As a candidate for president, Donald Trump made some bold predictions about deficits. He said the federal budget would be balanced ?relatively quickly.? He also pledged to reduce the trade deficit, promising to withdraw from trade deals he saw as disadvantageous to his ?America First? strategy. Both shortfalls have gone in exactly the opposite direction.
On Wednesday, the U.S. Department of Commerce revealed that the nation?s trade deficit last year grew to $891.2 million, the highest ever recorded, and driven in large measure by the $419 billion gap with China. The budget deficit, meanwhile, is up 77 percent for the first four months of the budget year for a total of $310.3 billion compared to $175.7 billion one year ago. And that is on top of Fiscal 2019?s total budget deficit of $985 billion, which itself was higher than the previous year?s $833 billion, according to Treasury Department statistics.
The cause of the worsening budget shortfall is clear enough. The $1.5 trillion Republican tax cut has meant Washington has collected substantially less in taxes from individuals and businesses. Meanwhile, federal spending has continued to grow. It doesn?t take a top-notch economist to recognize that less income plus more spending equals red ink. It?s Check-balancing 101, and perhaps the 248th example of the utter wrongfulness of the core belief of supply side economics that lower taxes lead to balanced budgets.