2020 deficit will exceed $1 trillion

The federal government will take in a trillion dollars less in tax revenue in fiscal year 2020 than it is expected to spend, according to the Congressional Budget Office (CBO).

Under current policies, annual deficits will continue to be at least $1 trillion in perpetuity, the CBO projects, causing the national debt to grow to $31 trillion over the next 10 years.

Debt affects the country's ability to operate, as the government must pay interest on the debt in order to keep borrowing money.

Why is spending increasing?

The only other time that annual deficits reached $1 trillion was during the first three years of the Barack Obama administration due to the Great Recession and 2008 financial crisis - causing increased spending to help individuals, auto manufacturers, and financial institutions.

Major expenses contributing to the 2020 deficit include...

Why do we have less money to pay?

During the Great Recession, revenues were low due to economic factors such as high unemployment.

This time, the culprit is tax reductions. Revenues increased, but not as much as they would have without the tax reduction, as more money simply remained in the hands of the wealthiest Americans and corporations.

A large part of the insufficient revenue also comes from the repeal of three taxes that were helping to pay for ObamaCare, including the Cadillac Tax, the Medical Device Tax, and an annual fee paid by health insurance companies.

For more, read the Washington Post story.

Click here to read the CBO report.

Two year budget will assure trillion-dollar deficits for years

After two shutdowns of the federal government within a month, Congress finally passed a budget for the 2018 and 2019 fiscal years by simply raining money on everyone. And by creating some of the biggest deficits in the country's history.

The budget increases yearly defense spending by about $75 billion and non-defense spending by about $60 billion.

Some of the things the budget does...

The expenses are not necessarily a problem. Paying for them could be...

All that is made possible because the budget also suspends the debt limit for two years and eliminates the sequester - the across-the-board reductions enacted in 2013.

Of course, the money to pay for all that has to come from somewhere.

It won't come from taxes, because the tax bill passed by Congress and signed by the president in December is projected to reduce tax revenues by $1.5 trillion over the next 10 years.

That only leaves borrowing. Under the new budget, the deficit - the amount the government would need to borrow - would be about $1 trillion in each of the next two years.

If these policies continue in combination with the lowered tax rates, it "would cement the return of trillion-dollar deficits," the Committee for a Responsible Federal Budget (CRFB) reported in their analysis.

For more details about what this budget will buy, read The Hill story.

For more on how the budget is projected to add hundreds of billions of dollars to the national debt of the next two years, read the New York Times analysis. It is based on this CRFB analysis.

The bill passed, but not after a long delay in the Senate by Sen. Rand Paul and an 8-hour speech in the house by House Minority Leader Nancy Pelosi. Click here for our explanation of what happened.

Click here for more details of the bill.

Congressional Republicans pass tax reduction. Who benefits?

Republicans in Congress have passed a bill to temporarily reduce taxes for most Americans, although it ultimately would raise taxes for many. The tax reductions are skewed heavily toward the richest Americans.

The Tax Cuts and Jobs Act also gives corporations a 40-percent tax reduction - lowering their maximum tax rate from 35 percent to 21 percent. The corporate tax reductions are permanent.

Eighty percent of taxpayers will see a tax cut next year, according to a Tax Policy Center analysis of the final bill. The cuts, however, would disproportionately benefit the wealthy.

In 2018, for example...

In the Senate, the bill was passed using a process known as budget reconciliation. This allowed Senate Republicans to pass the bill with a simple majority, without subjecting it to a filibuster.

A bill passed using budget reconciliation may not cause an increase in the country's deficit after 10 years. However, the reduction in the highest corporate tax rate amounts to a $1 trillion tax cut for businesses over the next decade. With those cuts being permanent, the bill needed make up that $1 trillion shortfall. It does that by re-increasing individual rates over that time.

By 2027 more than half of Americans will find themselves paying more in taxes, according to the Tax Policy Center.

Some beneficiaries...

One group that will benefit from the bill are those who receive income through a pass-through company. The tax on income received through these companies will be reduced by 20 percent through 2025.

Those who will directly benefit from the pass-through provision include President Trump (who pressed for the bill) and several Republicans (who wrote it).

Foreign investors also benefit. Foreign investors own more than a third of U.S. corporate stock. The reduced corporate tax rate will save them more than $50 billion a year - money that could have gone to help Americans.

The bill also will allow people to pass on twice as much to their heirs tax-free (up to $22 million for married couples).

The new tax policy is expected to add nearly $1.5 trillion to America's debt in the next decade.

Miscellaneous provisions in the bill

The bill essentially repeals ObamaCare's individual mandate starting in 2019 (Click here to see how).

The Congressional Budget Office (CBO) estimates this would increase insurance premiums by 10 percent - leading to 13 million fewer Americans purchasing health care insurance a decade from now.

Eliminating the mandate was done to offset some of the lost revenue from lower taxes - as the federal government will not have to subsidize the cost of the insurance some people won't purchase.

The bill also allows oil drilling in Alaska's Arctic National Wildlife Refuge (ANWR).

Update 2017-Dec-22: President Trump signed the bill into law.

For more details on what the new tax law will do, read the New York Times analysis and the Washington Post analysis.

Click here to read the Tax Policy Center analysis.

Click here to read the CBO's analysis of the effects of removing the Obamacare mandate.

Click here for more details about the Tax Cuts and Jobs Act.

Debt Ceiling looms after year-long respite

The federal government is again reaching a point where it must increase the debt limit or default on payments it owes.

The debt limit has nothing directly to do with how much debt the country incurs. Congress controls much of that through taxation and spending. But when there's a deficit that exceeds the amount the government is allowed to borrow, one of two things will happen...

Technically, the government already has reached the debt limit. In 2016, Congress extended it through this March. Since then, the Treasury Department has been moving cash from one account to another to pay debts.

But there might be enough money for only another few months due to less than expected tax revenue, according to Office of Management and Budget (OMB) Director Mick Mulvaney and Treasury Secretary Steve Mnuchin.

For more, read the CNN Money story.

Congress approves Debt Ceiling increase

The Senate has voted to approve raising the nation's debt limit enough to cover spending through March 2015. The bill passed the House of Representatives on Feb. 11. It is expected to be signed by President Obama.

As we have explained, raising the debt limit does not increase spending by the government. It merely allows the U.S. Treasury to borrow money to pay for services previously approved by Congress (and signed by the President) in a budget or other spending bill.

For more on the passage of the bill by the House of Representatives, read this Politico.com story.

For more on the passage of the bill by the Senate, read this Politico.com story.

To see how your representative voted on the debt limit extension, click here.
To see how your senators voted on the debt limit extension, click here.

Why does this bill have a funny name? See our explanation.

Congress restores government funding through January

Government employees returned to work, services resumed, and the Treasury Department was assured it would be able to pay the country's bills after Congress agreed to end the most recent shutdown of the government and raise the debt limit.

Most government services shut down Oct 1. when Congressional Republicans refused to pass a continuing resolution (CR) to keep the government running into December unless implementation of the Patient Protection and Affordable Care Act was rolled back or delayed.

The Continuing Resolution that Congress passed on Oct. 16 contained none of those restrictions. It will keep government operations funded through Jan. 15. A new budget (or at least a new Continuing Resolution) will be needed by then to avoid another shutdown. It also raised the debt limit through Feb. 7.

For more, read the New York Times story.

Ryan budget would cut taxes for wealthy, services for poor

Rep. Paul Ryan unveiled a budget plan Tuesday that would cut taxes, increase defense spending, and slash social programs.

Ryan, who chairs the House Budget Committee, proposed cutting spending by $4.6 trillion over the next decade and lowering the highest tax rate to 25 percent.

Nearly 70 percent of the cuts would come from health care programs.

The budget would:

In addition, the highest marginal tax rate - which was raised in January from 35 percent to 39.6 percent on income greater than $400,000 - would be lowered to 25 percent. The maximum corporate tax rate would be lowered from 35 percent to 25 percent.

Senate Budget Committee Chair Patty Murray will release a separate budget proposal this week. Her plan reportedly seeks to replace the "sequester" with $1.85 trillion in savings, evenly divided between spending cuts and the elimination of some tax breaks. You can see the differences in the two plans in this Washington Post chart.

For more, read the story in The Hill.

To read the complete budget plan submitted by Ryan, click here