There are a lot of important things we’re talking about in national politics these days. My law school classmate, Brett Kavanaugh, has been nominated to the Supreme Court and the usual (and appropriate) attention is being given to his record. Trade and international tariffs are a hot issue. So, of course, is the ongoing investigation into Russian influence on our elections.
What we aren’t discussing, however, is the subject that may be most important: our ballooning national deficit. We are shifting to our children and grandchildren a debt that could cripple the economy in the future.
We saw trillion-dollar annual deficits in the early years of the Obama administration (and, yes, I was critical of those). At that time, we were struggling to get out of the Great Recession and deficit spending was viewed — rightly or not — as a way to address the problem through government stimulus. Now, though, we’re looking at the prospect of several years with similar deficits in the absence of such justification.
The White House’s own Office of Management and Budget estimates that the budget deficit (not the total accumulated debt, just the annual shortfall) will be about $900 billion this year, and more than $1 trillion for each of the following three years. These numbers build in the economic growth that the White House anticipates. That means that after four years of the Trump administration, using its own numbers, the total federal debt will be about $25 trillion ($25,000,000,000,000), up about $5 trillion from when he took office. That’s about the same or a faster rate of increase than during the Obama administration (depending on how you measure it), even given the use of deficit spending by Obama to try to tame the recession.
It mattered then, it matters now. Servicing debt is a very real drag on the economy. And it will only get worse.
For those who feel the deficit can be greatly reduced by “cutting fat” or welfare out of the budget, there are some hard facts to deal with. Most federal spending is mandatory: It goes toward servicing the debt or payouts as required by law, primarily Social Security and Medicare. Discretionary spending is only about 29 percent of the federal budget. In total that’s some $1.1 trillion a year — about the same as the deficits the Trump administration predicts for the next several years. In other words, to get rid of the predicted deficits, we would have to wipe out all discretionary spending.
So, some might say, “just get rid of that discretionary spending!” Well... really? After all, about 59 percent of the discretionary budget (about $660 billion) goes to the military and veterans benefits. Presumably, conservatives don’t want to cut much into that. That leaves only $440 billion for everything else: Science research, housing programs, the Department of Justice, Head Start, etc. Even if you got rid of it all (and do you really want to get rid of the Department of Justice?), that wouldn’t even get you halfway toward closing the annual deficit.
In the end, if we want to seriously address the budget deficit, a limited number of ways exist to do so in any realistic fashion. First, we could cut Social Security and Medicare benefits significantly. Second, we could reduce our spending on the military. Third, we can raise taxes. Those are the real-life choices, and to really get rid of the annual deficit, much less the debt, we will probably have to do two of these things.
It’s not surprising that politicians want to choose “none of the above” and instead elect some form of magical thinking, pretending that we live in a world where the facts laid out above don’t exist. Don’t let them — be they Democrats or Republicans — get away with it.
President Obama (and to some extent, George W. Bush) drove the debt higher through stimulus spending. President Trump stands to make the problem much worse through the tax cuts he pushed through late last year (and, yes, some Republicans contemplate yet another round of tax cuts next month). While Trump has recently claimed that increased tariffs on foreign goods will pay down the debt, there are two problems with this narrative. First, tariffs are a form of tax, since consumers pay more for goods because government is taking a cut. Second, and more significantly, those tariffs will bring in about $40 billion this year — only about one twenty-fifth of the annual budget shortfall. Even if that amount tripled in future years (an optimistic forecast), it would fall far short of doing what needs to be done just to reverse annual deficits.
Should we be talking about deficits now, with so much else going on? Of course — in the same way we should have been talking about terrorism before 9/11 and sub-prime lending before the crash of 2008. It’s always the things we fail to talk about that bite us in the end.