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U.S. deficits and the debt in 5 charts: A 2018 midterm report

National

(AP/Jacquelyn Martin)

By Louis Jacobson November 2, 2018

As the midterm election campaign approaches its climax, the federal deficit has pushed its way back into the political discussion.

New government numbers show the deficit is on the rise.

The nonpartisan Congressional Budget Office reported that the preliminary federal budget deficit was $782 billion in fiscal year 2018 — $116 billion more than the shortfall in fiscal year 2017.

What happened?

Democrats blamed the Republican-backed tax bill that passed in December 2017, citing CBO’s earlier finding that the law would increase the deficit by almost $1.9 trillion over 10 years.

Republicans pointed to a broader issue of growth in programs such as Social Security and Medicare. "It’s a bipartisan problem — unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future," Senate Majority Leader Mitch McConnell, R-Ky., told Bloomberg.

As it happens, both sides are talking past each other.

"Never in our history has so much been promised for the future — promises on both sides for high spending growth and low taxes that cannot possibly be sustained," said Eugene Steuerle, a fellow at the Urban Institute. The two parties "compete in proclaiming what they will give us, but they never tell our kids how many of the bills are being passed onto them."

Let’s take a closer look at federal spending, tax revenues, the deficit and the debt.

The scope of federal spending, revenues and deficits

A few decades ago, discretionary spending accounted for a majority of federal spending. Today, the biggest segment comes from "mandatory" spending. That means streams of money that are not reauthorized on an annual basis, but are instead determined by a formula — if you qualify for payments under the terms of the program, then those payments are made.

This is the sense in which McConnell is right. Over the long term, the imbalance of spending and revenues is being driven by mandatory spending.

The net interest on the debt also continues to grow.

Annual deficits have been a consistent feature of the federal landscape for more than a decade and a half. Once you factor in the size of the U.S. economy, spending has exceeded revenues as a percentage of GDP since 2002.

Because of spending locked into mandatory outlays, "spending on everything else — children, infrastructure, defense, most government functions — are scheduled to go into a tailspin," Steuerle said.

These trends are projected to continue for the near future.

According to CBO projections, federal spending is expected to increase in lockstep over the next 10 years, and the annual deficit is on track to more than double between 2017 and 2028.

The accumulation of annual deficits will add to the debt. As recently as mid 2008, the public debt was about 65 percent of GDP. In recent quarters, it has exceeded 100 percent of GDP.

A just-released projection by the Committee for a Responsible Federal Budget said that in 75 years, the federal debt "will exceed 3.5 times the size of the economy under current law and 6 times the size of the economy assuming policymakers continue current policies."

What produced this year’s deficit increase?

The two biggest drivers of the projected increase in the 2019 deficit were the Republican tax bill and the bipartisan agreement on federal spending.

In the latter piece of legislation, Democratic and Republican lawmakers largely agreed to increase spending in a wide variety of areas, including defense spending. That came after a period under President Barack Obama and the Republican-led Congress when across-the-board spending constraints known as sequestration curbed the growth of federal spending.

Making it personal

What about the debts held by American families?

The biggest source of debt for families is — not surprisingly — mortgages, followed by vehicle loans, student loans and credit card balances.