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 via taxes, 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.
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 Obama and 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 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 is too late. Endless deficits and rising debt are not responsible public policy.
About The Writer
Alexander R.M. Boyle (email@example.com) is a retired vice chairman at Chevy Chase Bank.
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