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Spending, Not Tax Cuts, Driving Deficit

November 19, 2018

Here are a few quick facts…

 

The federal budget deficit is $782 billion in 2018, which is up 17 percent from last year’s $666 billion shortfall.

 

Federal revenues were up 1 percent over last year, which isn’t a lot, but it’s an increase. However, not surprisingly, federal spending increased 3 percent over 2017.

 

The deficit rose to 3.9 percent of Gross Domestic Product (GDP), up from 3.5 percent of GDP in 2017.

 

When the economy is strong, as ours is, deficits should go down. So, given the facts, our deficit should shrink, right?

 

Well, that’s obviously not happening. Why not?

 

A lot of the media thinks it’s because of President Trump’s tax cuts. That’s misguided, and I’m not the only one who thinks so.

 

If no tax cuts took place, the Congressional Budget Office said the deficit would be $660 billion instead of $782 billion.

 

Would you rather have strong growth, with rising wages and more jobs, or the anemic growth of past administrations? Either way there is going to be debt, and almost certainly a budget deficit.

 

In truth, it’s the increased spending by Congress that drove the deficit deeper. I mean $326,000 for coffee mugs since 2016 – what else are they spending on?

 

While the media will say one thing, the truth is Congress needs to spend less.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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