Larry Kudlow wrong about deficits falling rapidly under Donald Trump
Posted July 8, 2018 6:08 p.m. EDT
"The deficit … is coming down, and it's coming down rapidly."
Larry Kudlow, White House National Economic Council director, June 29 in an interview with Fox Business Network
As it happens, the deficit hasn't come down to date -- which sparked a quick backlash on social media and prompted Kudlow to amend his remarks later that day. Kudlow told the Washington Post that "the economy is so strong right now it's going to produce lower deficits. I probably should have said future deficits."
However, that assertion is questionable as well. The most trusted source for future budget projections, the Congressional Budget Office, shows rising deficits for years into the future.
In fiscal year 2015, when Barack Obama was president, the federal deficit was $438 billion. (A refresher: The deficit refers to federal revenues minus federal outlays. Each year's deficit adds to the overall public debt.)
In fiscal year 2016, which was also under Obama, the deficit rose to $585 billion.
In fiscal year 2017, which was about two-thirds on President Donald Trump's watch, the deficit rose to $665 billion.
The deficit also rose as a percentage of the nation's gross domestic product -- a way of comparing economic statistics across time. In fiscal year 2015, the deficit was 2.4 percent of GDP, rising to 3.2 percent of GDP in fiscal 2016 and 3.5 percent in fiscal 2017.
So on a full-year basis, Kudlow is wrong.
He's also wrong if you look at the first seven months of fiscal year 2018. According to the Treasury Department, the first seven months of the current fiscal year saw a deficit of $385 billion -- which is 12 percent higher than the first seven months of fiscal year 2017, when the deficit totaled $344 billion.
As for the future, the CBO finds no reason to expect the deficit to go down any time soon.
For fiscal year 2018, the CBO projects a deficit of $804 billion, rising each successive year to $981 billion in 2019, $1 trillion in 2020, $1.1 trillion in 2021, and $1.3 trillion in 2022.
The deficit is also poised to increase as a percentage of GDP -- from 3.5 percent in 2017 to 4.0 in 2018 and eventually to 5.4 percent in 2022.
Not only that, but the CBO specifically cited the tax cut Trump backed and signed into law as a reason for spiraling deficits.
"The deficit that CBO now estimates for 2018 is $242 billion larger than the one that it projected for that year in June 2017," the CBO wrote in its April report. "Accounting for most of that difference is a $194 billion reduction in projected revenues, mainly because the 2017 tax act is expected to reduce collections of individual and corporate income taxes."
And the projections would be even worse if Congress doesn't allow the recent round of tax cuts to expire. "In that scenario, far larger deficits and much greater debt would result than in CBO's baseline projections for the 2019–2028 period," the CBO wrote.
This statement is inaccurate and ridiculous. We rate it Pants on Fire!