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Defying the Odds

Defying the Odds
New book about the 2016 election.

Tuesday, October 8, 2019

Darkening Economic Skies

In Defying the Odds, we discuss the tax and economics issue in the 2016 campaign.  The update  -- recently published --includes a chapter on the 2018 midterms. and explains why the Trump tax cut backfired on Republicans.

James Pethokoukis at The Week:
Just take a look at the September jobs report, out Friday. Although the unemployment rate dipped to a 50-year low, the report also showed that both job and wage growth have slowed. JPMorgan economist Michael Feroli called it a "labor market in a controlled descent." Meanwhile, major banks, including JPMorgan, are forecasting third-quarter GDP growth will be lucky to hit 2 percent, and the manufacturing sector likely continues a contraction that began in July.
In other words, the economy could use a boost — like ending President Trump's trade war. The harmful and ill-considered conflict just isn't working out. Everything that's supposed to be down is up, and everything that is supposed to be up is down. Factory jobs are down, the trade deficit is up. Business investment is down, uncertainty is up. Once again, trade wars are proving neither good nor easy to win, despite the president's promise of easy victory over China.
From CBO:
The federal budget deficit was $984 billion in fiscal year 2019, the Congressional Budget Office estimates. CBO’s estimate is based on data from the Daily Treasury Statements issued by the Department of the Treasury; the department will report the actual deficit for fiscal year 2019 later this month.
Relative to the size of the economy, the deficit—at an estimated 4.7 percent of gross domestic product (GDP)—was the highest since 2012, and 2019 was the fourth consecutive year in which the deficit increased as a percentage of GDP.
The estimated deficit is $205 billion more than the shortfall recorded in fiscal year 2018. However, that year’s outlays were affected by a shift in the timing of certain payments. Because October 1, 2017, fell on a weekend, $44 billion in outlays was shifted to September of fiscal year 2017. If not for that, the 2019 deficit would have been $162 billion larger than the 2018 amount, rather than $205 billion larger. Excluding that effect, revenues were 4 percent higher and outlays were 7 percent higher in 2019 than they were in 2018, CBO estimates.
The deficit of $984 billion is about $24 billion larger than the shortfall that CBO projected in its August 2019 report, An Update to the Budget and Economic Outlook: 2019 to 2029. Revenues exceeded the projection by $11 billion but outlays exceeded the projection by $35 billion, according to CBO’s estimates.