Congress

Debt Ceiling Deadline Moves Forward After Tax Cuts

JM Ashby
Written by JM Ashby

I don't think you had to be a policy maven to see this coming.

The Congressional Budget Office (CBO) has informed Congress that the debt ceiling deadline could be moved forward as much as a month ahead of schedule because, not surprisingly, cutting tax revenue has consequences.

CBO said that the tax law is expected to lower tax receipts by $10 billion to $15 billion per month. Even though the tax cut law went into effect January 1, the large drop in tax receipts didn’t kick in yet because companies won’t start using new withholding tables until sometime in February.

“Withheld receipts are expected to be less than the amounts paid in the comparable period last year,” CBO said. “In addition, the government ran a deficit of $23 billion in December, and it normally runs a deficit in the second quarter of the fiscal year.” [...]

The Treasury Department had $272 billion in cash on hand as of Tuesday, a substantial amount. But that money can disappear quickly based on the government’s spending patterns. For example, the government typically spends $50 billion in just the first few days of each month on Social Security benefits and military pensions alone.

It's worth remembering this moment because this is the beginning of the beginning. It's only going to get worse from here. Much worse.

Federal revenue is expected to drop by at least $136 billion per year according to the congressional Joint Committee on Taxation and that begins right now. You may recall that many wealthy Americans and businesses withheld their taxes in 2017 in anticipation that they would soon receive a tax cut. You can do the quick math and realize that means the federal government will have already seen over $270 billion fly out the window by this time next year.

Meanwhile, we're 7 days away from a possible government shut down and Republican lawmakers are currently at a golf course in West Virginia for a "retreat."

The expectation is that Congress will pass yet another continuing resolution to keep the government running next week, and if you've been following along you know what that means: President Obama's last budget is still alive.

  • Draxiar

    And here we are spinning the wheel of misfortune. How many damn times have the Republicans cut taxes and regulation and driven up debt and caused a recession only to have the Democrats come in, save the economy by raising taxes and pulling the country out of the recession? Then of course Republicans claim fiscal responsibility by feigning surprise the debt is as high as it is then cast the Democrats as being all about “tax and spend” and so on and so on. What an exhausting and tired ploy it all is.

    • muselet

      It’s exhausting and tired, but the Rs will keep using it as long as they think it’ll win them elections.

      –alopecia

    • JMAshby

      This will keep happening as long as the political press plays along with it.

  • muselet

    Lower tax rates lead to lower tax revenues.

    Lower tax revenues lead to larger deficits.

    Larger deficits lead to a need for a raised debt limit.

    Alert the economists! There’s a Nobel Prize in Economics for someone who can explain … well, basic cause and effect.

    Someone needs to buy the Rs copies of The Big Golden Book of Macroeconomics, and quickly.

    –alopecia

    • Draxiar

      Make sure you scratch out the name of the author and replace it with “Saint Reagan” otherwise they’ll claim the book as fake news.