The more things change, the more they stay the same. Thanks to the debacle that was former President Barack Obama, the Republicans, making fiscal responsibility as one of their key campaign issues, scored a historic trifecta in 2016. In the second year of power, has the party broken the shackles of debt? One prominent GOP senator doesn’t think so, going as far as averring that Republicans only believe in fiscal conservatism in the “abstract.”
Recently, Senator Rand Paul (R-KY) submitted a “penny plan” to balance the budget in five years by freezing it for ten years, ending spending increases, and cutting just 1%, or $32 billion, per year. The balanced budget amendment also repeals the Affordable Care Act, freezes all on-budget spending without revisions to Social Security, and provides federal agencies ample time to prepare for new spending levels.
This prudent initiative would allow the U.S. government to start tackling its immense national debt and become less dependent on foreign nations to keep the doors of Capitol Hill open.
So, you would surmise that Republicans would overwhelmingly support this “conservative vision” for America. In the end, the legislation failed 21-76, receiving the denunciation by both Republicans and Democrats. Senator Lindsey Graham (R-SC) said the bill creates “unpredictability,” while Senate Minority Leader Chuck Schumer (D-NY) called the move “ironic” considering President Donald Trump’s tax plan.
Senator Paul, who didn’t expect the legislation to pass, was disappointed in his colleagues, noting that “we are simply the same as Democrats” because “we don’t care about the debt.” He told the Fox Business Network:
“Republicans are, in the abstract, for balanced budgets. But as you saw yesterday, the majority of the Republican senators are really not for the balanced budget. They’re only for it in the abstract.
We also need to be concerned that they have a trillion of our debt. And my concern with security is that we need to be not so dependent on countries that hold so much of our debt.”
This isn’t the first time that Paul has attempted to resuscitate fiscal conservatism in Washington. In January 2017, senators voted 14-83 against the senator’s balanced budget measure. Like his father, former Representative Ron Paul (R-TX), Dr. Paul can’t seem to persuade his fellow lawmakers.
Fiscal Madness Inflicting Washington
Only the government can extract trillions of dollars from taxpayers and still be in the red.
The national debt has topped $21 trillion, the budget deficit is on pace to reach $1 trillion again, and the government’s monthly interest payments have totaled $284 billion so far this fiscal year. Over the last eight months, the federal debt has ballooned $52,000 per second, while the debt-to-GDP ratio has surpassed 100%.
And there is no end to this mass fiscal madness in sight.
Because the federal government has applied widespread tax cuts and refused to impose deep spending cuts at the same time, the Treasury Department is boosting debt sales that could hit $1 trillion this year. Without that easy money from the Federal Reserve, which is unwinding its $4.5 trillion balance sheet, the government is increasing its sales of three-, 10-, and 30-year notes, and it will also start selling two-month Treasury bills later this year.
Treasury Secretary Steven Mnuchin isn’t concerned about the impact on the U.S. bond market:
“It’s a very large, robust market — it’s the most liquid market in the world [U.S. bond market], and there is a lot of supply. But I think the market can easily handle it. I’m not concerned about that. I think that there are still a lot of buyers for U.S. Treasuries.”
The future doesn’t look too bright. Today, total unfunded liabilities and expenditures are approximately $114 trillion, or $932,000 per taxpayer.
No wonder why Senator Paul is worried about the government borrowing $1 million per minute.
Moreover, all these numbers are from the federal government’s books. When you start factoring obligations at the other two levels of government into your calculations, the ocean of red ink expands. State debt is $1.2 trillion, local debt is $2 trillion, and unfunded pension liabilities are $7 trillion.
Make America’s Finances Great Again
In 1985, the Department of Commerce announced that the U.S. went from a creditor nation to a debtor nation for the first time since the First World War. After several administrations and both parties swapping power, the U.S. still owes foreign nations more than they owe the Land of the Free – other countries hold $6 trillion of American debt.
Thomas R. Robinson, then-manager of international economics at Merrill Lynch, told The New York Times at the time that “there’s nothing wrong if the investment is being used for productive purposes.”
Has the U.S. government taxed its citizens to death, printed trillions of dollars, and borrowed trillions more from friend and foe alike for productive purposes? Here are just some examples of waste:
- $66,000 to find out what bugs do near a light bulb.
- $2.6 million to train Chinese prostitutes to drink more responsibly on the job.
- $2.4 billion to buy ten new jets the Pentagon says it doesn’t need and will not use.
- $15 million to train Walmart cashiers in Mexico.
- $150,000 to study why politics stress us out.
Well, when the average American learns how much politicians and bureaucrats waste the fruits of their labor, it can be easy to learn to deduce why politics stress out the country.
Fiscal conservatism may not be a priority right now for President Trump, Republicans, and Democrats. But it needs to be if MAGA is the key objective. Otherwise, when interest rates spike, the world no longer enables reckless domestic spending, and the Fed can’t maintain the illusion anymore, the house of cards will crash. And then Senator Paul can tell his colleagues: “I told you so.”
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