Has America’s Future Already Been Spent?
The fiscal and economic results of the Tax Cuts and Jobs Act of 2017 – sneered at by Democrats as the “Trump Tax cuts” – are in. Workers’ net paychecks got a little bigger as Uncle Sam took a little less.
According to the U.S. Census Bureau, between 2017 and 2018, real median family income rose 1.2 percent; real median earnings increased 3.4 percent; the number of full-time, year-round workers increased 2.3 million; the poverty rate dropped from 12.3 to 11.8 percent; and a net 1.4 million people were lifted out of poverty.
Democrats opposed the tax cuts, predicting that Treasury revenues would decline, programs would suffer and a corporate tax rate reduction would benefit only the “wealthiest 1 percent.”
The Democrats were wrong – in detail. Government statistics reveal that federal revenues, flatlined at $3.2 trillion in 2015 and 2016, increased to $3.33 trillion in 2018 even though corporate tax collections dropped about $90 billion. Those corporate savings were invested in equipment, technology, and ultimately, the jobs that increased individual income, Social Security and Medicare tax collections.
The “Trump Tax cuts” actually brought in record Treasury revenues, while primarily benefitting lower and middle income households. Interestingly, according to the Census Bureau, while income among the bottom 80 percent of households increased measurably, some in the top 20 percent of earners saw incomes decline.
Overall, though, government spending increased much more than tax revenues, and America’s debt increased.
In September, the Congressional Budget Office (CBO) reported that, with one month to go, the federal deficit for fiscal year 2019 was already nearing $1 trillion. Predictably – and erroneously – Trump administration critics blamed the 2017 tax cuts.
The CBO report revealed that revenues climbed 3.4 percent in fiscal year 2019 – a growth rate faster than America’s total output of goods and services – and corporate tax revenues were up 5 percent over FY 2018.
But, while revenues increased by $102 billion, across the board spending soared $271 billion: Social Security payouts increased 5.7 percent; Medicare, 6.5 percent; Medicaid, 4.6 percent; defense spending went up 7.9 percent; and spending in other categories increased 4.5 percent.
One number should concern everyone: Interest payments on the national debt increased 14 percent over the prior year. Including last fiscal year’s nearly $1 trillion deficit, the national debt currently exceeds $23 trillion, so, eventually, debt payments will inevitably crowd out other expenditures.
Government spending levels are unsustainable. Yet, rather than confronting it, Congress and the Trump administration keep spending; Democrats insist that any increase in defense spending must be matched by spending on domestic programs; entitlement reform, an essential element, is ignored; and the national debt continues to soar.
Too many elected Republicans appear indifferent to America’s debt, and Democrats, especially those seeking the presidency, have proposed more than doubling the size of the federal government while offering no workable specifics on how to fund it, much less how they would address annual deficits and retire existing debt.
The government’s problem isn’t revenue, it’s spending. Unaddressed, a soft landing is impossible.