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Budget deficit soars as the Republican corporate tax cut takes hold

By Masao Suzuki |
October 17, 2018
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San Jose, CA - On October 15, the U.S. Treasury department said that the federal government budget deficit for Fiscal Year 2018 soared 17% from the previous year, to $779 billion. This was equal to 3.9% of the Gross Domestic Product, or GDP, the official measure of total production of goods in services in the United States in a year.

The growing deficit was driven by the December 2017 corporate tax cut, as corporate income tax revenues fell 31% despite booming profits. In contrast, individual income tax revenues actually rose 1%, showing again that the December 2017 tax cut was all about cutting taxes for big business, not for workers.

U.S. government spending also rose, with the most important being interest on the debt and more military spending. Interest payments went up $65 billion, 14% more than the year before as the Federal Reserve raised interest rates. Military spending went up $32 billion, 6% more than the year before as the U.S. strains to prepare for wars in Asia, the Middle East, Africa, and even Europe to defend the U.S. empire.

What is most striking about the growing federal government budget deficit is that it is happening in a time where the official unemployment rate is below 4%. The last time that this happened in 2000, under President Clinton, the federal budget was in a surplus equal to 2.3% of GDP. Adjusted for inflation and economic growth, this is equivalent to tax revenues exceeding spending by $450 billion! Before that, in 1969, the federal government budget surplus was smaller, at only 0.3% of GDP or $60 billion today. But this was during Vietnam War, which was much more expensive than all the wars that the U.S. has going today.

Tax cuts for corporations and the rich have been done before by the Republicans. Under Reagan, the Republicans promised that lower taxes would increase tax revenues. Instead the budget deficit soared and the Republicans used this to try to take a knife to carve away at social programs. Last year Trump and the Republicans cut taxes for corporations and the rich promising the same. Now the deficit has ballooned, and Trump has proposed to take an axe to social programs such as student loan forgiveness, food stamps, welfare and disability benefits. After failing to take down the Affordable Care Act (ACA or Obamacare) Republican House leader Paul Ryan has used the growing deficit to call for cuts in the two largest health care programs: Medicare (for seniors and the disabled) and Medicaid (for low income families and individuals). If the Republicans can keep control of the House and Senate in the upcoming November midterm election, their agenda is clear.