At the end of 2024, the federal deficit reached more than $1.8 trillion. Numbers so large are frightening to some and political fodder to others.
That’s better than the $3.1 trillion shortfall in 2020, the worst year of the pandemic. Still, as the late Sen. Everett Dirksen said, “A billion here, a billion there, and pretty soon you’re talking about real money.”
Whether the shortfall matters is debatable.
At least until the wrecking ball of the Trump administration, the United States enjoyed the unquestioned power of the dollar, the world’s reserve currency. The dollar provides the safest means of financial exchange, whether held by central banks, corporations or other financial entities.
It’s essentially a planetary gold card with an unlimited spending power. Most foreign exchanges are in dollars because of the currency and nation’s stability and reliability.
Since America created the institutions of trade and economic stability after the end of World War II, such as the World Bank and International Monetary Fund, as well as repeated freer-trade negotiations culminating in the creation of the World Trade Organization in 1995, the dollar was the unquestioned means of exchange.
Four years later, enough people were questioning the benefits of dollar-dominance and the American-led trading system that protests broke out at the WTO’s third ministerial conference in Seattle.
According to a paper from the Council on Foreign Relations, a nonpartisan think tank founded in 1921, “Many experts agree that the dollar will not be overtaken as the world’s leading reserve currency anytime soon. More likely, they say, is a future in which it slowly comes to share influence with other currencies, though this trend could be accelerated by the aggressive use of U.S. sanctions and growing U.S. financial instability.”
The only time the United States produced a surplus in recent decades was in 2000, after then-President Bill Clinton modestly raised taxes on the rich. The surplus was mild, to be sure — about $236 million — but those higher levies on the wealthy didn’t prevent the largest economic expansion in American history. About 28 million new jobs were created in the 1990s.
That decade was very good to the Seattle area and Washington, too.
The category of “services,” which includes software and technology, was the leading source of new jobs in every state, but Washington topped the list in earnings per job.
The ‘90s boom saw the rise of Amazon from garage bookstore to one of the most potent survivors of the end-of-decade dot-com crash. Microsoft survived its “lost decade” of federal antitrust oversight, ready to emerge strong and admired.
These were the years of the popular movies “Sleepless in Seattle” (1993) and “Disclosure” (1994). Seattle was growing in the national consciousness as much as during the 1962 World’s Fair.
Those heady days of 1990s Seattle feel like a century ago.
Wendy Edelburg, Ben Harris and Louise Sheiner of the Brookings Institution, a Washington, D.C.-based think tank, recently wrote, “The federal debt, measured against the size of the U.S. economy, is at levels not seen since World War II. Without changes in tax and spending laws, it is projected to climb steadily and indefinitely.”
They warn of a possible fiscal crisis.
Raising taxes on the wealthy is the best way to address the deficit, as Clinton showed in the 1990s. But that’s unlikely with a Trump administration promising to extend his 2017 tax cuts, mostly benefiting the rich.
No wonder billionaires like Washington Post owner Jeff Bezos — who spiked an editorial endorsement of former Vice President Kamala Harris and narrowed the purview of the opinion pages, although being committed to “defending personal liberties and the free market,” according to The Associated Press — cozy up to Donald Trump. They expect major tax cuts.
Meanwhile, the administration is firing thousands from the Internal Revenue Service, an action sure to increase the deficit despite Elon Musk’s promises to reduce it.
Former Missouri Rep. Billy Long is Trump’s pick to lead the agency, despite Long’s lack of experience in steering such a complicated institution. “This guy is an auctioneer — that’s his expertise,” Lindsay Owens, executive director of the Groundwork Collaborative, a progressive economic think tank told CBS News. “This is an incredibly unserious choice.”
The unelected Musk is itching to severely cut or privatize such safety net programs as Social Security and Medicare, as well as shutting down or privatizing Amtrak.
Yet the largest causes of the deficit are up to $6 trillion spent on wars of choice in Iraq and Afghanistan, as well as spending required by the Great Recession and pandemic.
When President Franklin Roosevelt — who campaigned in 1932 on balancing the budget and was always uneasy with deficit spending — was confronted with the Great Depression, he was willing to experiment in finding ways to save American democracy.
Historians still debate the degree to which the New Deal stopped the worst downturn of the 20th century, but few can argue that FDR saved our experiment in self-government. And many New Deal investments, such as Grand Coulee Dam, more than repaid their costs.
This is critical to understanding federal spending: What do we get for our taxes?
Uncertainty about federal funding, for example, caused the University of Washington to institute a hiring freeze of “nonessential” faculty and staff. Take that nationwide, and the consequences for education and innovation are severe.
Trump’s followers who claim to be worried about passing the deficit and debt on to their grandchildren are stunningly unconcerned about the more serious legacy: lack of action on human-caused climate change. Addressing it will require federal investment, such as electrified high-speed rail.
But that’s not going to happen.
Elections have consequences.
The opinions expressed in reader comments are those of the author only and do not reflect the opinions of The Seattle Times.