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While the U.S. government’s 2015 fiscal year is now half over, the days of a shrinking budget deficit now also appear to be over as well. The Washington Examiner‘s Joseph Lawler reports:
The federal budget deficit through the first half of fiscal year 2015 totaled $430 billion, the Congressional Budget Office said Tuesday, $17 billion more than at the same point in fiscal year 2014.
Both revenues and spending were up roughly 7 percent over the same time last year.
The total deficit for fiscal year 2014 was $483 billion, according to the Treasury, the lowest shortfall of President Obama’s tenure.
Lawler dug into the data and found two culprits that explain the sooner-than-expected reversal in the direction of the U.S. government’s annual budget deficits. First, 2014 marked the end of a number of one-time payments to the U.S. Treasury from Fannie Mae and Freddie Mac, the mortgage-lending government-sponsored enterprises that received large bailouts during the 2008-09 financial crisis.
Second, spending growth is once again outstripping the growth in the government’s revenue streams, despite increases in payroll tax collections from higher employment levels. Much of the increase in spending occurred in government-funded health care programs, such as Medicaid, Medicare, and Affordable Care Act subsidies, as well as for Social Security.
In a follow up article, Lawler identified the key driver behind what will be expected to be increasing budget deficits for the federal government in the future, despite an expected massive increase in the government’s tax revenue from additional new taxes imposed by the Affordable Care Act, increases which are set to take effect during the next several years:
Over time, the government is expected to see its finances drained by the long-term mismatch between planned taxation and the growing number of retirees owed Social Security and Medicare benefits.
Although the Congressional Budget Office sees the deficit dropping to $455 billion in 2016 and 2017, eventually it projects deficits to grow to $1 trillion over the next 10 years.
Beginning in 2016, most of the growth in the U.S. government’s tax collections will come from the imposition of the Affordable Care Act’s individual and employer health insurance coverage “mandates,” because many individual consumers and businesses are expected to choose to pay higher taxes rather than pay even higher costs for health insurance premiums.
And that’s also despite the even higher taxes to be impose by the Affordable Care Act in 2018, when the new tax on so-called “Cadillac” health insurance plans will begin to penalize Americans with plans that provide what the ACA’s authors believe to be excessively generous coverage, such as plans that include health care savings accounts and flexible spending accounts, or where employers directly provide on-site health care clinics as a benefit for their employees.