During the eight-year reign of The Chosen One, the Republicans rightfully slammed the way America’s finances were being abused, mistreated, and taken for granted. Despite abandoning fiscal conservatism throughout the Bush years, the GOP appeared to be born again deficit hawks once Obama came to power, helping the party regain monumental control of the swamp. Unfortunately for taxpayers, and future generations, the nation’s books are still drowning in red ink without any relief in sight.
Donald Trump recently completed his first full fiscal year in the White House. The president has recorded many victories since receiving the keys to 1600 Pennsylvania Avenue, but reining in spending has not been one of them.
According to a new report from the Treasury Department, the budget deficit rose to $779 billion in fiscal year 2018, the highest it has been in six years. This is $113 billion, or 17%, higher than the previous FY, but it is $70 billion less than what officials had anticipated in July.
Federal revenues only climbed by $14 billion, while outlays surged by $127 billion. An increase in entitlements, defense, and disaster relief contributed to the overall jump in spending.
Is there a game plan moving forward? Just rhetoric and empty promises. White House budget chief Mick Mulvaney vowed that a booming economy will contribute to government coffers, adding that the Trump administration will encourage congressional Republicans to commit to fiscal discipline.
“But this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending. Going forward, President Trump and this Administration will continue to work with Congress to make the difficult choices needed to bring fiscal restraint, which, when matched with increasing revenue, will reduce our deficit.”
What does Trump think about it? He was candid in an interview with the Associated Press:
“Excuse me. No. 1, I had to take care of our military. I had no choice but to do it, and I want to take care of our military. We had to do things that we had to do. And I’ve done them. Now we’re going to start bringing numbers down.”
When asked if entitlement reform is on the table, Trump dismissed it and confirmed that “I’m leaving Social Security. I’m not touching Social Security.”
Taking an Ax to Entitlements
First, it is understandable why Trump and the Republicans are refraining from touching entitlements – Medicare, Medicaid, Social Security, and other welfare items. It’s politically unfeasible. Anytime an administration, official, or even political candidate has ever hinted that he or she might cut entitlements, the opposition has pounced with hyperbole.
When Speaker of the House Paul Ryan (R-WI) proposed reforming entitlements during the 2012 election campaign, the left went on the attack, comparing the proposal to throwing seniors off cliffs. It was an absurd television advertisement, but it was effective in generating buzz and paranoia that Republicans would cut out all.
Trump always promised on the campaign trail that he wouldn’t touch retirement benefits. It helped.
But here is the thing: The GOP should take an ax – or a chainsaw – to entitlements. That is the only way the country’s finances can return to balance – or sanity.
Yes, it is commendable that the president is recommending his cabinet employ 5% cuts to their budgets, and, yes, the old adage of “watch the pennies and the dollars will follow” is true. However, when entitlements represent roughly $2 trillion, or 52% of the federal budget, you need the biggest, the greatest, the best ax you have ever seen in your lifetime.
As politicians continue to kick the can down the road, future liabilities and expenditures go unfunded – these now total more than $120 trillion. With this much red ink, a financial crisis is inevitable. The U.S. can’t afford today’s spending habits, so how could future governments fund tomorrow’s promises?
Should the democratic socialists take over the Democratic Party and then the government, the issues will only be exacerbated. They have pledged to offer a treasure trove of “free” stuff, from healthcare to a basic income to post-secondary tuition; studies have pegged the price-tag to be around $45 trillion.
Simply put: Without the will to take debt, deficits, and spending seriously, you only make things worse.
Looking at Forecasts
To be fair to Trump and the GOP, the budget deficit was always going to increase in the coming years. The Congressional Budget Office (CBO) repeatedly warned throughout Obama’s term that the federal deficit would eventually top $1 trillion by 2020 at the latest. But maintaining the status quo isn’t why 60 million Americans cast a ballot for the real estate billionaire.
Even if you think the good times will last forever, the debt is on track to surpass the size of the national economy, the deficit is poised to reach $2 trillion by 2025, and annual interest payments will be the second- or third-largest outlay. Moreover, Social Security is expected to go bankrupt by 2030 – it’s already tapping into reserves – and Medicare will be insolvent around the same time.
The GOP should take an ax – or a chainsaw – to entitlements.
With the Federal Reserve winding down the $4 trillion balance sheet and raising interest rates, the U.S. government is turning to the market to borrow more. At the moment, there is an appetite for Treasuries, but if there is a sea of red engulfing the nation, then it’ll be hard for investors and lenders to enable the reckless spending.
In the future, the U.S. government will be left with two choices: Raise taxes on the middle-class or cut benefits. This is indeed a tough pill to swallow, but even if the medicine tastes bad, you have to take it.
Legendary playwright George Bernard Shaw said: “We are made wise not by the recollection of our past, but by the responsibility for our future.” But Shaw also quipped, “He knows nothing; and he thinks he knows everything. That points clearly to a political career.” If you think the political class can solve problems it created, then we have 30-year Treasury notes to sell you. Fasten your seatbelts because it’s going to be a bumpy ride.