Tag: Deficit

‘Covid Relief’ Just a Democrat Wish List

 

America’s recent presidents have been all over the spectrum politically, but they shared one thing in common: near-total indifference to our national debt.

George W. Bush wasn’t that interested in fiscal matters, not vetoing a single bill his first six years in office. He exerted little influence as the deficit started to climb. Barack Obama zealously pursued spend and borrow strategies.  He affirmed the mindset of ignoring future implications.

Fiscal conservatives who hoped a Republican president could right the ship were crushed when Donald Trump announced the giant entitlement programs were safe from reform on his watch.

Carol Roth goes solo to cover her biggest post-election concerns, regardless on who wins, encompassing the size of government, spending, the Fed, the state of small business and more.

You can connect with Carol on Twitter @CarolJSRoth.

Jim Geraghty of National Review and Greg Corombos of Radio America are glad to see former New York City mayor Michael Bloomberg decide not to run for president in 2020 but groan as he vows to spend huge sums of money to move the world “beyond carbon” in the next decade.  They also fume as Hillary Clinton finds yet another pathetic excuse for losing to Donald Trump in 2016.  And they react with disgust as the federal budget deficit jumps 77 percent in the first four months of Fiscal 2019 compared to last year – and because neither party and most Americans have no interest in addressing our debt and deficit crisis.

Jim Geraghty of National Review and Rich McFadden of Radio America break down Senate Minority Leader Chuck Schumer’s request that red-state Democrats remain neutral on Brett Kavanaugh’s nomination to the Supreme Court. They also cannot believe that some Democrats are seriously considering the idea of almost doubling the federal budget to pay for Sen. Bernie Sander’s Medicare-for-all program. And they cannot find any examples of malfeasance in the Boston Globe story about the TSA’s passenger-monitoring program that tracks people who sweat too much and urinate too often.

Five Minutes to Midnight: Announcing the “Federal Government Debt Default Clock”

 

Beyond the troubling debt-ceiling standoffs we witness every few years looms a far more dire threat: a true US government default, which economists warn could lead to a collapse of confidence in the American economy, a run on the dollar, and perhaps even a global economic meltdown. How close are we to such a catastrophic federal default?

To answer this question, a group of private-sector economists and fiscal policy experts has formed a citizens’ committee, called the Default Clock Committee, to maintain an objective, fact-based Federal Government Default Clock. The Clock is designed to help the public to see and track the nearness of the danger.

For the Committee’s purposes, “default” is defined simply as a failure by the US Treasury to make a scheduled interest payment on just one direct US Government obligation such as a Treasury note or bond. “Insolvency” is defined as the point beyond which default becomes a virtual certainty.

A Less Cynical View on Why the GOP Now Seems Fine with Big Deficits

 

Since late December, Republicans in Washington have signed onto tax cuts and spending increases that could, over a decade, add several trillion dollars to the national debt and some 20 percentage points to the federal debt-GDP ratio. As such, this Bloomberg Businessweek headline seems warranted: “Doesn’t Anyone Care About Deficits Anymore?”

A classic case of Betteridge’s Law of Headlines if ever there was one. Bloomberg reporter Peter Coy offers this explanation for the apathy: “Voters don’t care about federal budget deficits. And that, in a nutshell, is why the deficit hawk is an endangered species in the environs of Washington.”

The Potential Downside and Upside in Washington’s New Stimulus Experiment

 

So are we really going to do this? Is the United States, the world’s most important economy, really going to thoughtlessly stumble into a novel experiment in fiscal policy? Massive fiscal stimulus at this point in the business cycle?

Apparently so. Even before Trump’s tax cuts, America’s debt-GDP ratio was projected to rise to 91% of GDP over the next decade from around 77% currently and 35% before the Great Recession. Now factor in the tax cuts and this new budget deal and — assuming what’s temporary is made permanent — the debt burden would reach 109% of GDP in 2027, “higher than the previous record of 106% of GDP set just after World War II,” notes the Committee for a Responsible Federal Budget. And trillion-dollar deficits as far as the eye can see. Up, up, and away.

It’s a tradition dating back to the Founding Fathers: the American government financing safeguards, be it retirement (Social Security), health benefits (Medicare), or rewards for military service in the form of federal entitlements. In an age of debt and deficits, when will lawmakers address entitlement reform? John Cogan, Hoover’s Leonard and Shirley Ely Senior Fellow and author of a new book on the long history of federal entitlements, assesses where the Trump administration goes from here.

The Problem No One in DC Wants to Talk About

 

While the Beltway class hyperventilates over the latest political gaffe and jockeys for position in the 2018 midterms, there’s one subject they studiously avoid: our nearly $20 trillion debt. I wrote about it for USA Today, but my chart above shows the facts better than any op-ed can.

Because most graphs look like this, I created my own user-friendly debt chart focused on three big numbers: deficit, revenue, and debt.


Senator James Lankford (R- OK) has issued an urgent plea to the Trump administration: start taking the national deficit seriously or else the nation could slip into irrevocable fiscal failure down the line.

In a revealing conversation on this week’s OppCast, Lankford lamented that the national debt was almost entirely absent as a talking point during the whole of the presidential campaign.

This Chart Shows Just How Hard a Balanced Budget Will Be

 

As a candidate, Donald Trump said he favored a balanced budget “relatively soon.” Then again, he also said, “I love debt. I love playing with it.” Just how much Trump loves or hates federal debt will be revealed in the coming months. Congress, too. Congressional Republicans have typically offered annual budget resolutions that would eliminate the budget deficit within a decade by reducing spending growth.

The same this time around? Goldman Sachs raises some issues:

Does Anyone Still Think the US National Debt Matters?

 

publicdebt

The federal debt-GDP ratio was 74% last year and will be a bit higher this year. Overall it’s twice what it was pre-Great Recession. The CBO baseline forecast puts that debt figure at 86% — and rising — in 2026. Add maybe 20 percentage points or so if Donald Trump is elected, according to analysis by the Committee for a Responsible Federal Budget.

Not that Washington, voters, and many political candidate seem to care. Neither the size of the debt nor entitlement reform have been big parts of this election season. And even among wonks, especially on the left, concern about debt and deficit isn’t what it used to be. After all, the national debt has risen tremendously, yet interest rates are low and the dollar strong.

Three Cheers for Infrastructure Spending!

 

240673_road_construction_ahead_c898a8e8-fbe8-47ea-b492-4497f91421f4-prvOne of Hillary Clinton’s campaign proposals is for additional infrastructure spending to the tune of $250 billion over five years. According to the Clinton campaign, this program would be paid for by “business tax reform. It’s not clear what “business tax reform” entails, but it sounds to me like higher taxes on corporations and high income earners. Clinton claims this would create tens of thousands of jobs, stimulate the economy and fix a failing infrastructure.

Anyone who’s been paying attention during the Obama years should not be surprised by this proposal. It has been a recurring theme throughout his term in office. Infrastructure spending was a major component of the 2009 Stimulus Bill accounting for $105 billion of “shovel-ready” public works projects in the approximately $900 stimulus package. Obama and congressional Democrats have continued to call for additional infrastructure spending as a stimulus despite the fact that the 2009 stimulus failed in its stated goals of 1) keeping the unemployment rate below 8% (I believe it peaked at a tick above 10%), and 2) in providing economic stimulus (GDP growth has bounced around between 1% and 2% through the Obama years). Even Obama eventually did admit that there were no “shovel-ready” projects.

You would think this would be an easy issue for the Republican presidential candidate to oppose by noting the historical failures of public works projects in stimulating economic growth, and the need to get our fiscal house in order what with the federal government debt over $19 trillion and rising and annual deficits of hundreds of billions that will only rise without major reforms of our entitlement programs. However, you would be wrong. Republican presidential hopeful Donald J. Trump has called Clinton’s proposal “a fraction of what we need” and has at various times called for either doubling or quadrupling of Clinton’s proposal to either a $500 billion or a $1 trillion infrastructure plan. Trump would pay for this massive spending increase by borrowing via the selling of bonds, stating in his usual blustering fashion “We’ll get a fund, we’ll make a phenomenal deal with low interest rates and rebuild our infrastructure.”

Entitlement Reform and the GOP: Goodbye to All That?

 

shutterstock_215312209_SocialSecurityNot much talk about the national debt during this GOP primary season. Oh, there’s the obligatory — passing — reference to it during speeches and debates, but little more. Indeed, GOP tax plans would make the debt much worse by trillions over the next decade and beyond.

Now maybe one reason there’s less debt talk is that budget deficits are way down, and the long-term fiscal outlook improved. On the latter front, the WSJ’s Grep Ip highlights a new study — co-authored by former CBO boss Doug Elmendorf — that forecasts the US debt-GDP ratio won’t hit 100 percent until 2032 vs. the CBO’s 2009 forecast of 2023. (Thank low interest rates and slower healthcare inflation for that.)

But maybe another reason Republicans aren’t talking about the debt is that it’s hard to do so without also talking about deep Medicare and Social Security reform. And while entitlement reform was a pretty hot topic early in the Obama presidency, passion on the right has waned. Reforming entitlements is out, defending them is in. As Donald Trump has put it: “Every Republican wants to do a big number on Social Security, they want to do it on Medicare, they want to do it on Medicaid. And we can’t do that. And it’s not fair to the people that have been paying in for years and now all of the sudden they want [it] to be cut.” Here’s WSJ columnist Holman Jenkins:

On Getting Serious

 

I spent yesterday afternoon debating spending and the deficit with some fellow local Republicans. My view on the subject is really quite simple: Cut it all. There is no program, no department, so sacred that it shouldn’t be cut in some fashion.

That said, we have to talk about the Big Three: Social Security, Medicare, and the military. These three spending categories together represented 74 percent of federal spending in 2015, according to these guys. If you are going to do something about the $500 billion in overspending, you have to do something in these three areas. Period. It’s just math.

The US Debt Situation Is as Good as It’s Going to Get

 

011916CBO1This may be as good as it gets regarding the US debt situation. This from the CBO:

In 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009, according to the Congressional Budget Office’s estimates. If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years, CBO projects. Debt held by the public would also grow significantly from its already high level.

011916CBO2

Want to Prevent a Debt Crisis? Here’s What Real-World, Center-Right Reform Looks Like.

 

011416debt_2Democrats have big spending plans. Republicans have big tax cut plans. Debt and deficits? No one much talks about those things any more, apparently. But they should. Sure, as Wall Street Journal reporter Nick Timiraos notes, the “U.S. budget deficit ended last year at its lowest level since 2007, marking the sixth straight annual drop.” The federal budget gap deficit ended 2015 at $478 billion, or around 2.6% of GDP. Timiraos explains why we no longer have the trillion dollar deficits of the Great Recession years:

After the financial crisis, the U.S. government in 2009 ran deficits not seen since World War II as revenues fell sharply and stimulus flowed. Deficits began to recede in 2010 as the stimulus faded and revenues stabilized. Congress cut spending further after Republicans took control of the House in 2011. Government spending started to rise two years ago, but deficits continued falling because of strong receipts to the Treasury, in part from tax increases that took effect in 2013.  Outlays last year rose 5%, roughly the same pace as the year before. Revenues were up 6%, versus a 10% gain in 2014.

The US has still added nearly $8 trillion in debt since 2007, more than doubling the debt-GDP ratio to around 73%. And the current deficit numbers may mark the bottom:

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How safe are your investments? Experts say the market is due for huge correction at any moment. The warning signs are everywhere: an unprecedented 18 trillion dollars in debt, loose-as-a-goose fiscal policy. And thanks to solar subsidies, politicians are now charging us for the sun. Preview Open

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SS and Medicare: The Truth Stinks

 

When the subject of debt and deficits comes up in polite conversation — with its progenitor, entitlements —  and I respond, I often feel like the dog who passed gas under the Thanksgiving dinner table. Sometimes, weakness shows and the “we all paid in” defense is presented with resounding harrumphs exchanged in agreement. If it gets this far, there is the assurance that the trust fund, while depleted, remains to cover our obligations. When I proceed to point out that this piggybank is filled with IOUs, not cash (and even if it were filled with appreciating assets, it contains far less than what will be needed to cover the actuarial obligation) I am summarily labeled as an un-American, naysaying, and unbelieving apostate. Who am I to denigrate the “full faith and promise of the USA?” To preserve the peace, I relent and agree to be muzzled.

The underlying and accepted conceit here is quite simple: wealth must find its origin in the bowels of Washington, DC. The corollary conceit is that the free marketplace perverts wealth and provides the means for its corruption. Thus, Washington not only creates wealth out of sheer political will, but it must counter the corrupting influence of the free market.