The U.S. government deficit is widening as spending is increasing. This is a concern for both Congress and the White House, with President Trump urging department heads to present revised budgets that will trim the fat for 2020 and beyond.
According to the Treasury, the national deficit for FY18 is $779 billion, an increase of $113 billion over the previous year.
Economy Will Increase Revenue but It’s Not Enough
The 17 percent increase in spending has been noted by the government and many financial analysts. Government spending is important and necessary, but cuts in some areas could improve the bottom line.
While the economy is booming, it’s not enough to offset the current government deficit. President Trump has told federal departments “I’m going to ask each of you to come back with a five percent cut for our next meeting. I think you’ll be able to do it. Some of you will say, ‘Hey, I can do much more than five.’”
The Department of Defense is likely to cut 2.3 percent from its budget, putting it below the five percent target that Trump is setting for federal departments. Spending on the military is likely to be $700 billion for FY20.
President Trump will present his budget to lawmakers early in 2019. The administration’s Council of Economic Advisers has warned “As you watch our next budget come out, and you’ll start to see things in the next few weeks, then you’ll see a much more aggressive stance. The deficit is absolutely higher than anyone would like.”
Education Cuts Will be Controversial
The Department of Education is one of the federal departments being asked to cut its budget by 5% across the board. This is something that will be difficult to pass through congress, as there is bipartisan resistance to reduced spending on education.
The 2019 budget for the Department of Education is the highest it has ever been, and voters see this as a positive point for the administration. Any reduction in the proposed budget next year could be a risk for President Trump as he moves into the second half of his first term.
A Budget Deficit Isn’t as bad as it Sounds
Governments push hard to balance the books, but deficits aren’t always as bad as they sound. Spending can boost the economy, so some form of deficit is often considered healthy. The key is to keep a balance with GDP growth.
The target now is to reduce the deficit while the economy is performing so well. Excess spending can lead to recession and that would be the worst-case scenario for voters, investors, and the government.
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