- The Washington Times
Tuesday, January 19, 2016

The tax-cut deal inked by President Obama and House Speaker Paul D. Ryan last month has put a major dent in the federal budget, helping send the deficit soaring by 24 percent, the Congressional Budget Office said Tuesday.

The $544 billion deficit projected for 2016 marks the first year since 2009 that the red ink has grown, and it powers the deficit back up over the half-trillion mark, where it had been for most of Mr. Obama’s tenure.

And the rest of the decade will only get worse, the CBO said, with Social Security beginning to draw down its trust funds in 2018, and overall deficits surging back above the $1 trillion mark by 2022.

Struck by the grim news, budget watchdogs said politicians needed to heed the wake-up call.

“Turning a blind eye to the problem, as so many congressional and presidential candidates have done, merely means they are passing the buck to the next generation as concerns about political damage outweigh policy advantages,” said Steve Bell, senior director of economic policy at the Bipartisan Policy Center.

CBO projections contained some good news, with the economy showing signs of solid growth in 2016 and 2017, finally overcoming some of the “slack” that built up during the 2008 Wall Street collapse and the Great Recession. Analysts said more people will be enticed back into the labor force, but inflation and interest rates will also rise as the economy ticks along.

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But spending and taxes remain the biggest problem for the budget, with the twin deals at the end of last year to break the sequester budget caps that had held spending in check, and to extend a series of special interest tax breaks.

Combined, they meant the government needed more money than ever — but had less flowing in.

Overall, spending will spike by 6 percent in fiscal year 2016, to reach $3.9 trillion. That amounts to 21.2 percent of the country’s output as measured by gross domestic product.

By contrast the government will collect just $3.4 trillion in taxes, or 18.3 percent of GDP.

Those trends will continue for the next decade, the CBO report. Taxes will hold steady at about 18 percent of GDP, while spending will rise from 21 percent to 23 percent — producing ever-worse budget news for the next president to handle.

Deficits peaked at $1.4 trillion in 2009, as the government under first President George W. Bush and then Mr. Obama spent freely to try to prop up banks and to stimulate the economy after the 2008 downturn. The numbers dropped steadily through 2012, when the hole was $1.1 trillion, then dropped more quickly in 2013, falling to $680 billion, and to $439 billion by last year.

At the White House, press secretary Josh Earnest said the economic numbers are proof that the president’s policies have finally righted the economy and produced 70 consecutive months of job gains.

“That’s an indication of a strong bounce back from the worst economic downturn since the Great Depression,” he said.

But Mr. Earnest refused to say whether the president’s 2017 budget, due to Congress in a few weeks, will make progress in cutting the deficit.

“Stay tuned,” the spokesman said.

Mr. Obama has never presented a balanced budget to Congress, and fought the spending cuts that helped reduce the deficits during his time in office. Instead, he’s pushed for tax increases, with the new money being used to finance his plans for broader government spending.

Those budgets have routinely been rejected by Congress, and with Republicans in control of both chambers, Mr. Obama’s latest plan is unlikely to do any better.

Just five months ago the CBO had projected the deficit would drop in 2016. Instead, it will rise some $105 billion.

“That increase is largely attributable to legislation enacted since August — in particular, the retroactive extension of a number of provisions that reduce corporate and individual income taxes,” the CBO said.

As deficits grow again, the debt will also pile up. Debt held by the public, which excludes borrowing from the Social Security and Medicare trust funds, already accounts for 73.6 percent of GDP. The CBO last year had projected debt might dip as the deficit dropped, but now says it will continue its steady rise, topping 85 percent by 2026.

The president and Congress did find bipartisan agreement on the tax package and spending hikes last year, undoing several years of progress in holding the line on spending. Indeed, government spending actually dropped in 2012 and 2013, then ticked up in 2014 and 2015.

This year, that trickle will become a flood.

Most of the increased spending will come from the government’s health programs, including Medicare, Medicaid and Obamacare, which will surge $104 billion, or 11 percent, compared to 2015.

• Stephen Dinan can be reached at sdinan@washingtontimes.com.

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