Federal Deficit For November Hits Record High Despite Tax Reform

Tax reform stands as the one major legislative accomplishment of the Trump Administration. The measure became law a year ago and, as forecasted, jumpstarted growth in an economy that had been largely stagnant since the Great Recession. Unfortunately, tax reform has so far not lived up to its promise of paying for itself with that increased growth. In fact, the deficit for the 2018 fiscal year, which ended in September, is the largest in six years despite increased growth and revenues.

Figures from November show that the budget deficit was the largest ever recorded for that month. The Treasury Department reported Thursday that federal spending increased by 18 percent to $411 billion for the first two months of FY 2019.

Despite the tax reform and the increased tariff taxes on trade, revenues were flat at $206 billion, about half of what the government spent. The deficit of $205 billion, 49.8 percent of spending, was almost twice as high as last November’s $139 billion deficit. Increased tariffs led to an 86 percent increase in customs duties received but still only accounted for $11.8 billion in revenues.

As Resurgent noted in October, the deficit problem is two-fold. Data from FY 2018 show that while individual tax receipts increased by one percent, overall tax revenues were flat because corporate tax receipts fell by 30 percent. Total federal receipts were $3.329 trillion in 2018 compared with $3.316 trillion in 2017.

The other side of the coin is that spending continues to increase while revenues are stagnant. Military spending increased by 27 percent over the same two months last year per the  . Interest payments on the ever-growing national debt increased by seven percent, partly due to higher interest rates.

The core problem is that the economy is growing but borrowing and spending are growing even faster. Over the past 12 months, spending increased by 5.1 percent while revenues only increased by 0.2 percent. The Trump Administration says that deficits will shrink in coming years as tax reform spurs growth and investment. In the meantime, the deficit is expected to reach the Obama-esque level of $1 trillion in the current fiscal year.

Other factors will drive increased spending that will compete with growth in coming years. Spending on Medicare and Social Security is projected to rise as more Baby Boomers retire. Interest payments on the debt will also increase as the Fed raises interest rates.

In the meantime, Trump Administration trade policy counteracts the economic benefits of tax reform. While businesses benefit from lower corporate tax rates and deregulation, tariffs and trade restrictions make it more expensive and difficult to import and export raw materials and finished products.

As the deficit rises, there is little reaction from either party in Congress. Where Republicans went to the mat to curb President Obama’s spending, most seem to have no qualms about the spending increases under President Trump. In fact, the big news on the budget lately is that Republicans are prepared to shut down the government if Democrats don’t agree to authorize even more taxpayer dollars for President Trump’s pet border wall project.

Debt Limit Battle Heats Up Between Trump Administration and Congress

Think that confrontations over the debt ceiling left town with the Obama? You might want to think again.

“I urge you to raise the debt limit before you leave for the summer” [on July 28], Treasury Secretary Steven Mnuchin told the House Ways and Means Committee on Wednesday according to the Wall Street Journal. Mnuchin said that he prefers a clean increase without conditions.

In response, the House Freedom Caucus released a statement opposing a clean increase. “The U.S. federal government is drowning in debt, yet continues to spend into oblivion on the backs of future taxpayers,” the statement said. “We have an obligation to the American people to tackle Washington’s out of control spending and put in place measures to get our country on the right fiscal course.”

The Freedom Caucus adopted a three-fold position on the issue. First, they categorically oppose a clean increase. Second, the group agrees that the debt ceiling should be address by Congress before it recesses for the summer. Finally, the statement demands “that any increase of the debt ceiling be paired with policy that addresses Washington’s unsustainable spending by cutting where necessary, capping where able, and working to balance in the near future.”

The government reached the debt ceiling imposed by Congress in March. Since then, the Treasury Department has been using cash conservation methods to keep the government operating. The shuffling of funds is a temporary solution that typically is only viable for a few months.

Previous estimates indicated that congressional action on the debt limit would need to be taken by late September or early October. Earlier this week, budget director Mick Mulvaney told Politico that the date might come sooner than expected.

“My understanding that the [tax] receipts, currently, are coming in slower than expected and you may soon hear from [Treasury Secretary Steven] Mnuchin about a change in the date,” Mulvaney said before the House Budget Committee.

The US national debt currently stands at $19.9 trillion. The House Freedom Caucus and other Republicans fought the Obama Administration on the debt ceiling several times during the past eight years. In exchange for increasing the debt limit, the GOP was able to win some concessions on spending from Obama and the Democrats.

Budget Hawks To Challenge Trump Spending Plans



A battle over spending is shaping up between President Trump and congressional Republicans. Many of Trump’s campaign promises involved spending large amounts of tax money on items from the military to infrastructure. Now budget hawks in Congress are gearing up to try to prevent the deficit from exploding over the next four years.

The Wall Street Journal reports that the tensions surfaced in the confirmation hearing of Mick Mulvaney, a South Carolina congressman who has been nominated by Mr. Trump to head the White House Office of Management and Budget. Mulvaney faced sharp questions from two different camps in the GOP. On one side were defense hawks who were concerned about Rep. Mulvaney’s past votes to cut military spending. On the other were those at odds with Mr. Trump’s campaign promise not to cut Social Security or Medicare.

While the Trump Administration has indicated that it plans some cuts in government spending, the elephant in the room is that programs like the National Endowment for the Arts and the Center for Public Broadcasting aren’t what’s busting the federal budget. Even foreign aid only represents about one percent of federal spending.

Let’s face it, America. We have an entitlement problem.

Entitlements make up about half of the federal budget. The largest entitlement of all is a program that many don’t even think of as an entitlement. Social Security accounts for 24 percent of the federal budget and is the largest single budget item. Health spending in the form of Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and Obamacare subsidies account for another 25 percent. Defense spending is a distant third at 16 percent. Entitlement spending is expected to rise even further as Baby Boomers age and leave the workforce.

“I’m not looking to pick a fight with the president of the United States, but if his goal is to put the country on a fiscally sound course, he’s going to have to address entitlement reform,” Rep. Tom Cole (R., Okla.) told the Journal. “Anybody who is going to balance the budget on discretionary spending [cuts] is on a fool’s errand.”

A fight that is likely to come before entitlement reform is Mr. Trump’s plan for an infrastructure stimulus. Rep. Mulvaney and many Republicans were critical of the infrastructure spending plan before the election, but a separate Journal article noted that Democrats were embracing the $1 trillion proposal.

“We’re challenging him to join us even if his Republican colleagues in the House and Senate aren’t for it,” Sen. Chuck Schumer (D-N.Y.) said. This raises the possibility that President Trump could form a bipartisan alliance with congressional Democrats to enact his spending proposals as well as block conservative attempts at entitlement reform.

The Republican budget hawks will have allies in the Trump Administration. Mr. Mulvaney, a proponent of entitlement reform during his four terms in Congress, said, “I haven’t been quiet and shy since I’ve been here. The president knew what he was getting when he asked me to fill this role.”

Likewise, the fiscally conservative Heritage Foundation was influential in the Trump transition team. Since the group holds President Trump’s ear, reports like the one that advise him to “not be taken in by hyperbolic rhetoric about the state of the nation’s infrastructure or lured by false promises of stimulus-induced job creation” may prove influential in the long term.

The Trump campaign has led to a Trump Administration that is filled with contradictions. Trump’s promises of spending, some made as recently as last week, conflict with his appointment of fiscal conservatives like Mulvaney. Other appointees, such as Steven Mnuchin, seem to be more squishy on deficit spending.

Will Trump follow his advisors or his instincts? Will Republicans back him if Trump follows his liberal inclinations on spending? Stay tuned and find out.

Barack Obama’s Legacy of Failure

As the Obama era draws to a long awaited close, it’s appropriate to look back on the past eight years and contemplate the legacy of Barack Obama. For those seeking to put a positive spin on President Obama’s seemingly endless administration, I’m reminded of Mr. Chow’s standard of excellence from the “Hangover” movies: “Did you die?” No, I didn’t die during Obama’s tenure, but by any other standard his administration will probably be judged a failure by history.

Mr. Obama’s signature piece of legislation, the law that bears his name in popular culture, is a failure and its days are numbered. The Affordable Care Act, better known as “Obamacare,” has not lived up to its name. Health insurance premiums have increased sharply under Obamacare, even as deductibles and coinsurance have increased. This means that Americans are paying more for healthcare both at the insurance office and the doctor’s office. And, of course, Barack Obama’s promise that “If you like your health care plan, you can keep it” went down in history as the Lie of the Year.

Even by the standard of providing coverage to the uninsured, Obamacare is a failure. The uninsured rate is at a historic low, but remains above 10 percent. For its enormous cost and disruption, Obamacare hardly ushered in an era of universal healthcare.

Obama’s 2009 stimulus plan is largely forgotten now, but it is part of his legacy. The plan failed to stimulate the economy, but the Obama era has been a period of heady deficit spending. The borrowed $787 billion stimulus set the tone for the rest of Obama’s presidency. In the final analysis, President Obama nearly doubled the national debt. According to data from USgovernmentspending.com, the total federal debt has increased to more than 100 percent of GDP under Obama. The debt increased from $12 trillion under President Bush to about $23 trillion today. That is more than a trillion dollars per year of debt for every year of the Obama presidency!

Even after inflating the national debt, the US has still not fully recovered from the Great Recession. Even though unemployment has stabilized and decreased, the labor participation rate, the metric that shows how many Americans are in the work force, has decreased throughout Obama’s presidency. To find a historic level that is as low as the current level under Obama, you’d have to look all the way back to 1978 and the presidency of Jimmy Carter.

One part of the Obama legacy that will stand, for better or for worse, is the redefinition of marriage. While this was an action of the Supreme Court and not the president, Obama failed to adequately defend marriage laws in court and appointed justices that helped to upend thousands of years of tradition. As the first sitting president to embrace same-sex marriage, the landmark decision will be linked to his presidency.

Barack Obama also has a secure place in history as the first black president. His election did not heal the racial divide among Americans however. His tenure was marred by racial tension, especially over shootings by police, and race riots. A CNN/ORC poll in October found that more than half of Americans think that race relations have gotten worse under Obama.

President Obama’s record on foreign policy isn’t much better than his domestic record. One of the first things that comes to mind with President Obama’s efforts at diplomacy is the withdrawal from Iraq. President Obama campaigned in 2008 on withdrawing from Iraq and, in 2012, made good his promise after failing to negotiate a status of forces agreement that would permit US troops to remain in the country.

In 2012, Iraq was a stable and functioning democracy. A short time later, after US troops left the country, the Islamic State launched an offensive and gained control of large parts of both Iraq and Syria. Military leaders say that Obama ignored their advice to maintain a US force in Iraq to stabilize the region. The hundreds of thousands of dead, many brutally murdered by ISIS, are a part of Obama’s legacy as well.

The Middle East is not the only region where America’s enemies advanced during the Obama years. Russian President Vladimir Putin brazenly annexed Crimea in 2014. Russia has been fighting a proxy war against the Ukraine ever since. The Ukraine had relied on US and British protection under the 1994 Budapest Memorandum in which Ukraine gave its nuclear weapons to Russia in exchange for “security assurances.”

In Asia, China has not fired shots in anger, but the communist country has illegally been turning South China Sea atolls into artificial islands. Military bases are being built on the islands that could threaten many US allies in the region.

Obama’s seminal foreign policy achievements are abject failures. His nuclear deal with Iran was never ratified by Congress and is already being violated by the Iranians. The Trans Pacific Partnership, one of Mr. Obama’s few conservative achievements, was pronounced dead on arrival by President-elect Donald Trump, who is on par with Bernie Sanders when it comes to free trade agreements.

Ironically, one of the biggest legacies of Obama, the champion of the nanny state, is the loss of faith in government among Americans. Gallup shows that American trust in government peaked in 2003 when 60 percent of Americans believed that government would do the right thing most of the time. The current number is lower even than when President Bush left office amid the Iraq War and the Great Recession. In spite of – or perhaps because of – Obama’s conviction that government is the solution to every problem, only 19 percent of Americans now trust the government. Gallup also shows that 67 percent of Americans see government as the biggest threat facing the country. This is a 13-point increase over Obama’s term.

The falloff in trust in government may explain another Obama legacy. Under President Obama, the Democratic Party has been devastated at the state and local level. During Obama’s eight years, the party of Big Government lost more than 1,000 seats in state legislatures, governorships, Congress and the White House.

Even though President Obama leaves office with a respectable approval rating of 57 percent, his coattails have been short to nonexistent. Barack Obama’s personal popularity has not translated into popularity for his party or his ideas. With few rising stars surviving the Republican electoral victories of the past four years and Democratic ideas rejected by voters, the Democratic Party has a difficult road ahead.

As Trump Heads to the White House, The Left Suddenly Cares About the National Debt

Janet Yellen has been one of the few officials in the government to consistently care about the national debt. Under Barack Obama, the national debt has gone up ten trillion dollars. He has added more to the national debt than any other President in history. Yellen has cautioned against this. As Donald Trump prepares to come in with an Obama style infrastructure plan, suddenly Janet Yellen is again worried about the national debt.

Yellen cautioned lawmakers that if they spend a lot on infrastructure and run up the debt, and then down the road the economy gets into trouble, “there is not a lot of fiscal space should a shock to the economy occur, an adverse shock, that should require fiscal stimulus.”

But the political left in America, since Barack Obama has been in office, has said the national debt was no big deal.

In February of 2013, Anne Mayhew of the University of Tennessee said there is nothing scary about the national debt.

In November of 2013, Raul Carrillo of the Modern Money Network said we shouldn’t be worried about the debt.

From January of 2015, The Week said not to worry about the debt.

In June of 2015, the International Monetary Fund advised us to stop worrying about rising national debt.

In April of this year, Bob Bryan at Business Insider said there was nothing wrong with $19 trillion in debt.

But suddenly, suddenly, Janet Yellen saying this about Donald Trump’s plan is making big news.

USA Today is reporting on it. NPR is on it too. Expect major Democrats to start complaining.

But keep in mind that they were perfectly fine with an ever growing national debt as long as Barack Obama was the one running up the tab.

What Your Vote For Trump Will Cost You, In Real Money

So you’ve decided to vote for Donald Trump. You think that Trump is going to Make America Great Again™ and that you’ll be winning so much you’ll be sick of winning. Laying aside whether you think you’re winning now, first ask yourself a few questions about how much your vote is going to cost you.

Do you have a 401(k) or IRA or other retirement plan? Do you have stocks or bonds or mutual funds? Do you have real estate investments? If the answer to these questions is “no,” then you’re either still in school, or you’re living in your parents’ basement, or you’re in trouble anyway because you haven’t set up a nest egg for your future.

In the latter case, your vote for Trump costs you nothing–in fact YOU are the voter Trump has targeted since 2012 when he decided to make his move into politics. Congratulations, you have the least to lose. Vote away (and you would anyway).

For the still-in-school and the parents’ basement crowd, you still have a lot of years to spend working, and you still have a lot to lose from a Trump presidency. So listen up.

Let me preface my remarks with the fact that if Trump becomes president, certain things will likely happen regardless of what Trump does in office. These things are governed by the financial markets and their response to a Trump win. They have nothing whatsoever to do with Trump’s deals, his “winning” or his negotiating skills. These things will happen because the markets react to facts and cold hard cash.

Therefore, your vote has a price, and it could be a very personal and costly price.

I know, you want to keep Hillary out of office. I do too. I would love to see her lose, but the opportunity to replace her with a cheaper option is fairly well behind us. So if you want to know exactly how much you’re going to pay for the privilege of a Trump presidency, here’s the run down.

We will start with what the billionaires say about a Trump win. Billionaires have a lot to lose, and spend a lot of time trying not to lose it. So what billionaires do is very important. Obviously, we can’t ask Trump what he’ll do with his billions to protect himself, but being president has its own rewards (ask Putin).

Mark Cuban told Neil Cavuto at Fox Business just two weeks ago:

“In the event Donald wins, I have no doubt in my mind the market tanks,” Cuban said. “If the polls look like there’s a decent chance that Donald could win, I’ll put a huge hedge on that’s over 100% of my equity positions… that protects me just in case he wins.”

Very comforting. Will your mutual fund manager cover you with a huge hedge that’s over 100% of your equity positions? Probably not, unless you are an accredited investor with a lot to lose.

But what does Wall Street think? I know, Trump says the system is rigged, but it takes time to unrig the system. Do you think Trump is just going to get a million young people to occupy Wall Street until they cave or something? Oh, wait. Never mind.

Here’s what Wall Street thinks about Trump. They’re freaking out. Literally, that’s the headline.

In short, a Trump presidency is the very definition of what markets hate: uncertainty. “Trump is widely considered to be reckless and Clinton is widely considered to be a friend to Wall Street,” explains Chris Irons, an analyst with the equity research firm GeoInvesting. “In terms of which of the two would shoot volatility into the market, he is clearly it.”

Société Générale analysts call it the “Trump factor.” They argue that the tightening of the polls between Trump and Clinton is a big reason for a sell-off in global bonds in September, which has led to the unease in equity markets, Bloomberg reported on Tuesday. Rates on both long-term Treasury and Japanese bonds have been rising since the polls started tightening, SocGen says.

Does your retirement portfolio include bonds? Your vote for Trump is going to cost you, big. It’s already costing you because he’s tightening in the polls. I hope you haven’t planned a luxury condo in Palm Beach County, because you may not be able to afford it. Maybe Trump will let you stay at Mar A Lago. And I’ve got a bridge for sale in Brooklyn.

New York Magazine just reported, “Some market prognosticators have suggested a win by Trump could send the stock market down at least 10 percent.” I hope your health insurance is paid up, because your next investment statement might give you chest pains.

Do you have money in savings or in your bank account? It probably won’t be worth as much if Trump wins.

“I don’t know what the U.S. dollar is worth with a Trump victory. I don’t know what it does to foreign flows into the U.S.,” says Josh Brown, CEO of financial adviser Ritzholtz Wealth Management. “Are foreign corporations as desirous of owning US dollars with someone so erratic in the White House?”

Markets hate uncertainty, and Trump is the king of uncertainty. Just having a decent chance of winning (and as of September 15, the bookies at Betfair have Trump’s odds under 2:1 for the first time) is causing the markets to–as my Jewish mother would say, Ver tsuzetst (actually she’d say “Farklempt”). As Trump would say: It’s very bad.

So you think Trump’s policies and deals will cause the markets to recover? That could be true, if his policies made sense. The problem is, they don’t. The markets don’t react to rhetoric or “believe me!” They don’t. Here, look for yourself.


If you invested $100 in Trump Hotels & Casino Resorts–a public company– in 1996, by 2005, when the company went private, you’d have somewhere around $4. The same $100 invested in a dart board tied to the stock market would have gotten you $200.

No professional on Wall Street believes a thing Trump says, and his policies–judging by what’s published–are equally disastrous.

CRFB estimates that Trump’s fiscal proposals as they are today would add $5.3 trillion to the nation’s debt in the first decade. That would push debt held by the public to 105% of GDP by 2026, up from 86% projected under current policies.

His plan would decrease both taxes and spending overall. His tax plan would reduce the amount of revenue going into federal coffers by nearly $6 trillion, CRFB notes, not including any potential effects of the tax changes on economic growth.

At the same time Trump would reduce spending on net by $1.2 trillion. He’d spend more ($2 trillion) on defense, veterans, child care and Medicare, but less ($3.2 trillion) on Obamacare, Medicaid and non-defense domestic spending.

The national debt, right now, is at $19.5 trillion, that’s $60,191 per citizen, and $163,192 per taxpayer. The Trump national debt would be $24.8 trillion; that’s $225,454 per current taxpayer. You just lost $62,262 by voting for Trump, and you haven’t even won yet.

A vote for Trump will cost you thousands of dollars in real money, from your retirement plan, and from you bank account, since the dollar will tank against foreign currency. (You want to see an example? Look at what Brexit did to the British pound, and I warn you, it will make your eyes glaze over.) Your investments will be worth less. Everything you buy will cost more, and your kids will be saddled with hundreds of thousands of dollars of additional government debt.

But, hey, you’ll be winning so much you’ll get sick of winning.