For six straight years, Americans watched their government’s borrowing shrink.
Then last month, that trend towards less and less borrowing suddenly came to an end. Congress overwhelmingly passed a federal budget that included a $680 billion tax-cut package, which President Obama signed.
Now the nonpartisan Congressional Budget Office says the federal deficit is set to jump 24 percent, to $544 billion, in this fiscal year. That’s up from last year’s $439 billion deficit.
The CBO’s latest estimate, released Tuesday, also said economic growth will be somewhat slower than originally forecast, reducing tax revenues for this year.
“This report makes it abundantly clear that the era of declining deficits is over,” Maya MacGuineas, head of the bipartisan Campaign to Fix the Debt, said in a statement. “Thanks to a series of huge and irresponsible unpaid-for tax cuts and spending increases last year, deficits and the national debt are rising much higher and much faster than expected.”
Each year, the CBO estimates future deficits, which reflect the gap between federal revenues and spending. Because of these annual funding shortfalls, the government must borrow to fill in the gap.
So year after year, the new IOUs get thrown on top of the old pile of debt, built from past deficits. To whittle down this debt, Congress would first have to pass a budget that has more money coming into government coffers than going out.
That hasn’t happened since fiscal 2001, the last year of the Clinton administration’s budget. Ever since, deficits have been accumulating, driving up national debt.
The borrowing problem got especially bad during the Great Recession. In 2009, deficit spending rose to a post-World War II high of nearly 10 percent of GDP. That’s because tax revenues were plunging while stimulus spending was surging.
But then the deficit started to decline, slipping down to 2.5 percent of GDP last year — the lowest level since 2007.
This gave rise to hopes that eventually, lawmakers could actually create surpluses. But instead, they overwhelmingly approved the December budget deal.
That made deficit hawks angry. Michael Peterson, CEO of the anti-debt Peter G. Peterson Foundation, said in a statement that the CBO figures show “we remain on a dangerous debt path.”
Peterson said the 2016 election offers “an important opportunity for a national conversation” on government borrowing.
But so far at least, political candidates have not been talking much about deficits. The website FiveThirtyEight measured the number of times candidates and lawmakers have mentioned “deficit” or “debt” recently, and it showed that the topic has dried up.
The FiveThirtyEight story notes that: “Total mentions in Congress of ‘deficit’ peaked in 2011 at 8,101. The count declined to 1,543 mentions in 2015.”
Steve Bell, senior director of economic policy at the Bipartisan Policy Center, issued a statement, criticizing political leaders for being so quiet on the issue. “Turning a blind eye to the problem, as so many congressional and presidential candidates have done, merely means they are passing the buck to the next generation as concerns about political damage outweigh policy advantages,” he said.