Buzz
The U.S. federal deficit is growing at a pace faster than initially expected. The Congressional Budget Office reported last week that the annual deficit will surpass $1 trillion in the upcoming fiscal year, starting in October. Over the next decade, the federal deficit is projected to increase by approximately $800 billion more than earlier estimates, according to the CBO.
If you’ve been following the lessons in your “Debt Is Bad” textbook, you know that a massive federal deficit is concerning. The current and expanding deficit stems partly from increased spending (especially on defense and Medicare), along with the 2017 tax cuts.
Whenever there’s a deficit, it gets added to the national debt, which the Wall Street Journal points out is the cumulative total of past and present deficits. The last time the deficit surpassed a trillion was in 2012. The most recent government surplus occurred back in 2000-2001.
What the deficit could signify for a struggling economy
“In a thriving economy, we should expect the deficit to decrease. Instead, we’re witnessing the deficit grow, even in an economy that is strong but vulnerable to a shift,” NBC News' Stephanie Ruhle explains.
The revised deficit figures are especially troubling to economists due to ongoing talks of a potential recession, as the Washington Post highlighted. The government would be faced with a “lack of tools” like tax cuts or interest rate cuts to rely on, as has been the case in past economic downturns. If there’s apprehension among policymakers about further national debt, it may become more difficult for President Trump (or whoever takes office) to pass any stimulus plan like the one implemented about 10 years ago.
