Posted on 02/11/2020 5:23:43 AM PST by Kaslin
President Donald Trump's new budget confirms that without corrective action, trillion-dollar deficits will be with us for years and perhaps decades to come. Trump's budget plan has many smart and urgent spending reforms. But will Congress ignore them once again?
Alas, probably, but the longer we wait, the shorter the debt bomb fuse. But step one in solving this crisis is to recognize the facts about it and to dispel the pervasive mythologies about what caused this ocean of systemic borrowing and how best to deal with it.
Myth 1: Trump created these deficits. No, no, no. These were the deficits that Trump was facing the day he entered office. The debt, according to the Congressional Budget Office, was expected to be this high and steadily growing every year for the next two to three decades. This was all baked into the cake, and everyone in Washington knew it. But for years, Congress did nothing to prepare for the impending retirement of some 80 million baby boomers. Trump can take the blame for not doing more to cut spending (by vetoing budget bills), and I'm happy to join that chorus.
Myth 2: Trump tax cuts have cost $1.2 trillion. Wrong. Federal revenues since the Trump tax cut passed in 2017 are up roughly $150 billion and were higher in 2019 than any other year in history (adjusted for inflation). These tax cuts and other reforms have added about $5 trillion to $6 trillion to the forecast for economic growth from 2018-2027. Over the decade, the higher revenues from the extra growth and employment have roughly offset the revenue loss from the rate reductions.
Myth 3: Entitlements are the reason the debt is exploding. Yes, income transfer programs such as Social Security, Medicare, Medicaid and the Affordable Care Act are surging, but so are the discretionary programs. Those are up some $200 billion over the last three years. Energy, agriculture, foreign aid and other giveaway programs can and should be cut immediately. The budget started to spiral out of control when Republicans and Democrats got together and foolishly scrapped budget caps and the automatic spending cuts known as sequestration.
Myth 4: Taxing the rich will solve the problem. Nope. There aren't enough millionaires and billionaires such as Bernie Sanders, Tom Steyer and Michael Bloomberg to get money to balance the budget. The latest "soak the rich" plans would raise $4 trillion (assuming they don't change any behavior), but even that would only reduce our deficits over the next decade by about one-third. Wealth taxes across the globe, including the U.S. death tax, have all been colossal failures that have been mostly repealed because they do more damage than benefit to a nation's economy.
Myth 5: Democrats have a plan to bring down the deficit. Oh, really! Sens. Sanders and Elizabeth Warren would authorize nearly $50 trillion for everything from "Medicare for All" and the Green New Deal to education spending and student loan forgiveness. Congressional Democrats want free health care for illegal immigrants and higher Social Security benefits, making the entitlement crisis worse. In other words, the Democrats' solution is to load even more people onto the deck of the Titanic. The new Democratic economic creed, Modern Monetary Theory, says that we can keep running deficits and never have to pay them back. Sure. And this magazine is going to give me $1 trillion for writing this article.
Myth 6: The deficit and debt problems are hopeless. This is the biggest myth of all. No. Here's how we balance the budget in two steps: First, get to 3% annual economic growth, which will mean more jobs, more taxpayers and fewer welfare payments. Second, impose an enforceable cap on overall spending at the inflation rate of 2% over 15 years. This gets us to zero deficits.
Is that so hard? The good news is if there is a national will to break our addiction to deficit spending, there is a way.
This isn't going to happen. On to the next article!
Myth 7: The debt is going to matter anytime in the foreseeable future.
The shocking truth is that the USA is TOO BIG TO FAIL. If we collapse the rest of the world rockets down a black hole. That is a risk they cannot take, so they will do absolutely anything to assure that our Fed printed fiat money has the illusion of value for as far into the future as they can keep those plates spinning.
Agree - any politician that says they're going to cut the deficit, is a 'lying dog-faced pony soldier'. Congress will NEVER cut spending, regardless of who is in power. Just make sure you have a good plan B.
Greed and gullibility control our economy.
Our current structure of the Federal Reserve Corporation of emitting pure fiat currency makes it virtually impossible to have a Balanced Budget, let alone pay off 1 penny of the National Debt, to do either would cause a depression that would make 1929 look like the Best Years America ever had.
Where is the pic of that guy riding the a- bomb down? That’s how this ends.
Nothing changes till the money stops.
We don’t know how or when.
But there is no safe harbor in the coming storm.
Trump is going to break the central banks globally.
https://youtu.be/fBRfPrxgvbA
This is the simplest problem in the world to solve: simply spend 1% more money each year than the prior year. Each department gets the same budget, plus 1%. You can fight in Congress or in the departments about how, exactly, that money is spent, but barring a national emergency (which would require a separate spending authorization), that’s it. Since the economy grows about 4%-5% each year (in nominal, i.e. non-inflation adjusted, terms), each year tax revenue growth will outstrip spending growth...and NO politician will be able to say that “my opponent voted to cut spending on women/children/minorities/transexual lesbian Martians” or anyone else.
Here’s what it would do if applied to FY 2021:
FY 2020 Outlays = $4,746 billion (!!!);
FY 2020 Revenue - $3,645 billion (geez, we can make it on that much?)
Deficit = $3,645 - $4,746 = ($1,101 billion)
FY 2021 Outlays = $4,746 x 1.01 = $4,793.5
FY 2021 Revenue = $3,645 x 1.04 = $3,790.8
Deficit = $3,790.8 - $4,793.5 = ($1,002.7)
Deficit shrinkage (thanks, George) = $1,101 - $1,002.7 = $98.3 billion
Do that for just 8 or so years, and then peg spending increases at the prior year’s GDP growth less 0.5%, and you’ll have deficits of under $250 billion/year, and shrinking. The US and the world economies will be immeasurably better off, with just a LITTLE bit of discipline.
FYI, FY 2020 budget figures from Table S-1 at https://www.whitehouse.gov/wp-content/uploads/2019/03/budget-fy2020.pdf
Rome was also “too big to fail.” How’d that one work out?
Stephen Moore of all people should know you also have to get rid of the Fed. Which I believe Trump will do in his second term.
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