Category Archives: Debt and deficits

Red ink rising

Debt and deficits, Politics, U.S. Congress

Uncle Sam hangs on for webBy Steve Brawner
© 2016 by Steve Brawner Communications, Inc.

Let’s start this column with two words that sound like they might mean the same thing, but don’t.

“Deficit” and “debt” both refer to when the government spends money it does not have. The big difference is that “deficit” refers to a yearly shortfall, whereas “debt” refers to the government’s accumulated shortfalls. “Deficit” is the money the government added to its credit cards just this year. “Debt” is the money that was already there, plus the new deficit. Add it all together, and the national debt now equals $18.96 trillion, or $58,700 for every American man, woman and child.

Another difference is that sometimes the deficit goes down, but the debt almost never does. In fact, the last time the United States government owed less than it did the year before was 1957 under President Eisenhower.

The one-year credit card additions, on the other hand, have been mostly shrinking since 2009, when the red ink hit $1.4 trillion, or more than $4,600 for every American. That was the year the economy was tanking, the banks were being bailed out, and the United States was still very much involved in Iraq and Afghanistan. Fiscal year 2009 started Oct. 1, 2008, when President George W. Bush was still in office. Under President Obama, yearly deficits stayed above $1 trillion each year until 2013, when the deficit dipped to $680 billion. In 2015, it was $439 billion.

As Obama pointed out in his State of the Union address, deficits have been cut by almost three-fourths since their peak. But with that $439 billon deficit, the government in 2015 still added about $1,400 in debt for every American.

Here’s another way to look at those numbers. As illustrated on the Department of the Treasury’s website, www.treasurydirect.gov, the $1.4 trillion in 2009 was equal to all the debt accumulated over the years from 1790 until 1983 – almost two centuries of combined borrowing. The $439 billion the president bragged about was equal to all the debt accumulated from 1790 until 1972.

That’s better. But no, the state of the union is not strong in this area.

Have I depressed you yet? Here’s the kicker. This brief period of falling deficits is now ending, and the yearly red ink will start rising faster again. On January 19, the Congressional Budget Office projected that the 2016 deficit will increase to $544 billion. From there, yearly deficits will keep expanding so that by 2026, a decade from now, we’ll be back to $1.4 trillion, and that’s assuming Congress doesn’t do anything to make the situation worse, that the United States isn’t in the middle of another recession or war, or that interest rates don’t spike. At that point, the deficit will be 4.9 percent of the nation’s gross domestic product, double what it is today.

This is occurring for several reasons. In December, Congress increased spending for defense and other areas while making permanent numerous tax breaks that were “temporary” but routinely extended every year. Meanwhile, the debt is being driven over the long term by Social Security, government health care programs such as Medicare and Medicaid, and interest payments for the money already owed.

People don’t like to read sentences like that last one. Aside from interest payments, those programs are generally very popular because they are seen as benefitting the needy and/or deserving.

But I’m just telling you where the money goes. The government is increasing spending by $2.7 trillion from 2015 to 2026. Ninety percent of that increase is in those areas.

So that’s where we are: The debt is still increasing, and now, so are the deficits. For the foreseeable future, the government will keep going deeper in debt, and it will do so faster and faster.

There are two types of debt that don’t show up on a balance sheet. One is the debt we owe to our ancestors, who sacrificed much and sometimes everything to build a better life for us. We owe it to them to do the same for our children.

The other debt is to those children. We owe them better than this.

Related columns: Tax-cut-and-spend Congress.

Reducing debt and cures for cancer

Debt and deficits, Health care, Politics, U.S. Congress

By Steve Brawner
© 2016 by Steve Brawner Communications, Inc.

During the president’s State of the Union address Tuesday, there was an elephant in the room, and I’m not talking about the Republican Party, whose mascot is the pachyderm.

The elephant would be the $19 trillion national debt, ignored by President Obama during an hour-long speech, which was otherwise pretty good, and alluded to a couple of times by South Carolina Gov. Nikki Haley in her Republican response, which was also pretty good.

What was good about the State of the Union speech was its optimistic tone and its call for reason on issues both at home and abroad. The United States should identify and respond to threats, not inflate them so that it makes bad decisions out of fear. Its politics should be messy, not ugly.

However, the president’s only referral to the government’s red ink was to say that annual budget deficits have been reduced amidst other aspects of an improving economy.

That’s true, but while deficits have decreased, they’re still occurring each year, and still adding to the national debt. At the tail end of the Bush administration and the first half of Obama’s, the United States government was spending more than $1 trillion more than it collected each year – more than $3,000 per American per year, and at its worst, $4,000. According to the Congressional Budget Office, the deficit for fiscal year 2015 was $439 billion, or almost $1,400 per American.

Yes, that’s an improvement. We’re adding to the debt less quickly than we were before.

But during this prolonged period of economic growth, policymakers have failed to act to reduce future deficits. They haven’t make changes to the government’s retirement and health care programs that soon will help drive those annual deficits back to $1 trillion levels. They’ve failed to reform a tax code to juice the economy by, if nothing else, reducing the time we all spend doing our taxes. They haven’t created a sustainable method to fund the country’s infrastructure.

The economy is much better than it was in the midst of the Great Recession. Unfortunately, it remains dependent on debt – and worse, the kind caused by in-and-out spending, not investment.

That’s why potentially one of the most important paragraphs in Obama’s speech was tucked in the middle, when he said the United States should cure cancer.

That’s exactly the kind of investment that can make life better for Americans and help reduce all that red ink described earlier in this column. According to the National Institutes of Health, cancer cost the health care system $124.6 billion in 2010 and will cost $158 billion in 2010 dollars in 2020 – and that’s not including the impact of each invaluable life lost, nor the financial and emotional losses suffered by cancer patients and their loved ones. The disease often strikes people during their most productive years, or before they’ve even reached those years. All those things slow the economy, cost taxpayer dollars, and add to the debt.

At the same time we’re spending that kind of money to treat the disease, Congress recently appropriated $5.2 billion for cancer research this fiscal year, which is actually a raise from the previous $4.9 billion. That’s pretty good, but we could do better.

Since 2009, the national discussion over heath care has been about bureaucracies – what kind and how much. At some point, it would be helpful to talk about health care when we’re talking about health care. Curing the various types of cancer would be one of the greatest investments America could ever undertake. It would increase Americans’ ability to enjoy their inalienable rights of life, liberty and the pursuit of happiness. It would be a far greater service to the world than many of the things we’ve been doing since 2001. It would be a wonderful gift to future generations and sort of make up for the debt we’re passing down to them.

The research must take into account not only medical effectiveness, but cost-effectiveness. The NIH assumes in its analysis that new technologies and treatments will cost more, not less. So not only must cures be found, but costs must be affordable – both for Americans and for poorer countries.

We can do it. Americans put a man on the moon. Let’s find cures for cancer next.

Related: Who gets first dibs on Uncle Sam’s money? Its creditors, of course.

Tax-cut-and-spend Congress

Debt and deficits, Politics, U.S. Congress

Uncle Sam hangs on for webBy Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

Many Republican members of Congress, including all six members of Arkansas’ congressional delegation, have signed the Americans for Tax Reform’s pledge not to raise taxes, and mostly they stick to it. Many Democrats have signed a pledge not to mess with Social Security. But there’s no group asking members of Congress to pledge to reduce the national debt.

Much as I hate all these pledges, maybe there should be.

This past week, Congress rushed through two legislative packages that will make the national debt bigger. One was a package that permanently extended tax breaks that, in fairness, mostly were being routinely extended temporarily before. We’re now assured of adding $700 billion to the national debt over 10 years, whereas before we at least argued about it every year. All four members of Arkansas’ House delegation voted for the deal, which was consistent with the pledge they have signed.

And that wouldn’t be a problem, if Congress had voted to cut spending elsewhere to offset the tax cuts. Just as you and I ought to cut back on spending if we decide to take a job that pays less, Congress ought to cut spending if it cuts taxes.

Instead, Congress also voted this week for a $1.1 trillion omnibus spending package that increases spending by $50 billion. The 2,000-page bill is full of provisions that range from the important (allowing the U.S. to compete in the oil exporting market) to the mundane ($65 million for salmon restoration). It was negotiated by congressional leaders behind closed doors and then presented to the membership with little time for them to read it and nothing else on the table to avert a government shutdown.

To their credit, Arkansas’ senators, Sen. John Boozman and Sen. Tom Cotton, voted against both packages, which were combined in the Senate into one vote. In the House, Rep. Rick Crawford and Rep. Bruce Westerman get credit for voting against the spending package. Meanwhile, I can’t blame the two House members who voted for that package, Rep. French Hill and Rep. Steve Womack. Time was running out, there was no alternative, and many Republicans want to give new Speaker Paul Ryan, who helped broker the deal, a chance to succeed.

Also, the tax deal isn’t that much of a break from past policy. It mostly extended tax breaks permanently that were being extended temporarily year after year. Now at least we have clarity.

The problem is that once again, members of Congress voted to cut taxes, increase spending, and add to the debt because they don’t have enough motivations to behave differently. People often complain about “tax-and-spend liberals.” The truth is that most members of Congress often are “tax-cut-and-spend Republicans and Democrats.” And that’s why the national debt is creeping toward $19 trillion, or $58,000 for every American.

In signing the combined packages into law Friday, President Obama said, “I think the system worked.”

He’s right. The system worked perfectly. It did exactly what it was designed to do: Cut taxes, increase spending, and make the numbers work because the costs will be borne by future generations who don’t yet vote.

This has been going on for almost all of America’s history. According to the U.S. Treasury’s website, the national debt was $71 million in 1790, and then it dipped to less than $34,000 at the beginning of 1835, and it’s been pretty much rising ever since, until recently, when it exploded under your and my watch. It took about 191 years for it to reach $1 trillion and then needed 20 years to reach $6 trillion. Under the last two presidents, it’s grown another $13 trillion. As of Dec. 16, it was $18,796,279,678,290.28.

Two things can change this dynamic.

One is voluntary. Voters can elect fiscally responsible candidates. In office, those lawmakers must place as high a priority on future generations as they do on cutting taxes and increasing spending today. Would signing a pledge to reduce the debt help? It’s helped elsewhere.

More likely, there must be a mechanism, such as a balanced budget amendment, that makes it easier for elected officials to make responsible choices because, if they don’t, they’re breaking or at least skirting the law.

That way the system would work only when it does right by everyone – those who vote, those who don’t, and those who can’t because they’re too young or not yet born.

Budget deal puts off tough talk

Debt and deficits, Politics, U.S. Congress, Uncategorized

Uncle Sam hangs on for webBy Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

The good news regarding last week’s budget deal is that Congress didn’t wait until the last minute to work in a somewhat bipartisan fashion to avoid a fiscal crisis, and the results were not terrible.

You know there’s a “bad news” element to this, right?

Here’s what happened. The federal government was about to reach the debt ceiling, which is the statutory limit for how big the national debt is allowed to become. Congress reaches the ceiling every year or two, often squabbles about it, and then raises it. Outgoing Speaker John Boehner was determined to “clean out the barn” before new Speaker Paul Ryan took his place. So Congress passed the Bipartisan Budget Act of 2015, a two-year budget deal that took the debt ceiling off the table until March 2017 – after the elections are over and everyone has been sworn into their new terms.

The act provides $80 billion in sequester relief over two years – meaning it increased spending. The sequester was a creation of the Budget Control Act of 2011, back when the government was adding $1 trillion in debt every year. (This year, thanks in large part to a better economy, it will be about half that.) Basically, if Congress didn’t come up with a plan to reduce those deficits on its own, spending automatically would be cut for the military and for domestic programs by $1.2 trillion over 10 years. The idea was to make the provision unpleasant enough that Congress would do its job and create a better process. It didn’t.

The sequester has been the law of the land ever since. On the plus side, it has been the most effective method Congress has created to reduce spending in a long time. On the negative side, it’s not enough. The national debt has ballooned past $18 trillion, about $57,000 for every American. It 1980, it was $1 trillion. Also, the cuts do not represent a thoughtful, careful approach to deficit reduction. It’s kind of a hacksaw when what’s needed is a scalpel, though a big one. A lot of elected officials don’t like it because they want more spending for domestic programs, the military, or both.

So negotiators came up with that $80 billion while claiming that the extra spending was offset in other parts of the budget. According to the Committee for a Responsible Federal Budget, that’s only partly correct. Meanwhile, Congress added another $31 billion in spending to the Pentagon’s Overseas Contingency Operations war-fighting account, which is exempt from the sequester.

Using a war-fighting account as a slush fund to get around the sequester and increase government spending – that’s bad policy on a lot of levels.

Five of the six members of Arkansas’ congressional delegation – Sens. John Boozman and Tom Cotton, and Reps. Rick Crawford, French Hill and Bruce Westerman – voted against the deal. Rep. Steve Womack in Northwest Arkansas’ 3rd District voted for it, saying the deal is imperfect but the debt ceiling must be raised, that the act would increase military spending, and that it would allow members of congressional Appropriations Committees to do their work in more regular order.

There are arguments to be made against having a debt ceiling, which periodically creates an avoidable crisis that brings the United States government to the brink of default and makes the markets and the rest of the world wonder when this country will ever get its act together.

On the other hand, for all its flaws, it forces elected officials to confront the national debt on a regular basis. Now Congress and President Obama have made it a little easier to avoid that awkward discussion – sort of like a family that’s going broke that always finds excuses to avoid the real issues because the time never seems to be right. And this happened during an election season, which is precisely when the time should be right.

That conversation will be difficult, if it ever occurs. It’s going to involve asking tough questions about Medicare, Social Security, the military, and other popular government programs that most Americans want more of, and taxes, which most Americans want less of. Like anything on a budget that’s not balanced, the solution will involve some combination of having less of what we like and more of what we don’t.

For now, that conversation will be limited to the campaign trail – not a place where elected officials like talking about tough choices in detail, but it will have to do.