US Budget Deficit Swells to $666b

America’s federal government finished fiscal 2017 with a budget deficit of $666 billion, an increase of $80 billion over the previous year. It was the biggest shortfall since 2013 and the sixth-highest on record.

The deficit equaled 3.5% of gross domestic product, up slightly from the prior year. Spending rose by 3% for the fiscal year, while receipts climbed by 1%. The government’s fiscal year runs from October through September, news outlets reported.

The federal budget deficit rose to $665.7 billion, an increase that comes as Republicans are moving to draft a tax code rewrite that promises to add up to $1.5 trillion to the national debt over the coming decade.

Deficit numbers, released Friday by the Treasury Department and the White House budget office, followed senate passage late Thursday of a 10-year budget plan that shelves GOP concerns on deficits and debt in favor of a tax overhaul.

President Donald Trump and his GOP allies on Capitol Hill promise this year's tax legislation will spark a burst of economic growth—and hope it will pay big political dividends for their party. Friday's budget figures represent an $80 billion jump over last year's $585 billion deficit, which itself had surpassed the previous year's $438 billion.

Tax Overhaul Needed

The administration says the sour deficit report shows a need to pass the tax overhaul measure. "Through a combination of tax reform and regulatory relief, this country can return to higher levels of GDP growth, helping to erase our fiscal deficit," Treasury Secretary Steven Mnuchin said.

"These numbers should serve as a smoke alarm for Washington, a reminder that we need to grow our economy again and get our fiscal house in order. We can do that through smart spending restraint, tax reform and cutting red tape," said White House budget director Mick Mulvaney, NWAonline reported.

Democrats argue that the GOP should work with them on a bipartisan approach to revamping the tax code without adding to the deficit. "With the deficit as large and growing as quickly as it is, Republicans pursuing a reckless plan that would blow a huge hole in the deficit and put Medicare and Medicaid at risk is the height of irresponsibility," said Senate Minority Leader Charles Schumer, D-NY.

Mulvaney drafted Trump's May budget plan, which promised to balance the budget within a decade, but only through politically unrealistic cuts and rosy assumptions of economic growth.

The Trump administration has expressed confidence that the tax cut can be paid for through economic growth. The national debt, meanwhile, has exceeded $20 trillion. In a report last summer, the Congressional Budget Office estimated that debt held by the public would rise to about 91% of the economy by 2027, absent major policy changes, MarketWatch reported.

Trump Makes Mess of Trade

America's closest neighbors, Mexico and Canada, rank high on Trump's to-do list of allies to offend. The North American Free Trade Agreement, the president insists, is "the worst deal ever". Actually, it's been a mostly good deal for all three partners. But even if the US stays in it, Trump's crazy-man act has already done the dirty deed, damaging America's ability to compete globally.

True to style, Trump started talks by bellowing invective against the negotiating partners. He repeatedly demanded an insulting wall with Mexico and turned the usual trade skirmishes with Canada into World War II-and-a-half.

Such intemperance has economic consequences. Canada and Mexico certainly want NAFTA to continue, but they are now taking steps to reduce their reliance on trade with the United States. Both have already signed new trade agreements with Europe featuring zero tariffs.

As Mexican Foreign Minister Luis Videgaray recently said, the demise of NAFTA wouldn't "be the end of the world." If tariffs returned to North America, Mexican factories would have incentives to replace American-made parts with parts made in Europe—or in Mexico itself. Some economists predict that the big automakers would just shift production altogether to Europe or Asia.

Leaving NAFTA, the American Automotive Policy Council concludes, would amount to a "$10 billion tax" on US manufacturers. US makers of auto parts say it would force them alone to cut up to 50,000 American jobs.