For the last decade or so, I have become increasingly concerned about the federal debt, now estimated to be $21.13 trillion.
It is an issue one does not hear much about in the 2018 campaigns, in large part because the voters have not demanded clarity on ways to address annual deficits and the long-term federal debt.
This is important because, at some point in our future, an “economic reckoning” will come from the continuing growth in federal spending and debt. As David Davenport, a fellow at Stanford’s Hoover Institution, wrote earlier this year in Forbes, “No one really knows how much federal debt is too much. Unfortunately some kind of major economic correction will be the signal that we have gone too far. Other countries will quit buying our debt, or will discount it heavily. The stock and bond markets will lose confidence in our fiscal policy and send prices plunging.”
He notes that we are creating our own “bed of instability” when the government spends far more than it takes in. One day, writes Davenport, “the bed will begin to collapse.”
Tim Penny a key player
One key player in all of this is former Minnesota First District congressman Tim Penny: He has long been trying to do something constructive about fiscal issues including deficit reduction, entitlement reform, fundamental tax reform and improving the budget process.
Penny and many insiders familiar with federal fiscal policy believe that America’s national debt threatens our future and that our nation’s leaders, including President Donald Trump and members of the U.S. House and Senate, ought to be well enough versed on the implications to act with a comprehensive, bipartisan plan.
Such a campaign must mobilize key communities — including leaders from business, government, and policy — and average people all across America have a role to play. Special attention must be paid by all to securing a workable “safety net” for those who most need it.
New federal tax law
Take, for example, the new federal tax bill that was passed by Republicans in Congress and signed into law by Trump last December. At that time, the significant tax cuts for both individuals and corporations were projected to be repaid by increased economic growth due to the projected stimulus resulting from the cuts.
The first six months of this year, however, have shown that’s not entirely the case. The reduction in corporate taxes paid, for example, is the lowest since 1943, down some 33 percent. The tax cuts for individuals have not yet been fully analyzed and will not be until mid-2019, well after the 2018 election.
Another complication is the growing momentum for additional spending to provide tax relief for manufacturers and others, especially including a proposed $12 billion tax cut for farmers hurt by the expanding tariff-induced trade wars with our partners.
10 pending issues affecting federal budget
At least 10 other controversial issues that have significant financial implications for the federal budget are, as noted by the Committee for a Responsible Federal Budget:
- Concluding the ongoing wars in Iraq and Afghanistan
- Raising the Social Security normal retirement age to 68
- Increasing defense funding levels
- Tightening border security and building a border wall
- Providing a workable plan to address undocumented immigrants
- Increasing infrastructure spending
- Increasing Social Security benefits
- Modifying the Obamacare health care reform law
- Increasing nondefense discretionary funding levels
- Reforming the estate tax
Both political parties will need to compromise to find a path forward.
These issues and others are timely as Minnesotans go to the polls on Nov. 6 to elect two new U.S. senators and eight U.S. House members, at least three from closely competitive districts that are on both parties’ top priority list.
The good news, of course, is that all of this is happening as the national economy is the healthiest it has been in decades, growing at a 4 percent annualized rate.
Chuck Slocum is president of the Williston Group, a management consulting firm. Contact him at chuck@willistongroup.com
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Oh Please
There is one party that talks a good game when out of the White House, then spends like drunken sailors after a year at sea.
The deficit comes down when adults are again in charge.
Deficit(s)
Mr. Phelan has nailed it. When I was a young man – half a century ago and more – the Republican Party was the party of fiscal responsibility, and they routinely bashed the Democratic Party as the party of “tax and spend.” The facts, especially as embodied in the most recent federal tax legislation, do not support the notion of the GOP as the party of fiscal responsibility. As was reported on at length at the time, the federal debt will more or less explode if/when all the segments of that tax legislation begin to take effect. Those interested in fiscal prudence should all be hoping that never happens.
Mr. Slocum conveniently blurs some major issues, including some slippery GOP concept of “bi-partisanship” that simply has not existed in Congress since the GOP took it over during the last six years of the Obama presidency. There has been ZERO attempt at any bi-partisanship in McConnell’s Senate. The House is run by an inept and hypocritical Speaker who is getting out before the entire nation realizes that Ryan has no idea of what effective fiscal policy is.
It’s the Republicans who are doing the big spending, and the Republicans who have insured that there is insufficient tax revenue to meet expenses, And I remind you: not only did Bill Clinton bring our deficit down dramatically, so did Barack Obama after George W.’s wild spending, and despite a history-making 2008 Recession and Republican stonewalling him at every turn.
Deficits climb dramatically when Republicans are in charge.
Republicans only scream about the horror–the horror!– of deficits when a Democrat is President.
The issue Slocum blurs as well as he can is, that the nation’s deficit is increasing by leaps and bounds since the tax bill of 2017 cut revenues sharply. He mentions a 30% decrease in tax revenue, but it’s greater than anyone expected it to be, and there are no measurable increases in jobs or wages to make up for that cut in corporate taxes and taxes for the wealthy. Corporations are not investing in R and D or infrastructure for the future, or in wages for workers; they are buying back their shares and giving huge dividends to shareholders. The workers and the public be damned.
Vote Democratic this November, everywhere you can! Only Democrats will protect Social Security and Medicare, and shore up the Trump-devastated shreds of Obamacare, which Americans have learned is a good health care program. We don’t need a wall. We need the party that has repeatedly shown fiscal discipline, and that ain’t the Republicans.
Seems like President Obama left office with a $13 trillion debt that he would have had to sign off on…
Remember when…
We were running budget surpluses under President Clinton? There was a concern that banks wouldn’t know how to price mortgages because the government had stopped selling 30 year bonds, and they planned to stop issuing 10 year bonds?
Then W came along, with his giant tax cuts, and instead of using the Clinton surplus to pay off the national debt, it re-inflated. Then the banksters crashed the economy, and it took most of Obama’s eight years to get things back on track. Deficits finally came back down to less than 3 percent of GDP, just in time to put the drunken sailors back in charge, and they couldn’t wait to pass their latest tax cut giveaway to the 1 percenters. Now, deficits are back up to 3.9 percent of GDP, projected by the Congressional Budget Office to hit 4.6 percent next year and in 2020.
We don’t need a bipartisan approach. We just need to put the adults back in charge, and this time leave them there for a solid 16 or so years.
We would be remiss not to observe that the adults in charge during the Clinton years were a Republican majority Congress.
Presidents can propose a budget, but it is the job of the Congress to pass one.
Clinton can take credit for listening to the adults, but not for reducing the deficit.
I guess we now know the difference
Between the goode olde tyme Republican Party and today’s bunch of Trumpeters. Too bad there’s no similarity between the two.
Really?
So, he also did not have the power to veto the budget? Nice try, but that is like saying “T” get’s credit for the success of the economy, seems that credit goes back 8-9 years ago and is shared by the Fed. Or is my history wrong?
Normally, a President has little effect for better or worse, on the economy. However it’s impossible to ignore the effect Trump’s trade negotiations and corporate repatriation efforts have had.
Clinton not only signed the cost saving budget, but you may recall he stated that the era of big government was over.
He was slippery, but not stupid. He saw which way the wind was blowing.
Ya Sure, You Betcha!
If that were the case, the deficit should be really low now. Instead, it’s going through the roof. Make that stratosphere.
It would seem that Clinton put a check on the GOP Congress. Except for financial deregulation, that was a bi-partisan deal, with GOP and Clinton’s finger prints all over it. But since that gets in the way of the “Clinton was a socialist” narrative, we’ll just not talk about that, OK?
But oddly enough, Bush blew the bottom out of the deficit by first, agreeing with Greenspan that a USA without debt would be a disaster, and second, putting two wars on the credit card, and then not withstanding the pressures that led to the second greatest economic collapse in history.
And today, in what is TRUMPeted as the world’s greatest economy, rather that matching spending and revenue, we have signed up for both record deficits and record spending, as well as loosening all of the possible financial restraints that were put into place just 10 years ago. Many of the same bozo’s who rode the flaming economy down last time are still in charge.
Whatever could go wrong with Republicans supposedly the adults in the room ?
It true: Bush did, in his second term, spend like a Democrat. It’s no surprise then that as one of his first acts as President, Obama doubled down on Bush’s disastrous TARP debacle.
And
Several hundred BILLION dollars on foreign wars in the first term was easily affordable?
Hindsight is….
Easy to criticize Obama at this late date. Remember when the GOP wanted to suspend the 2008 Presidential election campaign because the economy was on the verge of collapse? Trump inherited an absolute bed of roses compared to what Obama inherited in 2009. Everyone knows this and Trumpians avoid acknowledging it at all costs. Obama took the advice of the best he could find, left and right to steer us out of the GWB ditch upon taking office in 2009.
Come on! Spend like a democrat? Seems the budget in MN is balanced, and even has a few $ in the emergency fund! What by a democrat, could we please address facts and reality and quit with the political “hogwash”.
What are we spending our $ on, and what are we getting for them, note the GOP just passed $770+ B for defense (Most any economist will tell you its mostly dead end wasted $) does zero for infrastructure but lines the pockets of the military industrial complex (read wealthy stock holders).
Actually, you would be remiss (or just ignorant of the actual facts) if you give the Republicans any credit at all. The budget changes that led to the balanced budget occured during the first two years of Clinton’s presidency when there was a Democratic congress.
Actually, to be fair, Bush the elder was an adult too and his tax increases helped pave the way as well. But the congressional Republicans Clinton contributed nothing.
What absolute nonsense
Trump (and Bush before him) blew up the federal deficit with tax cuts for the rich and corporations. The idea that it should be fixed with “entitlement reform” a/k/a cutting Social Security and Medicare, is offensive.
It Takes Two
Totally agree that the Republicans need to follow up their talk of fiscal responsibility. But we’ve never seen a program that the Democrats never want. Add to it that the nation’s debt doubled under Obama, most of it set up when the Dems had super majority of Congress in Obama’s first 2 years. Dems have proved they don’t know what a balance sheet is but want to continually tax and spend, pushing everyone’s Tax Freedom Day later and later.
Add to it that the Dems seem to always like to rile up issues but never do anything other than put up a big stink about (like immigration). Other than raising taxes, what other plan do Democrats have? Nothing. That ticks people off.
Still, both sides need to just figure this out as they are in this together. The government takes in record amounts of tax revenues yet we are still going deeper in the red. Merely pointing at the Republicans alone on this is a lame excuse.
Too Funny!
Stop it! You’re killing me! Where to begin?
Obama had a 60 vote Senate for about 12 minutes. Remember how long it took to seat Al Franken? And about 12 minutes later, Ted Kennedy died. That’s a little short of two years.
The deficit doubled under Obama? After the economy tanked under Bush, who had a net zero on job creation. No joke: what was the trajectory of the debt in Obama’s 2nd term?
Democrats don’t know what a balance sheet is? Seriously? You better check on the deficit at the end of Cinton’s term. Did you live in MN in the 2000’s? If not, take a look at the balance sheet when Pawlenty left Saint Paul for The Swamp.
Here’s some programs Democrats don’t like: eliminating the estate tax, and tax giveaways for the wealthiest among us and corporate America.
“Obama Doubled the debt”? Hogwash alert.
Please review the supplemental (off budget) expenditures of the dual war Cheney and Dubya put on the old credit card. Also review how much of the cost of the Afghan and Iraqi war costs have been paid. You’ll find we haven’t even paid off. The rising debt during Obama came from two wars he didn’t start and tax cuts he didn’t give. Those tax cuts were Dubya’s, who thought they were a good idea.
Those immense costs, including the cost of munitions, war-torn destroyed aircraft and equipment, humvee “armoring”, and many many medical casualties- ARE STILL UNPAID.
War casualties, among the worst of which were the head wounds suffered from asymmetrical warfare, land mines and urban fighting, are also UNPAID. These are not “Obama’s debt”, he couldn’t even get a budget out of the Rs (see the budget control act).
Keep in mind these injured service people are still in need of VA care, and the Pentagon does not pay for the men they break. Homeless vets also ignored by Rs after their war is done with them. IT IS A COST TO BE BORNE BY WAR MAKERS. “oil will pay for it” we’ll be greeting as liberators”.
Dems did have a 2 year window majority with Obama. The Dems gave us the Affordable Care Act which did not raise the debt one cent and gave millions of people hope.
Get off the mythical “both sides”are the problem. They are as different as night and day. No one need be confused.
Republicans stand for deficit spending, reduced government effectiveness, cruelty, Trump bullying threats and treaty shredding, trade agreement destruction and injury to every poor old or sick person in the country. Yesterday Trump announced that the Palestinians have been cut off from US aid monies they need just to survive, while we continue to sell weapons and targeting expertise to the Saudis who are bombing children in Yemen who are already starving.
We need to Make America KIND Again. The Rs have no intention of stopping their assaults on decency. The least you could do is acknowledge: Obama was never our big problem.
Obama in fact was the best President we have seen since Truman.
“The Dems gave us the Affordable Care Act which did not raise the debt one cent”
And all the subsidies were paid for with what, non-tax money? And the increase in people on Medicare costs the Federal government nothing? Since Medicare for all costs the country nothing, maybe I should get on board.
The ACA was paid for by a variety of spending cuts (principally changes to reimbursement rates and Medicare Advantage plans which failed to cover people more cheaply than traditional medicare) and tax increases (the individual mandate, high-income surcharge, medical device tax, etc.).
False
If you have paid attention, and care about facts, you would know that the Democrats understand a balance sheet far better than Republicans. Runaway deficits started under Reagan and continued under Bush. Under Clinton, the budget was balanced. Bush blew that up with his tax cuts and wars. Obama brought the deficit down over time and the initial bump was the result of Bush handing Obama an economy in the midst of a crippling recession.
Not a lame excuse. Just the facts.
Debt and deficit dynamics are different
People (who always seem to be Republicans) who charge Obama with “doubling” the national debt miss something basic. As long as there is an annual deficit, the debt will increase. So if we want to reduce the national debt, we must reduce and ultimately eliminate the annual deficit. Actually, the national debt has increased under every president since Coolidge. The way to evaluate individual presidents is on how much progress occurred in reducing the annual deficit. Clinton, alone in modern times, has produced a balanced budget. In Obama’s two terms the annual deficit was reduced by two thirds. In contrast, it exploded under Reagan, Bush 43, and now Trump.
It’s the Republican Way
When a party gives themselves the name Conservative and claims they are fiscally responsible, deficit hawks, party of family values, for freedom of speech, for freedom of the press, for freedom of religion, and for voting rights but don’t live it, it makes them the party of hypocrites.
Fiscally Responsible, reference George W. Bush who put a war on a credit card.
Deficit Hawks, reference the two trillion the GOP was eagerly willing to add to the US deficit.
Party of Family Values, the GOP loves to mess with family values right into the bedroom.
Freedom of Speech is a Constitutional right that is a big joke for the GOP, reference the current occupant in the White House.
Freedom of the Press is a Constitutional right and another joke when it comes to the GOP. Contrary to Trump’s proclamation, the press is NOT the “Enemy of the People”, it too is a Constitutional right.
Freedom of Religion is a Constitutional right, that is if you are not a Muslim or some other religion the GOP doesn’t like.
Voting Rights are covered by the Voting Rights Act of 1965. Good luck voting if you can catch up with all the things the GOP does to keep you from voting especially if you are non-white. Changing voting times, locations, dates, requiring ID’s even though claimed voter fraud can’t be proven, etc.
To the GOP, America is keeping track of your hypocricy. Your words no longer have any meaning. Let us know when you are ready to work across the aisle in a meaningful manner. America is at its greatest when we work together.
A good start would be to stop listening to
This kind of crap: “….the significant tax cuts for both individuals and corporations were projected to be repaid by increased economic growth due to the projected stimulus resulting from the cuts.”
We’ve heard it for decades, its been proven over and over again not to work, so please let’s stop acting as if its Real, its not. Tax cuts don’t pay for themselves, they never have and they never will.
Tax cuts
If debt were really a problem, we wouldn’t be cutting taxes in a time of prosperity. It’s as simple as that.
There were no tax cuts
Once the money is spent, we all have an IOU. Taxes weren’t cut, they were delayed. The money spent does need to be paid back some day despite the payday loan which gave you and I a bigger paycheck in the short term.
I don’t know what we’d do without management consultants?
The fatuous nature of the: “Laffer Curve” (the idea that tax cuts pay for themselves by promoting economic growth) has been a documented fact for decades. These tax cuts were never anything more than magical thinking, and they ALWAYS blow up budgets and plunge us into more debt. This is why the concept of fiscally responsible Republicans is an oxymoron.
Slocum appears to be doubling down on the magic when he declares that we have a spending problem that’s causing our debt and provides a list of stuff we’re presumably spending too much on.
Look: if you’re worried about a debt, you pay it off. You would think a management consultant could make that observation since it’s an elementary budget fact. If you keep reducing the revenue you need to pay off your debt (i.e. tax cuts) you won’t have the funding you need pay off the debt, and the debt can only grow as you continue spending. How is this not obvious?
This is a manufactured crises. As a nation we’ve faced debt like this before and we simply paid it off, and we did so at time of huge growth in government spending. By the way, another fact we KNOW is that unlike the magical promises of the Laffer Curve, government spending actually does boost the economy, if it’s spent properly.
When did this country have a $21 trillion dollar debt before? What date was it paid off?
Actually, that $21 trillion figure includes the public debt. The actual national debt is closer to $6 trillion. In 1950 we had a post war national debt of $2.5 trillion (or something like that) which worked out to 117% of the GDP. That consistently dropped to a low of 32% in 1981 under President Carter, and then began rising to the current levels starting with Reagan. The debt now stands at 102% of GDP which is actually lower than the post war level.
Spending
Do we have a spending problem or do we have problems that require spending?
The fact is, the population of our country is getting older. What that means is that as a nation our health is declining requiring requiring more and more expensive health care. That’s what’s driving our spending increases. We don’t, as Republicans imply but do not say, grow older so we want to spend more on health care.