In this bizarre election cycle, the problem of increasing federal budget deficits has received little attention. But Greg Valliere of Horizon Investments brought it to light in a research note Wednesday titled, “A Forgotten Issue Suddenly Returns.”
The dramatic decline of the budget deficit is over, and red ink is heading sharply higher. Figures released yesterday from the Treasury Department show that in the first 11 months of this fiscal year, spending rose by 3%, mostly because of entitlement growth, while revenues grew by only 1% as corporate profits fell by 11%. September should be a surplus month, but the deficit this year could approach $600 billion, up nearly 25% from last year.
NEWS OF A SURGING DEFICIT comes as both presidential candidates ignore spending restraint. From Hillary Clinton’s tax credits to Donald Trump’s child care and infrastructure proposals, no one is focusing on how new programs will be paid for. Trump wants to eliminate “waste, fraud and abuse,” which is a meaningless cliche. Clinton would pay for new spending with tax hikes on the wealthy — which have no chance of passing in the House.
Valliere was among the first Washington analysts to point out that the deficit started shrinking over four years ago. Now he’s early to point out the positive trend has reversed.