The President and Congress Are Fiscal Swamp Monsters

All the recent talk in the political media has been about ideological division and partisan rancor, yet the results when progressives and nationalists and Democrats and Republicans agree should also give one pause.

The president and Republican and Democratic congressional leaders have just agreed on a two-year budget that would hike federal spending $320 billion above the fairly strict spending caps of the Budget Control Act of 2011, which is obviously no longer controlling the budget. Curiously, over the two years, a Republican president just agreed to add $46.5 billion in defense spending and even more—$56.5 billion—in domestic spending.

To state the obvious, neither party cares about yawning federal budget deficits (which will approach $1 trillion) that have compounded into a whopping $22 trillion in national debt (and counting). With unfunded pension plans at the federal, state and local level, the unfunded liabilities for the entire nation are estimated to be a staggering $150 trillion.

David M. McIntosh, President of the Club for Growth, was quoted in the New York Times lamenting, “It’s pretty clear that both houses of Congress and both parties have become big spenders, and Congress is no longer concerned about the extent of the budget deficits or the debt they add.” With all due respect to McIntosh, the country didn’t accumulate a $22 trillion debt overnight. Both parties, including the Democratic Party, with a reputation for big spending, and the supposedly fiscally responsible Republican Party haven’t really been consistently fiscally responsible since the 1990s.

The only time Republicans tender the claim of responsibility is when they are opposing a Democratic president. Starting with Richard Nixon, when they get the presidency, Republicans irresponsibly cut taxes and increase spending, thus ballooning budget deficits and piling on debt at a rapid rate. Thus, in terms of a spending record when running Congress, the two parties are roughly equal—very bad—but as far as presidential records, Democrats are better at restraining spending and reducing deficits. For example, since Harry Truman, the champion of fiscal restraint was Bill Clinton. He and runner-up Dwight Eisenhower, the last fiscally responsible Republican president, were the only two presidents to reduce federal spending as a percentage of the nation’s total economic output.

The last brief bout of fiscal responsibility occurred for a few years after the 10-year Budget Control Act of 2011 was enacted during Barack Obama’s administration. After his initial pork barrel “economic stimulus” program intended to combat the Great Recession, Obama’s second term saw a reduction of budget deficits by an average of 11% per year as a result of military and domestic spending reductions of an average of 2% per year. (By way of comparison, President Trump is increasing such domestic and military spending by almost 4% per year and has so far added more than $2 trillion to the national debt.)

The Budget Control Act, which Obama signed into law, pointed a fiscal gun to the heads of both parties if they couldn’t come to an agreement on yearly budget deals. That weapon was dreaded in Washington—across-the-board budget cuts or “sequestration.” And as it did during the Clinton administration, the partisan brinksmanship between a Democratic president and a Republican-controlled Congress led to the gun being fired in some years—thus laudably restraining budget growth.

Then the two parties decided that these outcomes were so horrible for the amount of candy they were able to hand out to their respective supplicant interest groups on the annual budget trick-or-treat that they began holding their noses and working with each other to achieve at least some sort of budget agreement in many years. In other words, the effects of the Act began to attenuate over time.

Those budget agreements were usually monuments to what in Washington is called “log-rolling.” Republicans got candy for their trick-or-treaters—defense contractors, agricultural and small business subsidies, etc.—and Democrats got candy for theirs—more money for social spending, environmental programs and the like.

However, in addition to the $320 billion in federal largess both parties handed out this time, the budget agreement runs out the clock on the Budget Control Act. In the future, no across-the-board sequestration cuts will even be possible. The budget gun has been permanently emptied of ammunition.

That comes at a really bad time. With the economy doing well and recouping some of the lost tax revenue from the Trump tax cuts (despite the president’s rhetoric, tax cuts have never paid for themselves), now would be the time to cut spending. Yet Trump and Congress instead have hiked spending yet again. During the next economic downturn, when deficits and debt usually increase, the country will be starting with too much red ink and will sink further into the fiscal abyss. And this comes at a time when the large baby boom generation is retiring and straining the big entitlement programs—for example, Social Security and Medicare.

The president keeps claiming that he will cut spending, but he never does. Before it’s too late, he needs to propose a reinstatement of budget sequestration with no override. All government programs need to be cut by a certain percentage every year. The only problems with the sequestration in the Budget Control Act of 2011 were the override and that it did not cover most entitlement programs, which are the big driver of ballooning deficits and the spiraling debt.

To avoid imminent U.S. fiscal ruin, such drastic measures now need to be taken immediately. The fiscal swamp is not being drained; it just expanded yet again.