[guest post by JVW]
While the assorted band of idiots and lunatics in the White House attempts to take a victory lap over the relatively low unemployment rate and a decreasing level of inflation, the real world threatens to intervene:
The federal deficit is projected to roughly double this year, as bigger interest payments and lower tax receipts widen the nation’s spending imbalance despite robust overall economic growth.
After the government’s record spending in 2020 and 2021 to combat the impact of covid-19, the deficit dropped by the greatest amount ever in 2022, falling from close to $3 trillion to roughly $1 trillion. But rather than continue to fall to its pre-pandemic levels, the deficit then shot upward. Budget experts now project that it will probably rise to about $2 trillion for the fiscal year that ends Sept. 30, according to the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for lower deficits. (These numbers ignore President Biden’s $400 billion student debt cancellation policy, which was struck down by the Supreme Court this year and never took effect.)
You know you’re reading the Washington Post when in the very next sentence they claim that the rise in the deficit is “unexpected,” which is absolute hogwash to anyone who had their eyes open during the Democrats’ spending orgy of 2021-22. The piece quotes former Obama Administration economic advisor Jason Furman, now a professor at Harvard naturally, claiming that our current economic growth rate of 2.1% represents “a good and strong economy.” So the Obama Administration, now manifest under Joe Biden, continues their longstanding campaign to lower economic expectations and convince the American people that mediocrity is in fact excellence, though one imagines that the chattering classes would deride this level of growth as insufficient were a Republican in the Oval Office.
The Trump Administration tax cuts of 2017 expire later this year, and though Democrats will almost certainly cooperate in renewing them for most taxpayers (this being an election year, after all), there will no doubt be a real donnybrook regarding just how far up the income ladder those cuts will be extended. Meanwhile, this rise in the deficit puts the lie to the Biden Administration’s claim that they are paying for all of their spending, which nobody with a modicum of sense should ever have believed.
So why did the deficit explode on us this year? Well gosh, it turns out that maybe the Biden economy isn’t so robust after all:
The Treasury Department is also on track to take in substantially less in new revenue this year, in part because of the stock market’s slump last year. In 2021, amid a cryptocurrency bubble and an explosion in housing prices driven by rock-bottom interest rates, investors recorded huge gains that led them to pay capital gains taxes at record levels. But then the bubble burst, leading to a sharp drop in capital gains tax revenue. Automatic adjustments to the tax brackets to account for inflation also reduced tax obligations for many Americans, resulting in less incoming revenue relative to last year.
And as anyone could have told you, the inflation spike which so flummoxed Janet Yellen had long-term consequences:
Then a number of other spending increases contributed to the rising deficit — Social Security payments increased because they are indexed to inflation; the government spent more on education, veterans benefits and health care; and the bipartisan infrastructure law, as well as the 2022 Inflation Reduction Act, started sending billions of dollars out from the government’s accounts.
The usual gaggle of big-spending progressives are already arguing that this crisis is overblown and that the U.S. can easily handle these levels of debt for years to come. Yet they always are forced to acknowledge that eventually there will be a reckoning (they just hope it will be when the GOP is running things in Washington). I fear we are accelerating that date quite rapidly and it will be sooner rather than later when we have to face up to our irresponsibility.