Why Federal Deficit Spending Will Never Be Fixed. Ever.

Rand Paul is right. Neither party cares about the deficit enough to cut their own programs.

If there was any notion that the Trump Administration was fiscally conservative, those beliefs should be reconsidered in light of last week’s bipartisan spending deal and the president’s spending proposals from the State of the Union speech. Despite the Republican victory on tax reform, it seems that the party is veering toward massive spending increases rather than fiscal restraint and entitlement reform.

Rand Paul (R-Ky.) was one of the few congressional voices that spoke out against the spending bill. In a speech on the Senate floor, Paul described why Congress is unlikely to ever resolve the problem of deficit spending. Ever.

“The right cries out, 'Our military is hollowed out!' Even though military spending more than doubled since 2001,” Paul said. “The left is no better. Democrats don't oppose military money as long as they can get some for themselves... for their pet causes.”

“The dirty little secret is that, by and large, both parties don't care about the debt,” the senator charged.

​The truth that Paul stumbled upon is that neither party can spend taxpayer money on its own. The Democrats want to spend on entitlements and social programs, but don’t have the votes by themselves. The Republicans have their own priorities, among them the military and up to $67 billion for President Trump’s border wall. Even though they have majorities in both houses, the Republicans don’t have the votes to pass a budget on their own either. On the other hand, when both parties come together in a bipartisan compromise, they have enough votes to spend like the proverbial drunken sailor.

Neither party sees their priorities as frivolous. Both see themselves as patriotic lawmakers looking out for the wellbeing of their constituents. They agree to each other’s priorities to secure their own and the deficit goes up and the national debt continues to mount.

There have been pauses in the trend. When Republicans won control of the House in the Tea Party wave of 2010, they kept a tight grip on the federal checkbook. Under Speaker John Boehner, the Republicans reduced spending in real dollar terms and reduced the deficit by 70 percent, thanks to the sequester’s spending caps. Nevertheless, the borrowing continued and the debt continued to grow, albeit at a slower rate. In the late 1990s, a booming economy paired with spending cuts actually led to federal surpluses for a few years.

By the end of Barack Obama’s second term, the federal debt had almost doubled. The US debt to GDP ratio reached 108 percent. This is far behind Japan with a 240 percent ratio and Greece at 180 percent, but the level of debt is generally acknowledged to be at a serious problem. The Keynesian ideal of deficit spending in times of crisis has given way to deficit spending to avoid a financial crisis.

Where Rand Paul is incorrect is in his hostility to military spending, a constitutional mission of the federal government. Paul argues that “military spending more than doubled since 2001,” but fails to consider how much the world changed on Sept. 11, 2001. Two wars and numerous missions against Islamic terrorism are only the most obvious aspect of the problem. Chinese and Russian expansionism represent serious Cold War-like threats.

In 2016, under President Obama, military leaders said that sequestration was a serious threat to military readiness. Budget cuts have led to difficulties in replacing and upgrading equipment. Financial limitations have also impacted training and troop retention.

Military spending is costly, but it is not the largest share of the federal budget. Defense and security spending (including veterans programs) make up only 20 percent of federal outlays. Over half of the federal budget is made up of health care spending (28 percent) and Social Security (25 percent). It is entitlements that are breaking the federal budget.

Democrats may get the lion’s share of the blame for entitlement spending, but the truth is that it is a bipartisan problem. Conservative voters claim to favor spending cuts, but quickly change their tune when the discussion moves to reforming Social Security. They have bought into the fiction that their “contributions” to Social Security are held into an account for when they retire. In reality, Social Security taxes are quickly spent on current retirees as soon as they are received. (If you think your payments to Social Security are a voluntary “contribution,” try not paying them.)

Speaker Paul Ryan is one of the few politicians of either party to dare to even mention entitlement reform. For his bravery, he is shown in Democrat ads pushing an old lady off a cliff. His own party was no better. When Ryan voted for the 2013 budget deal that included cuts in military retirement pay, he was skewered by Republicans even though the bill was supported by military leaders.

In the end, Rand Paul is right. Neither party cares about the debt, at least not enough to allow cuts to their favorite programs, although they are more than willing to cut the other party’s pet projects. The minority party becomes a deficit hawk to use the deficit as a club to beat their opponents and roles reverse when the parties change control. The few politicians who want to make real spending reforms are opposed by both parties.

There will be no spending reform for the foreseeable future. The US government will continue to spend like a billionaire’s wife in Saks Fifth Avenue as long as it can borrow. With the dollar maintaining strength and few other bastions of stability for world investments, many assume that purchases of treasury bonds will never stop.

But one day, sooner or later, interest payments will combine with other budget items to exceed the government’s ability to borrow. The government will not be able to pay its bills. When that day comes, members of both parties will have to get serious about spending cuts regardless of what their voters think.

Comments
No. 1-5
NCMike
NCMike

Clearly, the federal government will never fix itself. That's because the federal government is the PROBLEM, not the solution. The SOLUTION is the Constitution; particularly Article V. The STATES can fix this if we work together. Or we can just wait for the inevitable collapse. www.conventionofstates dot com.

CoachTD
CoachTD

The sequestration was the first serious attempt to rein in spending in 20 some odd years. The previous attempt was Gingrichs contract. Americans and hence their politicians really have no discipline or willingness to restore sound financial order. What’s required is a Dave Ramsey type approach to spending but nobody wants to go there. Obamacare did nothing to address the cost of healthcare. It was designed to expand and assist the healthcare insurance industry. Who incidentally were just bailed out via the latest Republican budget. This proving the authors point.

johntfs
johntfs

Military spending should be (and has been) reconsidered in terms of its priorities. While Vladimir Putin is evil and Kim Jung Un is evil AND crazy, we're not in danger of seeing a Red Dawn over Amerika any time soon. Figure our military is mostly going to do what it's been doing for the past few years for the foreseeable future - anti-terrorism and military police functions. We don't really need a super-ginormous Cold War-era force to do that, so there area that can be re-prioritized and, yes, cut. That all said, Defense and even Social Security spending isn't really the problem. Social Security spending will expand over the next 20-30 years because of the aging Baby Boomer but it will likely reduce and stabilize as the Boomers die off. The thing that's really going to kill us, deficit-wise is the Health Care spending. That just keeps going up. While Obamacare is hated here, it was at least a failed attempt to rein in health care costs by getting more people insured and keeping them from using emergency rooms as free clinics.

etbass
etbass

The military is not immune to waste just because their mission is critical and a defined function of the federal government. Limited funding leads to improved spending habits, innovation and needed reform. If you never squeeze a government agency with "less than requested" funding, regardless of that agency's mission, it will never self-reform. By its nature, there is never a convenient time to limit military spending for necessary reform. Therefore, it just has to be done. I am not opposed to additional military spending, but I bet a good effort could get at least 20% savings with no drop off in readiness and performance just be streamlining, innovating and removing waste. With the military, some things are worth paying more for, like domestically sourced equipment. We simply can't trust many foreign corporations with out technology and we need to be able to produce those good here in case of a worldwide military conflict. The bigger threat to our military is allowing it to be turned into a social experiment, instead of a deadly fighting force. That is a much more serious threat, and much harder to correct, than insufficient spending.

etbass
etbass

I have to agree with most of that. I think the bigger problem with spending so much is the power and control it gives the government over just the dollars themselves. The debt is an issue that will one day bust and become a major crisis (whether that is in 1 year or 100 years, I don't know). However, the biggest problem is that every time the federal government spends another dollar, it puts another hook into a person or company, creates another dependent or market distortion or otherwise eliminates and restricts liberty. Spending gives the government power and it is how the federal government has exerted almost complete control over the states and local governments. If the federal government doesn't like the way a state or locality does things, they simply pass a massive spending bill and tie strings to it that require the smaller governments to conform. Then "we the people" demand that our politicians secure us our fair share of the government pie. It is about power and control, not helping and doing.

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