I realize that concern about the deficit and the debt is no longer fashionable in Washington. Democratic candidates for president are engaged in a ruthless game of one‐up‐manship over who can propose the most costly and unsustainable new spending program. In the meantime, Republicans, from the president on down, have adopted Rush Limbaugh’s new mantra that worries about the debt are “bogus.” Even the so‐called Freedom Caucus spends far more effort defending the president’s latest tweet than in defending fiscal responsibility.
Yet even by these rather pathetic standards, the $1.37 trillion budget deal reached this week by President Trump and bipartisan congressional leaders stands out for its total abdication of fiscal discipline. The deal throws out the last vestiges of spending caps that were put in place as part of the two‐year budget agreement. Those caps have proven largely ineffective — Congress has repeatedly waived them — but this year’s agreement would exceed those caps by $320 billion over the next 2 years.
Actual total spending will rise by some $49 billion. There is no attempt to establish priorities — everyone just agreed to spend more. Defense spending will rise by $22 billion, but domestic discretionary spending will go up by even more, roughly $27 billion. And, as for addressing the urgent need for entitlement reform (the majority of federal spending), not a peep.
Moreover, the deal runs through 2021, thereby protecting politicians in both parties from having to do their jobs during an election year. At least they have their priorities in place. The deal also includes a two‐year waiver for the debt limit, removing any possible leverage against future reforms.
As bad as the deal looks on its face, its even worse in context. With only 2 months left in this fiscal year, the deficit has already hit $747 billion, a 23 percent increase since last year. It will almost certainly top $1 trillion by year’s end. From here, it is likely simply to grow worse.
The national debt has reached $22 trillion, a $3 trillion increase since President Trump took office. That’s a Barack Obama level of red ink — but during an economic expansion, not a recession. Of course, some might blame increased deficits on the 2018 tax cut, and there’s some truth to that. Indeed, the tax cut has not “paid for itself” through increased growth. But the real villain is increased government spending. It is estimated that, by the end of his first term, Trump will have increased discretionary spending by 22 percent.
We now pay more in interest on the debt than we spend on education and military personnel. By 2028, interest payments are expected to reach $914 billion annually. Over the next ten years, net interest cost will total around $7 trillion. Regardless of political ideology, everyone should recognize that interest payments are simply throwing money down a hole.
Worse, none of this includes the unfunded liabilities of entitlement programs such as Social Security and Medicare. According to Social Security’s own trustees, the program’s future shortfalls exceed $43 trillion. Medicare’s unfunded liabilities are harder to pin down but likely run into the tens of trillions of dollars. The real U.S. debt could easily run more than $100 trillion in all.
Democrats look at this and say, “let’s spend more.” Republicans look at it and say, well, “let’s spend more.”
It is true that the U.S. economy has proven more resilient than some of us thought. Warnings of an imminent financial disaster have proven premature. Yet it is axiomatic that that which cannot go on forever eventually stops. Eventually the sugar high of deficit spending will wear off, and there will be real consequences for the economy.
One thing we’ve learned about Trump is that he revels in the idea that whatever he does is the “biggest ever.” Still, “biggest deficit ever, “most debt in history,” and “most profligate president ever” may not be superlatives to which he should aspire.