Tuesday, September 10, 2019

Deficit Tops $1 Trillion

It has become a trope among many on both sides whenever a big news story breaks to ask, “What are they not wanting us to pay attention to?” I’m not a conspiracy theorist, but I will admit that today’s firing of National Security Advisor John Bolton overshadows what is, in reality, a much more pressing issue. As both sides react to Bolton’s ouster and even people who, as recently as yesterday were critics of the mustachioed advisor, weigh in on how his departure is a bad sign for the president, what many people are missing is the news that the federal budget deficit just exceeded $1 trillion.

In a report released on September 9, the Congressional Budget Office noted that the deficit for the first eleven months of the 2019 fiscal year was $1.067 trillion, which was $168 billion more than for the same period in 2018.

The historic deficit occurred as both revenues and spending increased over last year. Per the CBO, “revenues were $102 billion higher and outlays were $271 billion higher” than the first eleven months of 2018. Expenditures increased by seven percent, a larger rate than the three percent increase in total revenues, which accounts for the larger deficit.

I’d like to say that the lack of an outcry from Republicans is surprising, but it wouldn’t be true. At this point, it is no longer shocking that fiscal hawks from the Freedom Caucus and elsewhere are silent on the issue of Trumpian spending. Even Mark Sanford, the newest Republican challenger who is running on a platform of fiscal conservatism, was didn’t mark the occasion.

According to the White House Office of Management and Budget, the last year that the US ran a trillion-dollar deficit was 2012 when the red ink totaled $1.076 trillion in the wake of the Great Recession. Given that President Trump’s deficit this year is already at $1.067 trillion, it seems likely that Mr. Trump will exceed Obama’s spending level by the fiscal year ends on Sept. 30.

What makes the current budget deficit even worse is that President Obama’s spending was justified as a response to the 2008 financial crisis. I don’t believe in Keynesian stimulus spending but at least there was a crisis to blame back then. The current spending levels are in a relatively stable economy. With no crisis to avert, neither side is offering any pretense that the deficit will ever be under control.

Both sides like to talk about the various crises that America faces, but neither wants to face the difficult choices that will be required to solve our budget crisis. It is easier to attack AOC and the squad than to talk about the reality that entitlements are bankrupting our country. As commenters illustrate whenever I point out that Social Security and Medicare are both entitlements, even conservative voters are loathe to talk about cutting the programs that are driving us bankrupt.

Here’s the truth: Social Security, Medicare, Medicaid, and other safety-net programs make up 61 percent of the federal budget while interest on the debt adds another seven percent.

More truth is that Social Security and Medicare are entitlements, not savings accounts. Your payroll tax dollars that are euphemistically called “contributions” do not go into an account with your name on it. They go to pay current recipients. The Social Security trust fund is expected to be exhausted by 2032 and Medicare will be bankrupt by 2026.

Yet another difficult truth is that we could all foreign aid and trim wasteful spending until the sacred cows come home and we would still have a debt crisis. Entitlements are the problem and Social Security is the largest entitlement in the federal budget.

The YUGE national debt is the root of many of our problems. The Fed must keep interest rates low, punishing savers and investors, because higher rates will mean even more federal debt and a higher deficit. We are vulnerable to China because they hold much of debt and can dump it, causing a financial crisis, if we give them too many problems. The need to make payments on debt and interest crowd out many other things that we could be spending money on (although let’s be honest, not having money doesn’t stop the government from spending). The deficit also crowds out private borrowing and leads to higher taxes.

Maybe Rush Limbaugh was right when he said a few months ago that “all this talk about concern for the deficit and the budget has been bogus for as long as it’s been around.” It sure looks that way.

Originally published on The Resurgent

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