President Donald Trump has made many promises to the American people. One of them was his tax plan. He and his administration vowed tax cuts would lead to growth and pay for themselves, rather than add to the already ballooning deficit.
But that doesn’t seem to be the case. The latest reading from the Treasury Department showed the U.S. is sliding deeper into the red. After the country posted a $779 billion deficit for fiscal 2018, the deficit climbed to $100.5 billion in October. That’s a 60% increase from a year earlier as spending outpaced revenue growth.
The question facing lawmakers on both sides of the aisle is how to address the issue and steer the U.S. on a sustainable financial path. Part of the problem is the conflicting messages out of Washington.
“I think the average American is blissfully unaware of the scale and scope of the federal budget problem,” Douglas Holtz-Eakin, president of American Action Forum, said at Yahoo Finance’s All Markets Summit on Tuesday. “They were told for eight years under Barack Obama there’s nothing wrong that can’t be fixed by higher taxes. And they’ve been told for the past two years by President Trump there’s nothing wrong. Neither is true. There is something wrong. It needs to be fixed. They need to understand that because you can’t ask someone to start doing entitlement reform for no apparent reason. There will be a revolt. They need to understand what’s going on.”
The worry is being echoed by some on Wall Street. BlackRock CEO Larry Fink recently said the U.S. was heading towards a “supply problem,” as the widening deficit requires the U.S. Treasury Department to borrow more.
In terms of how or when this will be resolved, it doesn’t look like Republicans and Democrats will come to an agreement anytime soon. The big fight will be when the current two-year budget deal expires next September.
And the current two-year budget deal, which has set overall spending levels, expires at the end of next September.
Lawmakers are back in session this week, trying to hammer out a spending bill to avoid a government shutdown in December.
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