Big Things Happened In 2018
Following the data will reveal the impact in the coming years.
USAFacts' mission is to present a complete picture of the US through the data our government collects and publishes. This data covers everything from taxes and other revenue to economic and health outcomes and is impacted by real- world events like legislation, policy shifts, protests, natural disasters, and other factors. USAFacts is able to use data to provide context around these events: how did the tax bill affect government revenue? Are natural disasters getting more destructive and more common? What are the impacts of tariffs on the economy? These are all questions we hope to illuminate both in this report and on USAFacts.org.
Although this data can help us better judge the outcomes and impacts of these events, in many cases we cannot show you what happened in 2018 because that data has not yet been collected, organized, and published by the government. We must continue to expand our collection and examination of data to learn and provide context around the events that shape America.
Tax Cuts And Jobs Act
What Happened: The Tax Cuts And Jobs Act (TCJA) was signed into law by President Trump on December 22, 2017. The law made sweeping changes to the tax code for both individuals and corporations. Specifically, the law nearly doubled the standard deduction for individuals, affecting an estimated 28.5 million people, which is 20% of all tax filers. The law also capped the State And Local Tax (SALT) deduction to $10,000, affecting 10 million filers who had previously claimed SALT deductions above the new cap. The TCJA reduced the top corporate tax rate from 35% down to 21% and made several other changes to the corporate tax code like expanding pass-through tax deductions, repealing the corporate alternative minimum tax (AMT), and imposing new limits on business interest deductions.
Numbers to Watch: The TCJA changed tax policy at the start of 2018 and may affect government revenue, annual budget deficits, total government debt, and the ways individuals and corporations spend and save. Prior to passage of the law in 2017, the federal government took in $3.2 trillion in taxes while running a $665 billion deficit. According to estimates from the Congressional Budget Office (CBO), deficits could increase over the next ten years by $1.1 to $2.3 trillion, depending on economic growth. Many of the individual tax cut provisions and changes to business expensing are set to expire in 2025, but if they are extended through the entire 10-year budget window through 2028, the bill could have a larger impact on the federal deficits. One of the most debated aspects of the TCJA was the SALT cap, which affects many taxpayers living not only in higher-taxed states like New York, Connecticut, and California, but also affects smaller states where the average SALT deduction was above $10,000, including Iowa, Nebraska, and Maine. Total national SALT deductions fell from $104 billion to $34 billion between 2017 and 2018, but the full effects on individual tax filers will take several years to measure.
Continued Troop Withdrawal From Afghanistan
What Happened: The Trump Administration announced in December 2018 that it would begin the process of withdrawing approximately 7,000 troops from Afghanistan. The United States began the war in Afghanistan on October 7, 2001, just weeks after the September 11 attacks. Over the past 18 years, the number of US troops in Afghanistan has fluctuated, peaking at around 100,000 in 2010-11. Since then, there has been a steady drawdown of troops. Although the Pentagon stopped disclosing the total number of troops in Afghanistan in December 2017, there were an estimated 15,000 at the time of the Administration's announcement.
Numbers to Watch: In 2017, 215,259 out of a total of 1.3 million active duty military were stationed abroad. Meanwhile, the nation’s defense spending included $491 billion for goods, services, and compensation of personnel. The Department of Defense has estimated that the war in Afghanistan costs $45 billion per year, and reducing the troop total could lower the agency’s expenses. In addition to dollars spent on our troops, the Department of Defense reported 29,389 contractors in Afghanistan at the end of 2018, and those individuals are not counted among troop totals reported by the Pentagon.
Federal Government Shutdowns
What Happened: In 2018, the US Federal Government underwent several "shutdowns." A government shutdown occurs when Congress does not appropriate funding to pay for the operations of specific government agencies and programs. Historically, these shutdowns only affect a portion of government, and often allow essential functions to continue unabated. The first 2018 shutdown lasted three days, from January 20 to 22. The second shutdown lasted nine hours overnight on February 9-10 when Senator Paul (R-KY) filibustered a spending bill. The third shutdown became the longest in US history, beginning on December 22 and continuing for 35 days through January 25, 2019.
Numbers to Watch: GDP reached $20.5 trillion in 2018, growing at a rate of 2.2% per capita after adjusting for inflation. Federal government spending and investment accounted for $1.3 trillion, or 6.4% of GDP. The length and timing of shutdowns can have serious economic consequences when federal workers stop receiving paychecks and economic activity dependent on government operations halts. Although there is limited government data or estimates on the effects of the brief shutdowns in January and February 2018, the 35-day shutdown, which included missed paychecks over the holidays, reduced GDP by $3 billion, according to a CBO estimate.
Wildfires And Hurricanes
What Happened: Deadly and otherwise destructive natural disasters require local, state, and federal emergency responses and long-term rebuilding. Disaster declarations are becoming more frequent: half of the most expensive disaster declarations over the past 40 years occurred in the past decade. In 2018, wildfires in California collectively burned over 1.6 million acres of land, equivalent to the entire state of Delaware, and included three of the ten most destructive wildfires in the state's history. Additionally, two major hurricanes made landfall in the southeastern US in 2018. Hurricane Florence hit North Carolina as a Category 1 hurricane on September 14 and dropped as much as three feet of rain in some locations, leading to widespread flooding. Hurricane Michael hit the Florida panhandle on October 10 as a high-end Category 4 hurricane, bringing storm surge as high as 14 feet and near-record wind.
Numbers to Watch: In 2018, total federal government expenditures for fire suppression costs reached a record $3 billion in 2018, a nearly 100 percent increase over 2008. However, the long-term damage to areas hit by these natural disasters can be significantly higher, as these disasters can impact migration, jobs, agriculture, and property values, and unleash serious health impacts for vulnerable populations. In Florida, the Carolinas, and elsewhere, Hurricanes Florence and Michael caused an estimated combined $49 billion in damages and economic losses. It will be years before sufficient data exists to measure the true toll these disasters have levied.
What Happened: Thirty-one states have reassessed the criminality of marijuana, including selective enforcement, decriminalization, approval of medical use, or full legalization for recreational use. In 2018, Michigan became the 10th state to fully legalize recreational marijuana, while Utah, Missouri, and Oklahoma voted to approve medical marijuana, and Vermont became the first state to legalize marijuana through their legislature. Outside of the US, Canada fully legalized marijuana use, and Mexico's Supreme Court ruled the country's recreational marijuana prohibition was unconstitutional, paving the way for potential legalization.
Numbers to Watch: 1.6 million people were arrested for drug-related offenses in 2017, the largest category of arrests for the fifth year in a row. Decriminalization and legalization of marijuana directly affect the criminal justice system where 40.4% of drug arrests were related to marijuana. In addition, changes to drug laws may impact state revenues, as states that have legalized marijuana also tax it. For example, Colorado state revenue from marijuana taxes, fees, and licenses increased from $67 million in 2014 to $266 million in 2018. Combined state excise taxes reached $122 billion in 2016, 11% of all state taxes collected. Those figures could increase with legal marijuana sales.
What Happened: President Trump announced a series of tariffs on goods imported from foreign countries in 2018. A tariff is a fee imposed on a specific good and paid to the government by the entity bringing the good into the United States. The Trump Administration first imposed tariffs on washing machines and solar panels, and then targeted steel and aluminum imported by Canada and Mexico (later expanded to more countries), followed by additional tariffs on 800 goods imported from China. These tariffs were met with retaliatory tariffs by China on US food producers. The decision to impose these tariffs generated substantial debate over the utility and effectiveness of tariffs, as well as questions about how long the tariffs would need to last to achieve the stated aims.
Numbers to Watch: At the end of 2018, the total US trade deficit (goods, services, and income) reached $488 billion, an increase of 6% from 2017 after adjusting for inflation. The Administration put tariffs in place as a means to lower the trade deficit with China, which increased 10% between 2017 and 2018 to reach $401 billion, our nation’s largest deficit. Tariffs could also have an impact on government revenue. Revenues from customs and duties totaled $34.6 billion in 2017, 1% of total federal revenue. Finally, many US companies have global supply chains, buying and selling goods from countries targeted by tariffs. Increased importation costs could result in impacts on business profits, jobs, and wages.