Republicans’ reckless rush to open the spending taps can only end in tears
After two government shutdowns in a month, the passage of a two-year budget by Congress must appear nigh-on miraculous. The trouble is that Washington is not in the business of manufacturing miracles. The budget bill was passed because everybody, other than future American taxpayers, got exactly what he or she wanted. Instead of the hard business of making choices, the people’s representatives decided that mortgaging our grandchildren’s future was the best way to ensure a smooth glide path to re-election in November’s midterms.
The bill included disaster relief by the barrowful, extra military spending, extra healthcare spending and agricultural subsidies.
It also raises the debt ceiling through March 2019 and brings back a host of tax exemptions which had expired. I, personally, am deeply grateful that we were able to squeeze in extra tax breaks for racehorse owners – how else could we be certain of the country’s bright future?
From this year onwards, the US is projected to run trillion-dollar plus annual budget deficits, adding to the already groaning national debt. For the first time since the end of the Second World War, we can expect to see debt rise above 100 per cent of GDP – roughly the same level as Greece before the global financial crisis.
Those estimates are based, by the way, on fairly rosy economic productivity forecasts. Should growth not hit three per cent per annum (the ambitious target laid out in White House planning documents), we’ll really be in trouble.
The White House released its own budgetary wish list for the 2019 fiscal year last Monday; as it is the House of Representatives and not the White House which is constitutionally mandated to mind the country’s purse strings, it really is just a wish list. But it is an expression of the spendthrift spirit of the times. This administration would prefer to see more infrastructure and military spending even than what is currently on the table, without much clarity on where to source those funds, or on what, exactly, would be accomplished with them.
This simply confirms what many inside the Republican Party have long believed: Donald Trump is not one of us. He’s a tax-and-spend Democrat of the liberal New York order, perennially of the assumption that the money will come from somewhere. The difference is he’s also enthusiastic about tax cuts. The passage of a major personal and corporate tax reform bill before Christmas was heralded as great news for the economy, injecting fresh confidence into the business environment. But after passing a bill which reduces federal revenues by $1.5trillion (£1.07trillion) over 10 years, one must make equal and opposite cuts to federal outlays.
It appears that no one is willing to make those cuts. The president’s first instinct when he encounters a problem is to spend his way out of it. This is not entirely surprising, given that the man has no political capital to speak of, no friends on Capitol Hill and no favours to call in – so when he wants to nudge policymaking in a
at telegraph.co.uk/ opinion certain direction, he encourages the House of Representatives to whip out the national chequebook, fiscal continence be damned.
More than his confusion about the limits of his office, more than his reported boredom with the constitution, more than his swarm of wholly inappropriate and inept staffers gnawing their way through Washington like a termite infestation, this is the real problem with electing a total outsider to the most powerful political job on the planet. He has no mechanism for governing which does not involve increasing the national debt.
The deficit hawks left in Congress appear to have had the fight knocked out of them. Rand Paul is now the lone voice on the Hill squawking about budgetary responsibility, much to the chagrin of his colleagues. Not 10 years after the Tea Party swept to power on a tide of populist outrage about president Obama and speaker Nancy Pelosi’s profligate spending, the Republican Party has signed up to the same “buy now, pay later” formula of governance. Fiscal prudence, apparently, is only the watchword when someone else is in power.
One need not engage in crystal ball gazing to guess what we’re likely to reap from such reckless behaviour. It’s bad enough to borrow extravagant sums of money without a concrete plan for repayment; it is far worse to pile extra debt on top of what is already owed. Nothing less than the full faith and credit of the United States is at risk here; the legitimacy of our political leadership is already beyond salvation.
Molly Kiniry is a researcher at the Legatum Institute
It’s all very embarrassing for Sadiq Khan, the Mayor of London. Not only is the body that runs transport in the capital on his behalf in crisis, facing a deficit of almost £1billion following his grossly irresponsible and Corbyn-esque promise to freeze fares, but the number of people using that transport has fallen too.
It can’t be emphasised enough how shocking this is. Londoners have been fed bullish forecasts about demand for trains, the tube and buses for years, and the Mayor’s office only recently set out in great detail its dream of a city essentially free of cars, part of a country-wide obsession with planning away individualised mobility in favour of collectivised transport. Khan will be hoping the drop is temporary. The alternative – that public transport usage has peaked – would shake his ideology to the core.
This extends beyond the capital. Regional rail operators are in trouble as the number of passengers is not rising as expected after decades of growth. Bus use is falling in large parts of the country. Professor Tony Travers points out that passenger numbers in New York and Paris are flatlining, at best, too.
What is going on? A variety of explanations are offered, from the quality and cost of public transport itself, to changing behaviour (a rise in home-working, or an increase in the use of taxi apps like Uber). A hidden recession in the UK, not picked up by
Fiscal prudence, apparently, is only the watchword when someone else is in power
Khan will be hoping the drop is temporary. The alternative would shake his ideology to the core
at telegraph.co.uk/ opinion the official statistics, seems unlikely and the population is still growing.
But if falling usage persists, admittedly a big if, a zeitgeist will be dead – and well before we once thought, with the exciting future of autonomous electric vehicles still many years away. The implications are enormous. With HS2 already indefensible, its cancellation will become even more urgent. Countless smaller projects will have to be re-examined for whether they remain cost-effective in a very different transport environment.
Voters will have to ask searching questions of their representatives. Schemes to get everyone on public transport are often promoted on the basis of “efficiency”, but that argument only avoids being sinister if officials can claim that their policies are enabling people to more easily do what they already want to. If they persist in making it impossible to use cars as, all the while, public transport usage declines for reasons other than cost, it becomes harder to deny that they’re creating inconvenience for ideological ends.
The risk is of a Leftist backlash. Even if public transport usage is falling because of secular trends – more working at home, more online shopping, businesses moving outside our great cities, cheaper taxis – expect calls for subsidies to be increased to boost demand artificially. Germany is considering introducing entirely free – taxpayer-funded – buses and trains, an idea Labour might find attractive.
But this would be to throw good money after bad. Far better to take this as a lesson in the dangers of hubristic central planning, and a reminder that officials are rarely as far-sighted as they think they are.