While general budget talks continued last week, it comes against a backdrop of increasing budget shortfalls. In early October 2019, the Congressional Budget Office (CBO) projected its near-final report on the 2019 federal budget deficit. The deficit rose to just under $1 trillion for the fiscal year that ended on September 30, with the total at $984 billion. That is a 26 percent increase over the previous year. It also represents increased deficits for four straight years, which is the first time since the early 1980s when the country was coming into and out of a recession. The deficit is $205 billion more than the shortfall recorded in the last fiscal year, 2018. The deficit is $24 billion larger than the shortfall that CBO projected in August and is at its highest since 2012 when the country was still recovering from the great recession with unemployment at 7 percent.
There have been significant increases in spending for defense and non-defense spending, while tax revenues are $400 billion lower than what had projected in the summer of 2017.
In effect, the federal budget totaled $4.4 trillion in FY 2019, with $3.4 trillion in revenue. The $4.4 trillion includes all of the government spending, including the approximate $1.3 trillion in annually appropriated funds (including approximately $680 billion for the Defense Department).
The total spending of $4.4 trillion also includes over $423 billion in interest payments resulting from the total national debt. The rest of the budget is made of entitlements and mandatory spending, which includes Social Security, Medicare, Medicaid, Veterans programs and at the small end approximately $8.9 billion for Title IV-E foster care, adoption assistance, independent living, and part of Title IV-B Promoting Safe and Stable Funds. Title IV-E and IV-B mandatory/entitlement spending are less than two-tenths of one percent of total federal spending.
Against this backdrop, Congress agreed to new spending targets for FY 2020 this past summer. Late last week there were reports of discussions between Speaker Pelosi (D-CA) and Majority Leader McConnell (R-KY) with the dispute over how to allocate the non-defense spending between the various appropriations bills. There will be increases for both defense and non-defense spending. The Senate did approve their first set of bills last week (HR 3055), included in the package was juvenile justice programs funding levels. Noteworthy programs consist of: Title II at $63 million (House level $66 million), Title V at $40 million (House level $64.5 million), Youth Mentoring at $97 million (House level $100 million), and the Senate zeroed funding for JBAG whereas the house allocated at $10 million. The House and Senate have yet to come to an agreement on top line allocations, which will have to happen before the bills can be reconciled.
Efforts to move a Labor-HHS-Education/Defense Appropriations have failed so far. Possibly complicating budget discussions, perhaps next year, are emerging plans for the White House to propose a new set of tax cuts in 2020. Funding runs out by November 22, and there have been suggestions of a second CR that would run until late December or even next February.
