It’s the spending, stupid!

The 2018 federal deficit grew — surprise, surprise — because the federal government spent more money and revenues were flat due to tax cuts, not down mind you, but flat, according to The Wall Street Journal.

“Government receipts held steady at $3.3 trillion, despite strong economic growth and a robust labor market. …” WSJ reported. “But individual withheld income taxes rose just 1% in fiscal 2018, and corporate tax receipts declined 31% — both reflecting changes implemented as part of the sweeping tax overhaul enacted in December.”

But spending rose 3 percent overall. Increases in interest rates on the federal debt drove up spending by 14 percent, while defense spending increased 6 percent and  Social Security costs rose 4 percent.

So, the deficit is not entirely due to the tax cuts, as the Democrats will scream.




11 comments on “It’s the spending, stupid!

  1. Rincon says:

    Thank you for the clear information, Thomas. It is of major importance.

    I thought the tax cut was supposed to stimulate the economy so much that it would pay for itself. Weren’t the Republicans screaming about how big deficits would ruin the country during the Obama Administration?

    Interesting that the Republican dominated government is spending more than the Obama Administration did once the recession had settled down a bit. Deficit spending during good times will cripple our ability to respond when the economy finally does go south. Then Illinois will have company.

  2. Bob Coffin says:

    Tom, I know this is snarky but where do you suppose the unneccessary 12B payoff to mid-west farmers for tariff damage control will hide? So many off-budget funds out there!

  3. Bruce Feher says:

    What’s the Big Deal? Every politician knows money is made of paper and paper is made from trees and there are lots of trees! Just keep those printing presses running!

  4. Maybe it was the tariffs that slowed the economic growth that the tax cuts should’ve sparked.

  5. Steve says:

    Tariff’s and the associated talk sure pushed the market around. The FED and their rate policy are also slowing things down. The FED has much more effect on the economy than taxes. And the FED still has huge debt, incurred during the Obama years (known as QE and QE2) it needs to sell back into the money supply to get it off their books. Clearing that debt also slows the economy.
    These FED actions are some of the stuff Trump called crazy the other day.
    All we can do is hope the FED is careful and successful in clearing that debt without actually harming the economy. But it is also true the FED was the reason the “great recession” was not worse. (again, government action is weak in comparison) Tax rate changes tend to be a one off event and very temporary.
    What the FED does has long term effect. In this case, it offsets the tax rate changes and they should not have raised interest rates this soon or this fast. Inflation has taken a sudden break from its recent increase. Effects on the economy are already evident in the auto and housing markets, due mostly to higher borrowing costs.

  6. Rincon says:

    Cutting tax rates simply means increasing the deficit, at least in the short term. If spending as a percentage of GDP is reasonably constant, which it has been for over 50 years, then by your reckoning, reducing real tax rates, which we have for over 50 years, should have eliminated deficits. It has not worked that way. Someone please explain.

    If the FED shouldn’t raise interest rates after a recovery has matured nicely, unemployment is at historic lows, financial markets are at all time highs, and GDP is growing rapidly, then when should they increase rates? Never?

  7. Anonymous says:


    Now take a look at the percentages of wealth and income of those at the top over that last 50 years and compare it to the rest of the slobs and see why it is that republicans are so intwnt on tax breaks.

    Sure has nothing to do with the economy (which has gone up down and sideways during that period) or anything else OTHER than increasing the wealth of the wealthiest, and to hell for everyone else.

    Hard to understand why this is hard to understand for the right wing.

  8. Rincon says:

    No doubt there. What’s hard is to get Conservatives to believe that a small percentage hoovering up most of the money can damage everyone else. They still believe that a rising tide lifts all boats. Works that way in water, not in finance, because the amount of money is limited; therefore, it is quite possible for one group to deprive the others by accumulating too much wealth.

  9. Steve says:

    As usual, Rincon and nonymus read only what they want to read.

    No one is saying rates can’t rise…only that the speed of that rise needs to be more controlled.

    Moreover, lower tax rates have not resulted in lower revenue….


  10. Rincon says:

    “…they should not have raised interest rates this soon or this fast.”

    I was addressing your complaint that they were raising interest rates too soon, which was obvious because I said, “… then when should they increase rates?” Did I say anything about the speed of the rate increases? I did not.

    I do agree that the Fed is raising them too fast, but I suspect they waited too long to do so. There is usually a delay between an action and its effect in economics. As with driving, smooth, steady speed changes are much safer that hitting the gas and brakes ad infinitum Our historically low interest rates were goosing the economy continually for years. Maintaining them so low left little room for action in the event of a recession.

  11. Steve says:

    The economy is no longer a national beast, it is irrevocably tied to the world economy and is the driver of the world economy. The world is not on stable ground and the FED appears to be ignoring the effects their actions are having on the world economy. Slowing the US hurts others, then comes back to bite us.

    But, by all means, keep being introverted.

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