Here’s a fresh entry in the file of misleading half-truths from politicians who surely know better: Treasury Secretary Janet Yellen recently touted how the Biden administration is on track to cut the federal budget deficit by $1.5 trillion this year.
Yellen is an economist with a Ph.D. and the former chair of the U.S. Federal Reserve and Council of Economic Advisers. Yet she left unsaid the other half of the equation: The deficit is indeed plunging this year, but only because the COVID-19 relief spending that sent it soaring in the previous two years is expiring.
More importantly, and also unsaid by Yellen, the long-term outlook for the deficit remains dire.
Without a drastic change in direction, the deficit will soar to the point that it enfeebles the country and hamstrings future generations.
That unfortunate truth can be downloaded in black-and-white from the Congressional Budget Office. Every year, this nonpartisan agency projects the deficit and other key budget indicators, based on current laws governing taxing and spending.
No surprise, the news from CBO is horrifying.
If Congress keeps going the way it has been for the next 30 years, the U.S. will be severely limited in its ability to respond to crises, defend itself and otherwise keep its financial commitments.
For decades now, the government has spent more money than it takes in. Except for brief interludes when it reports a temporary surplus, deficit spending has been the rule, and it’s getting worse.
In the coming 30 years, the U.S. is on track to overspend at roughly double the pace of the past half-century, the CBO reports.
Just like a household, the government goes deeper into debt when it overspends year after year, and the amount borrowed in relation to economic output is also expected to nearly double over that 30-year period the CBO examined. To service its debt, the government will be obliged to pay more and more in interest payments, much of it to foreign investors such as China, which leaves less for other priorities.
The late Charles Schultze, economist at the Brookings Institution and Jimmy Carter’s Chief White House domestic policy adviser, used to compare deficit spending to termites eating away at the woodwork. Someday, the homeowner who ignores the termites will step out on the porch and fall rightthrough. Businessman Ken Griffin made a similar point in an interview published in the Tribune’s opinion section this week.
It’s depressing to think that those in positions of authority who know better are doing nothing to stop the termites.
If you’re from Illinois, this termite analogy probably sounds familiar. Illinois’ public pension systems are on a similarly unsustainable track. Unlike the federal government, Illinois can’t print money and it has less capacity to borrow, so the reckoning will come sooner — and it will surely come, unless those in power change course.
At the national level, Democrats have made no secret of their willingness to tax and overspend, and the GOP’s record is nearly as bad.
During the Obama administration, deficit hawks such as former House Speaker Paul Ryan, R-Wis., warned, accurately, about the trillions of dollars that America doesn’t have — but spends anyway — on entitlements. He stuck his neck out to propose budget solutions, including a revamp of Medicare that would use a voucher system to provide subsidies for seniors to obtain private insurance. Instead, the U.S. got Obamacare, and the overspending kept on piling up.
We understand that politicians live to make lofty promises and pay off donors and constituents. Few want to be associated with responsible budget-cutting proposals that would tick off some people. And they especially don’t want to touch the “third rail” of Medicare and Social Security.
In the end, Ryan was unable to sway his party to do the responsible thing. Deficit hawks gave way to former President Donald Trump, who (like other modern GOP presidents) presided over a massive increase in deficit spending.
Who is today’s principled minder of the budget? It’s a commentary on the sad state of both parties that the most prominent pol speaking out about what needs to be done is Ron Johnson, best known for making loony statements.
The GOP senator from Wisconsin has shamefully pushed vaccine and election misinformation. He has little credibility, and no one is following his lead, but at least he raised a critical issue.
In an interview this month, Johnson suggested that Social Security and Medicare be eliminated as federal entitlement programs and instead become classified as discretionary spending, which would subject the programs to congressional approval on an annual basis. Hell will freeze over before that happens, but Johnson is right that those programs, representing a huge part of federal spending, are on autopilot into the stratosphere.
After the predictable political fallout rained down, a spokeswoman for Johnson explained his point better than he had: “Without fiscal discipline and oversight typically found with discretionary spending, Congress has allowed the guaranteed benefits for programs like Social Security and Medicare to be threatened.”
That’s exactly right, and shame on those too cowardly to fight back against the red ink before it’s too late.