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Five reasons why $1 trillion deficits may not be far away for Uncle Sam

Published: Saturday, January 13, 2018 @ 12:00 AM

It wasn’t that long ago that Republicans denounced four consecutive yearly deficits of over $1 trillion during the Obama Administration, but now that the GOP is fully in charge of the White House and Congress, it’s possible the deficit may be heading back into the territory of that very large figure.

The federal deficit in 2017 was $666 billion; the Congressional Budget Office estimates it will be $699 billion in 2018, and after the first three months of the fiscal year, the deficit is running higher than a year ago at this time.

Let’s look at some of the reasons why the deficit might be going up – not only this year – but in the future as well.

1. 2018 deficit running slightly ahead of 2017. As mentioned above, the CBO projects a deficit this year of $699 billion; already in the first three months of this fiscal year, Uncle Sam has run up $25 billion more in red ink than a year earlier. The numbers in December 2017 were actually a couple of billion better than a year earlier, as more tax revenues came in last month. So far, in the first three months of Fiscal Year 2018, record revenues from individual income taxes have come into Uncle Sam, $390.8 billion. That seems to be a good indicator of economic strength.  But will those revenues continue to climb in the rest of 2018?  And what about spending?

2. Tax cuts may reduce revenues in 2018. I can hear people gritting their teeth already. They don’t believe the CBO estimates, and they don’t believe that the tax cuts signed into law at the end of 2017 will lead to a drop in revenues. They will yell, “Static scoring!” on my Twitter time line. But if you look back in history, a tax cut doesn’t always translate immediately into more revenues. In 1981, when President Ronald Reagan pushed tax cuts through Congress, the feds took in $599.2 billion in revenues. By 1983, the figure was basically unchanged at $600.5 billion. The same type of thing happened with the Bush tax cuts of 2001 and 2003. In 2001, revenues were $1.99 trillion. They dropped to $1.85 trillion in 2002, down to $1.78 trillion in 2003, and went up to $1.8 trillion in 2004. Finally in 2005, revenues went above the levels from 2000. If history repeats itself with the Trump tax cuts, there could be a revenue drop this year, which would mean a higher budget deficit in 2018.

3. Spending deal expected to add more to deficit. President Trump has made clear he wants $54 billion more in defense spending for both 2018 and 2019 – Democrats say, okay, then add the same amount of money for non-defense spending. While Republicans don’t want to do that, the GOP doesn’t have 60 votes in the Senate, so there will have to be a budget deal to set the limits on spending going forward. If you are going to have parity, or something close to it, then that means a big chunk of extra spending, as much as $100 billion in 2018 and $100 billion more in 2019. If you hear about a deal in Congress on the ‘budget caps,’ this is what they are talking about.  And when you add in another $100 billion, that’s more red ink.

4. Disaster aid will add more to the deficit. After three major hurricanes – Harvey, Irma and Maria – and a devastating wildfire season out West, the Congress has already approved $53 billion in disaster relief, and much more is likely to be spent. Texas, Florida, and Puerto Rico have all staked a claim for large amounts of money, and in coming weeks, lawmakers could approve another $80 billion or more – and even more money will be needed after that. It wouldn’t surprise me to see the aid figure go over $200 billion, and maybe even higher in 2018. The White House asked for $44 billion in December – the House passed a bill with $81 billion, and that could jump more in coming weeks and months.  The Senate has to act on that disaster aid next.

5. What you’re not hearing about – budget cuts. For all the talk from Republicans and President Trump about cutting federal spending, there is little likelihood that Congress will come through with budget savings to offset new spending in 2018. When the President asked for $44 billion in new hurricane disaster relief late last year, that spending was offset by $44 billion in budget savings proposed by the White House – except those savings wouldn’t happen until 2025-2027. The House tried to get $200 billion in savings from mandatory spending programs over ten years – $20 billion per year – but Senate Republicans refused to agree to that. It’s easy to talk budget cuts, but much more difficult to pass them.  And when you don’t offset extra spending, the deficit goes up.

So, let’s recap.

The CBO estimate for the budget deficit in 2018 is $699 billion, so we’ll call it $700 billion.

If there is a budget caps deal, it would probably add about $100 billion in spending for this year. That’s a deficit of $800 billion.

If there is $200 billion spent on hurricane and other disaster relief, then you are already bumping up against a $1 trillion deficit.

And if the new tax cuts mean stable or lower revenues in 2018 for Uncle Sam – which has happened with the last three major tax cuts in 1981, 2001 and 2003 – that could push the yearly deficit even higher.

Don’t take my word for it – the Committee for a Responsible Federal Budget recently said, “failure to offset disaster funding, along with the lack of sufficient offsets for tax reform and a potential budget caps deal, is likely to lead to the return of trillion dollar deficits by next fiscal year.”

You’ve been warned.

Don’t be surprised if it happens.

 

Going through FBI texts, Republicans discover five missing months

Published: Monday, January 22, 2018 @ 11:30 PM

Already raising questions about possible investigatory bias inside the FBI, Republicans in Congress are now demanding more answers about how five months of text messages between two senior FBI employees on the Hillary Clinton email probe, Peter Strzok and Lisa Page, were not archived and properly retained by the bureau.

“The loss of records from this period is concerning because it is apparent from other records that Mr. Strzok and Ms. Page communicated frequently about the investigation,” said Sen. Ron Johnson (R-WI) in a letter to the FBI Director.

The FBI says the texts weren’t kept because of a misconfiguration of software upgrades on cell phones issued to employees.

That explanation fell flat on Capitol Hill.

“This is a “my dog ate my homework” level excuse,” said Rep. Mark Meadows (R-NC). “Americans deserve to know if there was rampant anti-Trump bias at the FBI, and certainly if there was an effort to cover it up.”

The review of how the FBI handled the Clinton email case has gone hand in hand with assertions by Republicans that officials inside the FBI were biased in favor of Clinton, and biased against President Donald Trump, saying that may have bled into the subsequent investigation of Russian interference in the 2016 election.

In a joint statement, three House GOP lawmakers said the details of newly revealed texts were “extremely troubling,” and showed bias involved in the investigation.

“The omission of text messages between December 2016 and May 2017, a critical gap encompassing the FBI’s Russia investigation, is equally concerning, ” said Rep. Trey Gowdy (R-SC), Rep. Devin Nunes (R-CA), and Rep. Bob Goodlatte (R-VA).

The texts between Strzok and Page, would have covered a period during the Trump transition, running up to the time that Robert Mueller’s Special Counsel investigation began.

Few specifics were released from the latest batch of FBI texts to detail what exactly the Republicans had found, as GOP lawmakers instead focused on the overall situation – for example, Rep. John Ratcliffe (R-TX) said the texts he saw “revealed manifest bias among top FBI officials.”

The discovery of the missing texts swiftly brought back memories for Republicans of how thousands of emails went missing of Lois Lerner, a top Internal Revenue Service officials involved in a controversy about bias against more conservative groups seeking non-profit status.

Strzok and Page are important figures for two reasons – they were both part of the Clinton email investigation, and then had roles in Mueller’s investigation of Russian interference in the 2016 election.

Two were found to be having an affair; Strzok, a senior counterintelligence official, was reassigned from the Mueller probe after the discovery of the text messages between the two.

President Trump signs bill ending government shutdown

Published: Monday, January 22, 2018 @ 12:16 PM
Updated: Monday, January 22, 2018 @ 9:02 PM

What You Need to Know: Government Shutdown

A Senate standoff that partially shuttered the federal government for nearly three days ended Monday when Senate Democrats agreed to support a bill to re-open the federal government through Feb. 8.

Sen. Sherrod Brown joined 31 Democrats and independent Angus King of Maine in backing the spending bill, which they did under the condition that the GOP permit debate on a bill to provide protection for the children of undocumented immigrants, a program known as the Deferred Action for Child Arrivals, or DACA.

The final vote to move forward was 81-18. Sen. Rob Portman, R-Ohio, also backed the measure. The House passed the bill later Monday on a 266-150 vote.

President Donald Trump signed the bill just before 9 p.m. Monday.

WATCH LIVE: Senate votes on shutdown

Senate Minority Leader Chuck Schumer, D–N.Y., announced the breakthrough on the Senate floor shortly before a scheduled vote on a bill to keep the government open 17 days. The bill would also extend for six years a popular program that provides billions of federal dollars to the states to pay for the health care costs of low-income children.

"We expect that a bipartisan bill on DACA will receive fair consideration and an up–or–down vote on the floor," Schumer said.

Earlier Monday, Senate Majority Leader Mitch McConnell, R–Ky., pledged to have the Senate will take up immigration after the government re-opens. In a floor speech Monday morning, McConnell promised “an amendment process that is fair to all sides.”

“This immigration debate will have a level playing field at the outset,” McConnell said.

Said President Trump in a statement: "I am pleased that Democrats in Congress have come to their senses and are now willing to fund our great military, border patrol, first responders, and insurance for vulnerable children."

In a separate e-mail to supporters, he exulted: "Democrats CAVED — because of you ... We can’t let them get away with it. We will never forget the names of EVERY single liberal obstructionist responsible for this disgusting shut down, and we will work to FIRE them come November."

However, even if the Senate does ultimately vote on a bill on DACA, it's unclear whether the House will follow suit.

Not a big impact in D.C.

Still, the spending agreement cut off what had been an inconvenient but not overly disruptive morning on Capitol Hill — the first regular work day since the government closed at midnight Friday. While some Capitol staff had been furloughed because of the partial shutdown, Brown and Sen. Rob Portman, R-Ohio, kept their staffs at full capacity.

Some of the Capitol’s restaurants and entrances were closed. A popular coffee place in a Senate office building couldn’t serve sandwiches after 1:30; it had run out of bread because of the flood of customers. Some federal workers who had driven into D.C. Monday morning to get furlough notices returned home only to find that the government was to reopen. In all, it was anticlimactic.

LATEST: Dems align on plan to fund government, end shutdown

But Republicans and Democrats seemed to disagree on the takeaway. Brown and others said they were hopeful that the agreement would be the beginning of a new era of bipartisan compromise. Republicans, meanwhile, argued that Democrats learned the hard way what congressional Republicans learned in 1995 and 2013: that it is difficult to prevail in a partial shutdown against a White House that will not budge. 

In 2013, Republican Sen. Ted Cruz, R-Texas, demanded that the price for keeping the federal government open was for President Barack Obama to scrap his signature 2010 health-care law known as Obamacare. Obama held firm and the congressional Republicans collapsed in acrimony. Republicans including House Speaker Paul Ryan later acknowledged that the plan had not worked.

“I think if we’ve learned anything during this process it’s that a strategy to shut down the government over the issue of illegal immigration is something that the American people didn’t understand and wouldn’t have understood in the future,” McConnell said.

Portman echoed those comments. “It was wrong of Democrats to vote against continuing the operations of the government for something unrelated,” he said.

But Democrats including Brown seemed heartened that the agreement would mean not only fewer short-term spending bills, but possible compromises on pensions and other issues.

Their optimism appeared to carry to the Senate floor, where Republicans and Democrats chatted amiably with one another before the vote.

An unusual scenario

 Sen. Dick Durbin, D–Ill., said the dialogue over the weekend was something he’d not seen in years: “constructive bipartisan conversation and dialogue on the floor.”

Brown, meanwhile, said senators had “better conversations than we’ve seen in a long time, more substantive and more sort of directed.”

He said he had voted against the spending bill that failed, shutting down the government, largely because of his frustration with the temporary, month-to-month spending measures.

“You can’t run a government like that,” he said, saying the agreement reached Monday “fundamentally changes it.” If Republicans keep their part of the agreement and allow a debate on DACA, he said, it will be the first time they have allowed a Democratic amendment on the Senate floor since Trump has been president.

Although most analysts do not believe a brief shutdown will have any meaningful impact on the November elections, Senate Democrats such as Brown and Bob Casey in Pennsylvania were among those under intense pressure to keep the government open, with the National Republican Senatorial Committee airing ads online against they and other Democrats in states that Trump won in 2016.

Privately, Republicans in a closed door meeting after the vote wondered if they would need to end a rule that requires 60 votes to pass a spending bill in order to prevent further shutdowns.

If there was any agreement, it was this: Republicans and Democrats would have to rely on one another in order to forge compromise; they’d have to leave Trump out of it.

Filing taxes? Here’s how a government shutdown impacts the process

 

Congress ends government shutdown, as Senate agrees to immigration debate

Published: Monday, January 22, 2018 @ 1:11 PM

Ending a three day stalemate that resulted in a federal government shutdown, Democrats on Monday dropped their filibuster of a temporary spending bill in the Senate, allowing the Congress to swiftly approve a resumption of government funding, which will put hundreds of thousands of federal workers back on the job immediately.

“I am pleased that Democrats in Congress have come to their senses,” President Donald Trump said in a written statement issued by the White House, as Republicans said Democrats had folded under pressure.

The Senate voted 81-18 to re-open the government. The House followed soon after, voting 266-150 in favor of the plan.

The deal reached on Monday between the two parties not only allows government funding to resume, but will re-start negotiations on major budget issues, as well as the question of what should be done with illegal immigrant “Dreamers” in the United States.

“We will make a long-term deal on immigration if, and only if, it is good for our country,” the President said, as he met separately with Senators of each party on the matter.

When asked if they had been on the short end of the shutdown fight, Democrats emphasized the deal on immigration legislation, which will allow a Senate debate if there is no negotiated deal by February 8.

“What other choice did we have?” said Sen. Bill Nelson (R-FL) to reporters. “Otherwise, to go in gridlock and shutdown for weeks? I mean, that’s not acceptable.”

Lawmakers also approved language that will insure federal workers and members of the military will be paid, despite the funding lapse of the last three days.

While this agreement ended the shutdown, it didn’t solve the underlying problems which contributed to the high stakes political showdown.

Both parties must still work out a deal on how much to spend on the federal government operations this year – President Trump wants a big increase in military spending, while Democrats want extra money for domestic programs.

And then, there is immigration, which has bedeviled the Congress for years, and could again, as lawmakers try to work out a deal with something for both sides.

“There’s a symmetric deal to be done here on these DACA young people,” said Sen. David Perdue (R-GA), who joined a small group of other GOP Senators in meeting with the President this afternoon on immigration.

Perdue says the deal is simple – Democrats get protections for illegal immigrant “Dreamers,” while Republicans would get provisions “to provide border security, end chain migration issues, and end the diversity visa lottery.”

The White House emphasized that as well.

But to get something into law, lawmakers will need some help from the President.

“What has been difficult is dealing with the White House, and not knowing where the President is,” said Sen. Jeff Flake (R-AZ), as Republicans have complained publicly about conflicting signals on immigration from Mr. Trump.

“Congress should act responsibly to allow these young people to stay,” Rep. Steny Hoyer (D-MD) said of the “Dreamers.”

Senate moves to end shutdown as Democrats accept DACA debate offer

Published: Monday, January 22, 2018 @ 7:34 AM

In the third day of a government shutdown, the Senate moved Monday afternoon to approve a bill to fund the operations of the federal government, as Democrats dropped their opposition to a three week funding plan, accepting an assurance from Senate Republicans that there would be an upcoming debate on immigration issues involving illegal immigrants who were brought to this country at a young age by their parents.

“The Trump shutdown will soon end,” said Senate Democratic Leader Charles Schumer.

The deal hinged on the pledge of Senate Majority Leader Mitch McConnell to bring a bill to the floor of the Senate dealing with DACA, illegal immigrant “Dreamers” and general immigration enforcement matters, if no deal is reached in negotiations by February 8.

“I’m encouraged by the commitments that Leader McConnell has made,” said Sen. Chris Coons (D-DE), who joined other Democrats in supporting a move to re-open the federal government.

“I’m confident that we can get the 60 votes needed in the Senate for a DACA bill,” said Senate Democratic Leader Charles Schumer, who said the process will be “neutral and fair to all sides.”

“We have a way to address the fate of the Dreamers, instead of waiting until March,” Schumer added, referencing the March 5 deadline set by President Donald Trump for action in Congress on that subject.

But even with this agreement, there is certainly no guarantee that Democrats will get a bill that they like on immigration – and no assurance that whatever gets approved by Senators will be voted on in the House.

And there were quickly signs that Republicans would not cave to Democrats on the issue.

“We’re not going to go through this charade again where Democrats shut down the government because they’re putting the interests of illegal immigrants and foreigners over American citizens,” said Sen. Tom Cotton (R-AR).