Taxes The U.S. has run surpluses in only 12 of the last 77 years. A budget deficit that shrank as a share of the economy for six straight years, narrowed to 2.5 percent of gross domestic product in the fiscal year that ended in September 2015. In October, the U.S. Treasury Department reported that the budget deficit for the 2017 fiscal year that had just ended was $665.7 billion, up from $585.6 billion the year before. However, the gap started widening again, to 3.2 percent of GDP in fiscal 2016 and 3.5 percent in 2017. The recently passed tax cuts in 2017, will only add to that deficit and spending has still not been capped in early 2018. Tax cuts boost the economy by putting more money into circulation. They also increase the deficit if they aren't offset by spending cuts. As a result, tax cuts improve the economy in the short-term but depress the economy in the long-term if they lead to increased federal debt (Miller, 2017). The recently enacted tax plan in 2017 by Congress will cut the corporate tax rate from 35 percent to 20 percent beginning in 2019. It cuts income tax rates, doubles the standard deduction, and eliminates personal exemptions. Additionally it repealed the Obamacare tax on those who don't get health insurance (Amadeo, 2017). What this may mean for businesses is additional tax savings with the potential for increased discretionary spending from consumers at least in the short term. Consumer and Producer Price Indexes The CPI is probably the most important and widely watched economic indicator, and it's the best known measure for determining cost of living changes--which, as history shows us, can be detrimental if they are large and rapid. The CPI is used to adjust wages, retirement benefits, tax brackets and other important economic indicators. It can tell investors some things about what may happen in the financial markets, which share both direct and indirect relationships with consumer prices. The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measures the average change over time in prices received (price changes) by producers for domestically produced goods, services, and construction. PPIs measure price change from the perspective of the seller. This contrasts with other measures, such as the Consumer Price Index (CPI). CPIs measure price change from the purchaser's perspective. Chart 1. One-month percent changes in selected PPI final demand price indexes, seasonally adjusted Percent change 1.0 0.5 nn
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