[Vision2020] Deficit Soars Under Trump

[Nicholas Gier]

Remember Reagan's Tax Cuts? Deficits soared, especially after defense
spending was increased, and then tax increases (mostly on the middle class)
were passed to prevent deficit disaster.  The only difference with this
administration is that there will be no tax increases.  Watch that national
debt go through the ceiling!

WASHINGTON (NY Times, 1/30/18)— Treasury Secretary Steven Mnuchin urged
Congress on Tuesday to raise the federal government’s statutory borrowing
limit and said Washington must soon grapple with the mounting federal debt,
just as lawmakers are embarking on a significant spending spree.

Annual deficits are creeping up to $1 trillion a year and the national debt
has topped $20 trillion. On Monday, Treasury said that the United States
will need to borrow $441 billion in privately-held debt this quarter, the
largest sum since 2010 when the economy was emerging from the worst
downturn since the Great Depression.

Yet the need to deal with the federal debt seems to have taken a back seat
to other priorities, including the $1.5 trillion tax cut increased defense
and domestic spending, and an expected infrastructure request from
President Trump.

“The president is very much concerned about the rate of increase of the
debt and particularly the rate that it grew over the last eight years,” Mr.
Mnuchin said during a Senate Banking Committee hearing. “Over time we need
to figure out where we can have government savings to deal with the
deficit.”

He dismissed suggestions that the tax cut, which is projected to add more
than $1 trillion to the deficit over a decade even with economic growth,
would only worsen the problem.

Mr. Mnuchin’s request to raise the debt limit stems from the simple fact
that federal spending is far outpacing revenue. The Treasury must borrow
money from private investors but needs congressional approval to go above
the $
<https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53336-debtlimit.pdf>20.5
trillion
<https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53336-debtlimit.pdf>
debt limit that caps the United States debt load.

Fiscal hawks warn that mounting federal debt will ultimately slow economic
growth, but Washington shows no signs of paying heed. Congress is poised to
dole out billions of dollars for a host of different priorities and the
spending spree is being embraced across party lines.

Mr. Trump and Republicans are pushing for a big increase in military
spending, warning that the nation’s security is at stake. The president
wants $25 billion for border security, including his promised wall on the
border with Mexico. Mr. Mnuchin also said on Tuesday that infrastructure
would be an administration priority this year. Mr. Trump has suggested that
rebuilding roads and bridges is something that could garner bipartisan
support, and White House has signaled that it will seek $200 billion
<https://www.nytimes.com/reuters/2018/01/29/us/politics/29reuters-usa-trump-infrastructure.html>from
Congress to jump-start an infrastructure investment program.

On top of that spending, the party is still celebrating its sweeping
overhaul of the tax code, casting aside expectations of how it will impact
the national debt.

After loudly bemoaning that the tax overhaul would swell the national debt,
Democrats are now pressing to secure a sizable boost in spending on
domestic programs, including billions of dollars to address the opioid
crisis. And lawmakers from both parties are looking to approve at least
about $80 billion in additional aid in response to last year’s hurricanes
and wildfires.

“The deep dark secret is Republicans like to spend money just as much as
Democrats,” said Representative Jim Costa, Democrat of California and a
co-chairman of the centrist Blue Dog Coalition. “They just want to spend it
on something different.”

Just last week, lawmakers approved a stopgap spending bill to end a
government shutdown and keep agencies funded until Feb. 8 while also
extending funding for the Children’s Health Insurance Program for six
years. But the fine print of the bill also suspended or delayed a handful
of taxes imposed by the Affordable Care Act, which will cost the government
$31 billion, according to the congressional Joint Committee on Taxation.

The deficit is now projected to reach $1 trillion in the 2019 fiscal year,
which begins Oct. 1, according to the Committee for a Responsible Federal
Budget
<http://www.crfb.org/blogs/trillion-dollar-deficits-could-return-next-year-deal-could-make-them-worse>,
a fiscal watchdog group.

That could grow even larger if, as expected, congressional leaders from
both parties can reach an agreement to raise strict caps on military and
domestic spending that were imposed in 2011.

Republicans are pushing for a big increase to the cap on military spending,
while Democrats are insisting on an equal increase in nonmilitary spending.
All told, lawmakers could reach a two-year agreement to raise the spending
caps by more than $200 billion over that period.

For Democrats, the firm posture in spending talks does not perfectly
harmonize with their outcry during the battle over the Republican tax
overhaul. Senator Roy Blunt of Missouri, a member of the Senate Republican
leadership, recalled that just recently, during the fight over taxes,
Democrats were “absolutely outraged at what potential deficit impact there
might be.”

“And then we immediately get into a tens and hundreds of billion dollars of
discussion about how we now raise the spending caps,” Mr. Blunt said. “So I
think there’s plenty of inconsistency.”

With the tax overhaul now law and with lawmakers pushing to increase
spending, fiscal watchdogs have been left reeling.

“Even just to keep the government open for a few weeks, for some reason it
was necessary to add to our debt,” said Michael A. Peterson, the president
and chief executive of the Peter G. Peterson Foundation, which advocates
reining in federal budget deficits.

The tax overhaul approved in December “clearly dug the hole deeper,” Mr.
Peterson said. The bill is projected to add $1.5 trillion to the deficit
over a decade, or about $1.1 trillion if the effects of economic growth and
interest rates are taken into account, according to the Joint Committee on
Taxation.

Mr. Mnuchin dismissed that idea on Tuesday, reiterating his position that
if economic growth can be sustained at an annual rate of 3 percent, the tax
cuts will pay for themselves. (Macroeconomic Advisers, an economic
forecasting firm, expects growth in the first three months on 2018 to fall
to 2.3 percent.)

While Democrats tried to draw attention to how the tax cuts would worsen
the government’s finances, few Republicans expressed similar concerns. One
who did, Senator Bob Corker of Tennessee, vowed to oppose the tax rewrite
if it added “one penny” to the deficit, but even he ended up voting for it.

At the hearing on Tuesday, Mr. Corker praised the tax bill for bringing
better results than he expected, noting that the International Monetary
Fund had raised its global economic growth projections in response to the
tax cuts.

“It seems to be having an impact far beyond what we thought it would have
just on our own country,” Mr. Corker said.

In conversations about the deficit, Republican lawmakers are quick to talk
about the need to rein in the cost of entitlement programs, such as Social
Security and Medicare, which make up a big portion of federal spending. But
there is little expectation that Congress will take any significant action
in those areas any time soon.

“This is out of control,” complained Senator David Perdue, Republican of
Georgia, as he lamented that lawmakers were set to approve disaster aid
without finding a way to pay for it.

“Every dime that we’re talking about for disaster relief is borrowed,” Mr.
Perdue said. “We have to go to China and borrow that money to give disaster
relief to farmers in Texas and people in Florida.”

At the Senate hearing on Tuesday, Mr. Mnuchin said that Mr. Trump has been
focused on initiatives that will spur economic growth as a way of
generating additional revenue for the government.

“His first priority was to create economic growth,” Mr. Mnuchin said.
“That’s the single most important thing that will create revenues.”

Some Republicans are not so sure.

“At some point we’re going to have to change the name of the Department of
Treasury to the Department of Debt, because there’s not going to be any
treasury left,” said Senator John Kennedy, Republican of Louisiana. “It
would seem to me that we need to have an adult discussion at some point
about how we’re going to get control of that.”


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-- 

A society grows great when old men plant trees whose shade they know they
shall never sit in.

-Greek proverb

“Enlightenment is man’s emergence from his self-imposed immaturity.
Immaturity is the inability to use one’s understanding without guidance
from another. This immaturity is self- imposed when its cause lies not in
lack of understanding, but in lack of resolve and courage to use it without
guidance from another. Sapere Aude! ‘Have courage to use your own
understand-ing!—that is the motto of enlightenment.

--Immanuel Kant
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