Fixing the Federal Fisc
GOP leaders argue over priorities, but it’s still the spending, stupid.
Republicans are locked in one of those inside the beltway debates that only they and an opposition media hoping to divide them care about. Ostensibly, it’s about which agenda items to bring up first in the new Congress.
There’s the ‘shock and awe’ approach, combining everything from renewing tax cuts to border security to the debt ceiling in one big reconciliation package. It’s a heavier lift sure to outrage Democrats so national security hawks in the Senate want to just dangle tightening up the border for increases in defense spending and more aid to Ukraine.
Renewing the soon-to-expire 2017 Tax Cut & Jobs Act (TC&JA)—thus avoiding a massive snapback tax increase—would have to come later.
Fool me once?
The real elephant in the GOP living room, however, is federal outlays. An explosion of federal spending has resulted in a $36 trillion national debt—larger than our GDP for the first time since World War II. But financing the war was temporary—today’s $2 trillion annual deficits are built-in and have no end in sight.1
That is, until the nation is unable to service $882 billion (and rapidly growing) in annual interest payments and suffers a genuine sovereign debt crisis, replete with historic dollar devaluation wiping out trillions in family savings.2
It’s easy to look at our looming fiscal crisis and blame Washington, but the fault is not in our stars, but with us. And the basic problem is as old as scripture—too many voters want to cut everyone’s budget but their own.
Ask any farmer in the Midwest if they’re OK with a reduction in ag subsidizes. Think General Mills is lobbying for a cut to food stamps? How do EV manufacturers feel about eliminating their customer’s generous tax credits? Go to one of the hundreds of communities with a defense contractor or military base and try selling cuts to a defense department that can’t pass an audit.3
The ever expanding tentacles of federal spending in the post-war era (from under 14% of GDP in 1951 to over 30% during COVID) has made it so most Americans get some form of government aid.4 And if no one wants their own ‘ox to be gored,’ it becomes next to impossible to shrink the budget.