|Excessive Debt Can Lead to Big Problems Down the Road|
(first published in North State Journal 2/14/18)
The two 'easiest' things a politician can do while in elective office are the following:
1) Cut Taxes
2) Raise Spending
No Republican is afraid to let voters keep more of their hard-earned money. No Democrat is afraid to spend more tax money on federal domestic programs. Their core constituencies will love them even more for doing so.
On December 22, 2017, President Donald Trump and the Republicans in Congress and the Senate cut taxes without any Democrat votes at all. On February 8, 2018, a substantial bipartisan majority of both Congress and the US Senate passed a massive budget bill that increases domestic spending, which includes military spending, by $1.7 trillion over the next decade.
One can almost hear Congress singing 'I Love A Parade! in unison.
‘A Parade of Debt’, that is.
$2.7 trillion of new debt has been loaded up on the backs of our children, grandchildren and great-to-the-nth degree grandchildren in just the last 6 weeks.
President Donald Trump signed both bills. Republicans are 100% responsible for at least $1.07 trillion in new debt from the tax bill. Democrats and Republicans who voted for the budget deal are now on the hook for an additional $1.7 trillion in new debt.
Both tonnages of debt come on top of the additional debt of $10 trillion that was already-baked-in-cake in the budget baselines before President Trump was even elected in 2016.
Adding $2.7 trillion in new debt on top of what CBO already anticipated to be incurred by 2027 means US debt held by the public will exceed 100% of GDP 10 years from now.
Unless, that is, everything works out absolutely perfectly with higher economic growth and employment with hardly a centimeter to spare in terms of margin of error with respect to inflation and interest rate projections.
In 2016, CBO published a document stating one of their 'rules of thumb' for estimation purposes was that if US economic growth exceeded their current projections by 0.3% per year for a decade, our federal deficits at the time could be essentially reduced to zero by 2026. Assuming no other changes to inflation expectations, interest rate shocks or terrorist attacks on domestic soil.
Now that number might have to be 0.4% excess GDP growth annually. Or 0.5%.
The most direct way to get our fiscal house in order rather than hope and pray for higher-than-expected growth rates is for our President and Congress to control and curtail federal spending at every cost and turn.
President ‘Silent Cal’ Coolidge and Republicans in Congress proved the efficacy of spending cuts, followed by tax cuts, followed by economic growth, followed by reduction in federal debt from 1924-1928 when debt was reduced by 25%.
Maybe history will repeat itself.
But Congress and the President have to want to seriously control spending first.
In 1993, I was part of a team on the Republican side of the House Budget Committee that produced a proposed budget which reduced projected federal spending by $500 billion over 5 years, about 5% in total, from a base budget of $1.38 trillion in FY 1992.
We were about laughed out of Congress by the then-Republican leadership and caucus members plus the Democrats and the national media.
4 years later, the core of that document, 'Cutting Spending First' was passed as the base legislative language of The Balanced Budget Agreement of 1997 which produced the first, and only, 4 balanced budgets since the 1950s.
There were heroic Republicans and Democrats who came together over those 5 years to do something great for this nation at the time which quite honestly, most people thought would last for decades.
The euphoria lasted until September 11. 2001. 9/11.
It is time for another crop of heroic Americans to do the same now.
Who will they be in Washington this time around?