You can budget – DC, not so much
If trends go on, you may feel financial squeeze
WASHINGTON – President Donald Trump’s acting budget director served notice to federal department heads as the administration put together its budget for the coming year:
The ax will fall hard on spending, so get ready to chop, chop, chop.
“Hard-working American families make these sorts of tough decisions every day,” Russ Vought explained in an article published last month on the website RealClearPolitics. “The president believes Washington should be no different.”
Get it? The U.S. government is just like you, struggling to make ends meet and forced to live within its means.
Except it’s not. And it doesn’t.
Trump budget, version 3.0
The Trump administration will send its third budget to Congress on Monday. As in previous years, the document will land with a thud.
In Washington-speak, it will be dead on arrival.
A few details have leaked out about the spending plan, which was delayed because of the 35-day government shutdown. The president said last fall that he would ask every Cabinet head to prepare for a 5 percent spending cut.
“Get rid of the fat, get rid of the waste,” he said at a meeting. “I’m sure everybody at this table can do it.”
Everybody but the Pentagon, apparently. The Hill reported the military will be spared from the budget ax.
Congress gets its say
One of the big ways the federal budget differs from yours: You and your family develop a budget without seeking input from 535 other people.
That’s not how it works in Washington.
The budget the president sends to Congress is just a starting point, a way for the administration to spell out its spending priorities. Lawmakers have their own ideas about how federal dollars should be spent, and since they seldom line up with the president’s vision, Congress usually shelves the president’s plan and writes its own.
The process becomes even more complicated when an opposing party is in charge, as it is this year. Democrats led by Speaker Nancy Pelosi control the House for the first time in eight years, while Republicans still hold the Senate and the White House.
Options you don’t have with debt
Like many Americans, the federal government spends more money than it has. So, like many Americans, it borrows money to pay its bills.
Lots of money.
The national debt surpassed $22 trillion for the first time last month, a milestone that experts warned is further proof the country is on an unsustainable financial path.
To put that amount into perspective: The median U.S. household income was $61,372 in 2017, according to the Census Bureau. If every American man, woman and child earned that median wage and gave every penny of it to the government, the total still wouldn’t pay off the national debt.
The federal deficit – the gap between the government’s income and expenses – grew by 77 percent over the first four months of the current fiscal year. It’s likely to total $900 billion this fiscal year and hover near or above $1 trillion for the next decade.
About 40 percent of the rise can be traced to the $1.5 trillion tax cut Trump spearheaded that took effect last year, as well as a two-year budget deal that increased government spending by about $300 billion. Growth in Social Security, Medicare and other expenses also swell the deficit.
Many struggling Americans are forced to contend with their own budget deficit. Americans owe a record $1.04 trillion in credit card debt – up from less than $854 billion five years ago, according to the Federal Reserve. On average, Americans owe $6,354 on bank-issued credit cards.
But the federal government has options that average Americans don’t.
If it needs more money, it can raise taxes. If it needs to borrow, it can get much lower interest rates than consumers can. If it hits its borrowing limit, it can simply raise that ceiling.
Individual Americans eventually have to pay off their creditors. When you die, your estate settles your debts. Since the federal government doesn’t go away, neither does its debt. It lives on and keeps accumulating.
Why you should care
For average Americans, the federal budget deficit may seem like a huge abstract number that has no effect on their daily lives.
It does. Or at least it can.
Debt not only suppresses economic growth, it suppresses future wages. The Congressional Budget Office projects that average income in 30 years will be $5,000 less a year if the national debt continues its trajectory.
That means average income for a family of four will drop by $16,000 over the next three decades if debt rises as projected, according to the Peter G. Peterson Foundation, a nonpartisan organization dedicated to addressing the country’s long-term fiscal challenges.
Rising debt and deficits can lead to higher interest rates. Those mean it will cost more to borrow money to buy a house or a car.
It may be more difficult to prop up financially strapped programs such as Medicare, which is projected to run out of money by 2026, and Social Security, which is likely to be insolvent by 2034, unless benefits are cut or other steps are taken to shore them up.
“The deficit should matter to anyone who cares about the future of America,” said Michael A. Peterson, CEO of the Peterson Foundation.
He said in a few years, interest will exceed what the government spends on children or defense, and it will total $7 trillion over the next 10 years. “Failing to manage this debt problem now makes it harder for all Americans down the road,” he said.