Treasury Dept.: The real deficit is twice as big – and getting worse

· February 23, 2018  
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Money down the drain
Bill Oxford | Getty Images

The largest financial institution in the world – the U.S. government – issued its financial statement just a few days ago, and nobody in Washington seems to care that the deficit is almost twice as large as they once thought.

We were treated to so many inspiring speeches and seminars at CPAC on the health, vibrancy, and success of the “conservative movement.” Yet for those of us who are fighting for the actual policy outcomes that determine the levels of spending and size of government, it’s an awfully lonely fight. The debt crisis is unfathomable and is actually worse than you think.

In substance-free Washington, the release of the annual financial statements of the U.S. government isn’t a big deal, but it should be. The statements demonstrate that we have gone backward, not forward, with Republicans in charge of all branches of government. According to the annual financial report of the U.S. government published by the Treasury Department, the real deficit for fiscal year 2017 was $1.2 trillion, almost double the official estimate of $666 billion.

The budget figures we see from the Office of Management and Budget (OMB) and Congressional Budget Office (CBO) only factor in actual outlays compared to actual revenues to calculate the “budget deficit.” The financial report from the Treasury Department, however, calculates “net operating cost” of the federal government, which includes expenses incurred but not yet paid out that year. These include the cost of benefits for federal employees and veterans, for example. This is a much more accurate depiction of our financial doom, because this is money we absolutely owe and will have to pay.

Overall, the budget deficit grew by $78.3 billion and the net operating cost grew by $105 billion in fiscal year 2017 as compared to fiscal year 2016. This means that the deficit grew by 13.3 percent when Republicans controlled all of government as compared to Obama’s final year. And this is with the economy humming. It’s the untold story of the first year in office you won’t hear from all those at CPAC, including Vice President Pence, fawning over the vibrancy of the conservative movement.

The worst element of our budget is health care. It accounts for 24 percent of our costs, dwarfing even the cost of the military and surpassing the cost of Social Security. Yet health care and spending are the two issues Republicans have promised not to touch this year. They have embraced every tenet of government-run health care, and GOP governors are almost universally clamoring for its expansion.

And remember, these numbers don’t factor in the spending bill they just passed and the future ones they are planning this year. Budget hawks were warning that we will return to trillion-dollar annual deficits in fiscal year 2018, but the real deficit already broke that milestone last year. This year’s real net operating costs will likely approach $2 trillion.

Until recently, nobody really cared about the consequences of eye-popping debt, because interest rates were so low and the annual interest payments on the debt were stagnant at approximately $230 billion. With interest rates rising, that number will grow to $447 billion in 2019 and surpass all defense spending in 2026.

Even more perfidious about the spending betrayal is that in addition to passing all the new spending, Congress pre-empted conservatives from harnessing the one tool in the legislative box to force systemic budget reforms by raising the debt ceiling for another year.

The only leverage conservatives have left is the omnibus at the end of March. Although Republicans legally nullified the budget caps, it doesn’t mean we have to appropriate all of the proposed increase in spending. To Trump’s credit, the OMB put out a memo last week recommending that Congress not spend most of the $65 billion proposed increase in non-defense spending, despite the deal on budget caps. It’s time for some brave conservatives to begin circulating a letter pledging to oppose any budget bill that spends that money, in addition to funding sanctuary cities.

That is a good “breakout panel” for you at CPAC if anyone is really interested in the “health” and “future” of conservatism.

When you look at the long-term and definitive policy outcomes, it is quite evident that we need a gathering of conservatives committed to addressing what really matters. There’s nothing wrong with celebrating the areas of positive change relative to the Obama era, but if we actually want to see our ideas put into action, we can’t delude ourselves about the basic state of the Republican Party on the most important issues of our time. The president has shown he is willing to listen to conservatives if we raise our voices. Will we?


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Author: Daniel Horowitz

Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.