The federal government budget deficit is fiscally irresponsible. For the second year in a row, the shortfall will exceed $1 trillion. The current generation of political leaders is now oblivious to fiscal constraint.
The recent bipartisan budget agreement substantially increased federal outlays and suspended limits on government borrowing for two years. As a consequence, the Congressional Budget Office estimated last week that the cumulative 10-year deficit will be $12.4 trillion from 2019 to 2028.
As a share of the economy the deficit will more than double over the next 20 years. The government’s cumulative debt will grow from 78 percent of Gross Domestic Product this year to 148 percent in 2038. Debt at such high levels would be unprecedented in the nation’s history.
To sustain rising deficits during a period of economic growth is an aberration. Low unemployment and rising paychecks historically push up federal tax revenue, and reduce automatic spending on safety-net programs.
Congressional leaders recently agreed to postpone any review of spending until after the 2020 election. Republicans tolerated higher deficits in exchange for tax cuts and greater military spending. Democrats embraced increased spending on domestic programs that will expand the legacy of the Great Society. Many Democratic Presidential hopefuls want to expand Medicare to every citizen, increase infrastructure spending and provide free college education.
To increase our growth rate, President Trump has advocated reducing taxes and interest rates.
Paying interest on our mounting debt will become the largest federal expenditure. It will consume one-third of all federal spending. Interest expenses on the debt will become more burdensome if rates rise.
I feel that I am suffering the same fate as Cassandra, the woman in Greek mythology who prophesized true forecasts that were not believed. Our federal deficits are in the long-term unsustainable. Historically, sovereign governments that run outsized deficits incur such massive inflation that they cannot provide the basic services necessary to fulfill their fiduciary obligations to their citizens. Zimbabwe issued $100 trillion-dollar bank notes.
Americans will not renege on entitlement programs, although Social Security, Medicare, and Medicaid account for about 70 percent of annual federal government expenditures. We want everyone to enjoy medical access, a living wage, and social security benefits. My only proviso is that until we get our economic house in order, we should only prudently expand our Great Society programs.
We need to examine critically the military costs attendant to being the world’s policeman. The U.S. represented 37 percent of the world’s total military expenditures. Our military expenditures are about the same amount as the combined amount of the next seven largest military budgets.
Over the past 25 years, both political parties advocated fiscal responsibility. Under President Clinton and President George H.W. Bush, Congress passed tax increases that achieved budget surpluses for the first time since 1969.
In 1985 Congress passed the Gramm-Rudman Act. Republican Sen. Philip Gramm and Democratic Sen. Ernest Hollings obtained bipartisan support because of concerns over growing federal deficits. The act called for a balanced budget by1991.
In 2010 President Obama formed the National Commission on Fiscal Responsibility, headed by Republican Sens. Alan Simpson and Democrat Erskine Bowles. Their goal was to solve the U.S. debt crisis in a way acceptable to both parties. Instead of accepting their controversial proposals, the administration and Congress kicked “the can down the road.”
To solve our debt problems, we can reduce some expenditures and slow down the rate of increase of others. However, the hefty lifting will require raising taxes on a broad section of the American public, and not just the top 1% of wage earners. Raising taxes poses a stigma. In 1984 Walter Mondale ran for president on a pledge to raise taxes. He carried one state.
Originally published in the Sarasota Herald-Tribune
