money to finance the deficit, the national debt continues to grow. When President Donald Trump took office, the debt was $19.9 trillion. It has since risen to $21.6 trillion.
While discussing rising deficit levels, Tony Sayegh, the assistant secretary for public affairs at the Treasury Department, said the philosophy of the Trump administration is that economic growth spurred on by their new policies will help tame the deficit.
“We inherited a huge deficit, a huge debt. We want to grow the economy because that’s the only way you’re going to solve it,” he told Fox Business.
Lowenthal’s office declined to comment.
Have a fact check suggestion? Send ideas to [email protected].