The federal budget deficit in October and November, the first two months of fiscal year 2021, totaled $430 billion, an increase of $87 billion, or 25%, over the same period last year, the Congressional Budget Office estimated on Tuesday. Spending rose by 9% while revenues fell by 3%. Individual income tax and payroll tax receipts dropped by 4% while corporate income taxes decreased 13%.
Deficits have risen dramatically under President Trump, climbing from $585 billion in fiscal year 2016 to nearly $1 trillion in 2019. Emergency coronavirus relief in fiscal year 2020 lifted a deficit that was already projected to top $1 trillion to a record $3.13 trillion.
While deficit reduction has become less of a priority as the nation grapples with the pandemic and its economic toll, CBO on Wednesday issued the latest edition of a periodic report laying out dozens of options — 83 in all this time — for reducing the deficit over the coming decade.
Some of the options would save relatively little, such as limiting enrollment in the Department of Agriculture’s conservation programs, which is projected to save between $3 billion and $8 billion over the decade. Others would save or raise hundreds of billions of dollars:
- Reducing funding for international affairs programs ($117 billion)
- Setting caps on federal spending for Medicaid ($353 billion to $959 billion)
- Cutting the Defense Department’s budget ($317 billion to $607 billion)
- Increasing the payroll tax cap for Social Security ($647 billion to $1.024 trillion)
- Eliminating itemized deductions ($1.718 trillion)
- Imposing a 5% Value-Added Tax ($1.82 trillion to $2.83 trillion)
Most of the options in the report would save $10 billion or more over 10 years.
In a statement accompanying the report, CBO Direct Phillip Swagel warns that lawmakers will need to make significant policy changes to put the federal budget on a sustainable long-term path. “Beyond the coming decade, the fiscal outlook is daunting,” he says.
CBO notes that the options “are intended to reflect a range of possibilities rather than to rank priorities or present a comprehensive list” and it says that the inclusion or exclusion of an idea does not represent an endorsement or rejection. CBO’s website includes a search tool that allows users to choose options based on potential savings or budget category.