Trump keeps fo­cus­ing on the econ­omy, but not on the deficit

Baltimore Sun - - COMMENTARY - By Alexan­der R.M. Boyle

By now, many are aware that our fed­eral gov­ern­ment ended last year with a deficit that sur­passed $1 tril­lion and a na­tional debt of more than $23 tril­lion.

Dur­ing his cam­paign for the pres­i­dency, Pres­i­dent Don­ald Trump’s in­con­sis­tent boasts about our fis­cal af­fairs ranged all the way from as­sert­ing that he would “pay off the en­tire na­tional debt” to call­ing him­self “The King of Debt, “ap­par­ently a ref­er­ence to his ag­gres­sive use of lever­age in his real es­tate in­vest­ments. It’s now clear that the lat­ter pre­vailed.

Very lit­tle at­ten­tion has been given in the press to the sig­nif­i­cance of a $1 tril­lion fed­eral deficit at a time when the econ­omy is grow­ing and un­em­ploy­ment is at a his­tor­i­cally low level. It should re­ceive much more at­ten­tion.

Politi­cians of all stripes seem to be­lieve that the gen­eral pub­lic views deficits and debt as ab­stract con­cepts, and folks’ eyes tend to glaze over at such com­plex and un­pleas­ant sub­jects.

That just means we must do a bet­ter job of ex­plain­ing the true sig­nif­i­cance of these is­sues. We have to make sure that people un­der­stand that when the gov­ern­ment spends more each year than it takes in in taxes that we have a deficit. This deficit then adds to the na­tional debt, now over $23 bil­lion.

Do “deficits” and “debt” re­ally mat­ter, or can we just ig­nore them? In the past, our po­lit­i­cal lead­ers felt that deficits and debt were important. “Fis­cal re­spon­si­bil­ity” was a term gen­er­ally em­braced by both ma­jor par­ties, es­pe­cially the Repub­li­can Party. In the 2009-2010 time pe­riod, when the ad­min­is­tra­tion of Pres­i­dent Barack Obama en­acted a bold stim­u­lus (deficit) plan to help the econ­omy re­cover from the near eco­nomic col­lapse of that time, the Repub­li­cans cried foul, claim­ing that there would be a fi­nan­cial cri­sis.

The Obama ad­min­is­tra­tion was able to phase out the stim­u­lus pro­grams and in­crease cer­tain tax rev­enues in such a way that the an­nual deficits came down sub­stan­tially in his sec­ond term. Thus, the gov­ern­ment bor­rowed less each year as the econ­omy im­proved.

The Trump Ad­min­is­tra­tion took a dif­fer­ent ap­proach. Nor­mally deficits or stim­u­lus spend­ing by the gov­ern­ment are only used when the econ­omy is weak and in re­ces­sion. In De­cem­ber 2017, the Trump ad­min­is­tra­tion and the Repub­li­can con­trolled Congress cut taxes, par­tic­u­larly ben­e­fit­ing business and the wealthy, at a time when the econ­omy had al­ready re­cov­ered from the “Great Re­ces­sion” and was show­ing steady, sus­tained growth.

They jus­ti­fied this large and per­ma­nent tax re­duc­tion on the the­ory that it would pay for it­self with greater rev­enues. Many noted econ­o­mists ques­tioned this as­ser­tion.

They were right.

In fact, the non­par­ti­san Con­gres­sional Bud­get Of­fice has just re­leased its lat­est eco­nomic and bud­getary fore­casts show­ing that deficits will con­tinue to rise from the cur­rent $1 tril­lion level as far as the eye can see. The na­tional debt will in­crease to a level of $33 to $34 tril­lion by the end of this decade.

Fed­eral Re­serve Chair­man Jerome Pow­ell, among many oth­ers, has ex­pressed alarm re­gard­ing these in­creas­ing an­nual deficits and debt lev­els now facing us. In­ter­est on the na­tional debt ex­ceeded $400 bil­lion in 2019 and will con­tinue to grow with the debt. Should in­ter­est rates in­crease in the years ahead as is likely, in­ter­est on the debt will be­gin to over­whelm the fed­eral bud­get.

Mr. Trump could per­haps take some credit if the $3 bil­lion of in­creased debt since he took of­fice were re­spon­si­ble for the ben­e­fits of eco­nomic growth, but the record does not sup­port this claim. In­deed once the econ­omy had re­cov­ered from the col­lapse of 2008 and 2009, eco­nomic growth has re­mained rel­a­tively con­stant at the 2% to 2.5% level un­der both Mr. Obama and Mr. Trump. Re­cently re­leased data from the La­bor De­part­ment shows that over 500,000 fewer jobs were added in 2018 and 2019 than orig­i­nally thought, mak­ing 2019 the weakest year of job growth in the past eight years. Job growth has been grad­u­ally slow­ing since it peaked in 2014. The pub­lic does not seem aware that Mr. Trump’s tax re­lief has done lit­tle other than widen in­come inequality and raise our an­nual deficits and debt.

The in­creas­ing debt bur­den which we are plac­ing on suc­ceed­ing gen­er­a­tions has gone be­yond the point of be­ing just a fi­nan­cial is­sue; it has now be­come a moral im­per­a­tive as well. Bor­row­ing to pay for a sig­nif­i­cant por­tion of our gov­ern­ment’s spend­ing and ex­pect­ing our chil­dren and grand­chil­dren to deal with the re­sult­ing bur­den is sim­ply wrong and can­not be de­fended.

It’s a bit like say­ing we can ig­nore the sci­ence of cli­mate change and let some­one else deal with the con­se­quences down the road. Sound fa­mil­iar?

The pub­lic needs a wake up call in order to fo­cus at­ten­tion on these po­ten­tially cat­a­strophic is­sues. We must urge our na­tional lead­ers to be­gin this dis­cus­sion, ex­am­in­ing ways to in­crease rev­enues and con­trol the growth of spend­ing be­fore it’s too late. End­less deficits and ris­ing debt are not re­spon­si­ble pub­lic policy.

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