White House Predicts Budget Deficit Will Reach $600 Billion This Year
This major increase represents a disappointing setback as the Obama administration comes to a close. It stands in stark contrast to previous years, during which budget deficits steadily decreased from the staggering $1.4 trillion deficit we saw during President Obama’s first term.
“Even as the administration made critical investments to support economic growth, it also succeeded in putting the nation on a sound fiscal path,” said Shaun Donovan, director of the White House Office of Management and Budget. “Since 2009, federal deficits have fallen by nearly three-quarters as a share of the economy — the most rapid sustained reduction since just after World War II.”
So, people are asking: What changed? Why are we seeing an increase in the deficit this year after so many consecutive years of reduction?
Economists are pointing an accusatory finger at this year’s weak corporate tax revenues. Though individual income taxes have increased due to consistent job growth, corporate taxes have declined.
From a broader perspective, long-term trends are showing signs of a rising deficit. Over the past year, revenues rose just two percent, which is low in comparison to the six percent rise seen in recent years. Making matters worse, government spending has been steadily increasing. This is partly due to the rising demand for Social Security and Medicare as the country’s demographic profile gets older.
Additionally, President Obama requested a 6.8% increase above the 2015 level for base budget Pentagon spending, arguing for the third year that current budget caps are not sustainable for defense for non-defense spending.
Though an increase of any amount is disappointing, Donovan said that the $600 billion projection is actually $16 billion lower that the deficit estimated back in February.