The humorist P.J. O’Rourke once observed that “giving money and power to government is like giving whiskey and car keys to teenage boys.” Based on what Congress just did to “fix” the budget impasse in Washington, O’Rourke owes an apology to tipsy teens across America for the unfair comparison.
Even before the passage of federal tax reform in December, the federal budget was massively imbalanced. Projected or promised federal spending exceeded projected federal revenue by $10 trillion over the next 10 years.
Properly measured — that is, excluding the gimmicks that masked its fiscal impact — the federal tax law will likely increase those projected deficits by $1.4 trillion even after accounting for the higher economic growth that lower corporate tax rates, in particular, will likely produce.
Federal tax reform was a good idea. Its benefits, in the form of higher employment and gains in household income, will be most welcome. But its fiscal impact ought to have been offset by at least a $1.4 trillion reduction in federal spending growth over the coming decade.
In accounting terms, government spending is never self-financing. A dollar of federal spending must always be paid by a dollar of federal revenue. It’s just a question of timing. When a budget is balanced, past or current taxpayers are footing the bill. When it isn’t, future taxpayers will be.
When Congress came back to Washington in January, the federal budget impasse presented them with the opportunity to make a down payment on deficit reduction. Lawmakers could have agreed to spend less on their own priorities in exchange for other lawmakers spending less on theirs. At the very least, they could have continued to enforce budget caps on both defense and discretionary spending.
It was too much to ask of the immature motorists at Washington’s wheel, apparently. Smashing through the budget caps, majorities in both chambers agreed to federal spending hikes that, if sustained over the coming decade, will add another $1.5 trillion to the federal debt. A few days later, the Trump administration pitched a spending outline with some budget cuts that would reduce the fiscal damage somewhat, if fully implemented. Alas, they won’t be.
Several dozen members of the U.S. House had the courage of their fiscally conservative convictions and voted against the deal. North Carolinians should be proud of the fact that most of our delegation said no.
“Fiscal discipline is not a principle of convenience, and responsible governing requires making the tough choices and keeping promises,” said Rep. Mark Walker (R-6th District), who chairs the Republican Study Committee — the largest conservative caucus in the House.
The need to restrain federal spending is “why the people of North Carolina sent me to Congress,” he added, “not to throw more money towards our problems at the expense of our children and grandchildren.” Rep. Mark Meadows (R-11th District), who chairs the House Freedom Caucus, summed it up this way: “The swamp won. And the American taxpayer lost.”
Political sophisticates say that deficit-reduction is a losing proposition, politically speaking, because voters don’t care about it. The sophisticates are mistaken. If you look at the approval ratings of Congress over the past five decades, you’ll find that the only sustained period of time most Americans approved of the institution was in the late 1990s and early 2000s, when the federal budget was either balanced or close to it.
That happened both because federal revenue in the late 1990s was above the long-term average of 17 percent of gross domestic product, thanks in part to a surging stock market, and because federal spending was below its long-term average of 20 percent. By comparison, President Trump’s new budget outline projects that over the next six years, revenue will average 16.6 percent of GDP and expenditures 20.6 percent. And that’s the best-case scenario.
We teach our kids to accept painful realities. We teach them not to be reckless. We teach them to think about the future. Then politicians come along and teach them otherwise.
John Hood (@JohnHoodNC) is chairman of the John Locke Foundation.