Like a wild-spending holiday shopper, the U.S. government has some repair work to do to put the nation on sound financial footing, writes guest columnist Brian Baird. Spending more and cutting taxes won’t work.
Just like people who overspent for the holidays and are now getting credit-card bills they can’t pay, the new Trump administration and Congress soon will have to try and square easy campaign promises with cold hard realities.
Let’s start by reviewing the preholiday campaign promises of the victors. Taxes will be lowered for corporations and individuals (especially the wealthy); Social Security will be untouched or expanded; military spending and veterans benefits will increase; Medicare won’t be cut; the Affordable Care Act will be dismantled but replaced with something (as yet unspecified) that still makes health care affordable for everyone without rationing, taxes or mandates; we’ll build a wall between Mexico and the U.S.; college tuition and student debt will be either free or reduced; tariffs on imports won’t increase consumer costs; the infrastructure will be repaired and expanded and, of course, the budget will be balanced and we may even amend the Constitution to require it.
Ho Ho Ho, Merry Christmas, Happy Hanukkah, etc., etc.
Learn more about the national debt
Fix the Debt:
The Concord Coalition: http://www.concordcoalition.org/
Committee for a Responsible Federal Budget: http://crfb.org/
Now, like the holiday spender opening January bills, brace yourself for the realities. Bear with me. The numbers that follow are important.
Thanks to past and current promises and policies of both parties, the federal deficit for this fiscal year is already projected to be nearly $600 billion and growing again, while the national debt will very soon top $20 trillion — or $20,000,000,000,000. That’s 77 percent of gross domestic product (GDP) — a post World War II era high and equivalent to nearly $62,000 in federal debt for every person in America, or more than $257,000 owed per child under the age of 18.
This year, to support more than 61 million people, Social Security will pay out $73 billion more in benefits than it generates in revenue, and the program is projected to run a $1.4 trillion shortfall over the next decade. Meanwhile, with 10,000 new beneficiaries signing up for benefits every day, Medicare costs have been projected to rise from 3.6 percent of GDP to 5.6 percent in 2040. On the infrastructure front the nation faces an estimated $3.6 trillion deficit between now and 2020 just to maintain existing water supplies, roads, bridges etc. And none of this takes into account the costs of climate change and its impact on infrastructure, agriculture, insurance, human health, national security or real-estate values.
At this point, like the holiday spender staring at credit-card bills, you may be saying, “Wow, that’s a lot of bad news.”
But wait, there’s more.
Beyond what the nation owes, individual Americans are heavily in debt and have insufficient savings. The total outstanding individual U.S. credit card debt was recently estimated at $762 billion, and households that do not pay off their credit cards each month owe an average of approximately $16,000 to credit-card companies. The median total personal savings in retirement accounts for couples in their late 50s or early 60s has been estimated at less than $20,000 per person, and half of all working families report having no retirement account savings at all.
As bad as things are now, when interest rates rise, as they have inevitably begun to do, servicing all the public and private debt gets only more challenging. Already, interest on the debt is the fastest growing part of the federal budget and the Congressional Budget Office forecasts that cost will likely double in the next five years.
Try solving all of that in a tweet.
“Nonsense,” cry principals of the incoming administration and their ardent supporters. They promise economic growth so robust it will make all the campaign promises come true. According to them, we can cut taxes, leave entitlements untouched or expanded, grow the military, build border walls, not deal with climate change, and the magic of growth will make it all work out just fine.
Maybe, but common sense, history, the example of states, most independent economists, and simple math say it’s not likely to work out that way. If you lower revenues and grow spending, debt gets worse not better.
Which raises this question: Who ultimately pays for all the tax-cutting and entitlements if this gamble by a gambling magnate doesn’t pay off?
The answer is, our kids pay for it — if they can.
There is another way. But it will demand real political leadership and courage from both parties plus honest math. Nonpartisan organizations like the Committee for a Responsible Federal Budget, the Concord Coalition, Fix the Debt and others have put forward real, practical and achievable measures that can be taken quickly and going forward to reduce the debt. Together, these proposals would limit the growth of spending on entitlements, make responsible and fair reforms to the tax code, invest in infrastructure and education, and take other measures to grow the economy without incurring additional debt.
The key to a solution is for the adults in the country, all of us, and especially those in Congress and the administration, to start dealing with reality honestly in our personal lives and in our public policy.
As the administration takes office and Congress reconvenes, we all have to recognize that the holidays are over. There is no Santa or fiscal magic, the bills are coming due and it’s time now to act responsibly. Our children could not vote in this election, but they deserve parents, leaders and representatives who will do what is right — not what is easy.