Two data points explain the current debate in Washington on more rounds of COVID spending. The Biden administration’s repeated statements that “the risk is not…going too small, but…going not big enough” reflects a position Joe Biden publicly articulated while serving in the Obama administration a dozen years ago:
As to the cumulative effects of these policies, the budget resolution itself tells the tale, with its projected estimates of the total national debt over the coming decade:
(5) PUBLIC DEBT.—Pursuant to section 4 301(a)(5) of the Congressional Budget Act of 1974 (2 U.S.C. 632(a)(5)), the appropriate levels of the public debt are as follows:
Fiscal year 2021: $29,943,000,000,000.
Fiscal year 2022: $31,647,000,000,000.
Fiscal year 2023: $32,911,000,000,000.
Fiscal year 2024: $34,102,000,000,000.
Fiscal year 2025: $35,262,000,000,000.
Fiscal year 2026: $36,311,000,000,000.
Fiscal year 2027: $37,261,000,000,000.
Fiscal year 2028: $38,443,000,000,000.
Fiscal year 2029: $39,652,000,000,000.
Fiscal year 2030: $41,068,000,000,000.
To provide some sense of perspective, the most recent gross domestic product estimates show the size of the American economy at $21.5 trillion on an annual basis. In other words, our total national debt (including IOUs placed in the Medicare and Social Security Trust Funds) already exceeds the size of our economy. A decade from now—after an additional $13.6 trillion in deficits under the Democrat budget—our debt will approach twice the size of our economy now.
Contra Biden circa 2009, that’s not “spending money to keep from going bankrupt”—that’s already bankrupt.
Dishonesty with the American People
Without a doubt, many American families and small businesses are hurting due to the pandemic, and the lockdowns associated with it. These individuals and businesses deserve some level of assistance to overcome the government-mandated lockdowns, reopen their establishments, and get on with their lives.
But a spending spree that would give $5,000 in “stimulus” payments to a family of five making $250,000, or Obamacare subsidies to households earning $300,000, far exceeds the reasonable or even rational limits of federal aid. Rather, it epitomizes a myth that politicians of both parties have perpetuated for far too long: That the American people can have more government than we can afford.
Mitch Daniels, the former Indiana Republican governor and Office of Management and Budget director now heading Purdue University, eloquently made this case in the Washington Post last week:
I conclude, reluctantly and dejectedly, that it’s time to face the unpleasant facts. The past decade demonstrates amply that our political process is not capable of the kind of decisions that are necessary. The temptation to savage anyone proposing safety-net reform (the sine qua non of any serious fiscal rescue, really the only issue that matters) remains electorally irresistible and invariably effective.
Because politicians believe they can profit by attacking anyone who proposes changes to entitlements—e.g., Paul Ryan throwing grandma off a cliff—leaders in both parties have abandoned any attempts at reform, such that we may have passed a fiscal “point of no return.”
Three Inconvenient Truths
Daniels cited the “noble lies” that politicians have used over the years to avoid making necessary but unpopular fiscal choices. To correct three of the most popular misnomers:
No. 1: You Haven’t “Earned” Your Medicare Benefits: According to the Urban Institute (not exactly a home for firebrand conservatives), a single male making average wages who retired in 2020 paid in a total of $81,000 in Medicare taxes over his working life, but will receive a total of $229,000 in Medicare subsidies. Those gaps will continue to grow over time, such that a retiree in 2060—someone just starting his or her working life at present—will pay $133,000 in Medicare taxes, but receive $573,000 in benefits.
No. 2: Medicare Is Functionally Insolvent: Not least because of No. 1 above, Medicare has already exhausted its trust fund. In 2009, the program’s last trustees report before Obamacare’s enactment showed an insolvency date of 2017. In other words, for (at least) the past four years, Medicare has stayed afloat only because the tax increases and Medicare reductions included in Obamacare have been used to both fund that law and address Medicare’s solvency—an illogical budgetary gimmick born of government trust fund accounting.
This fiscal sleight-of-hand not only didn’t really improve Medicare’s fiscal condition, it also encouraged politicians to ignore the program’s underlying problems to this day. It also reinforces the pernicious Democratic policies that would raid Medicare to pay for other spending, whether the current “stimulus” bill or a single-payer health care system.
No. 3: Tax Cuts Don’t (Fully) Pay for Themselves: Yes, lowering tax rates, particularly on capital gains and investment, can unlock productivity gains in the economy that generate additional revenue. But that additional revenue only offsets part of the fiscal impact of tax relief, which is why conservatives must also work to reduce our unsustainable spending levels.
Politicians Reaping Americans the Whirlwind
Also last week, former House Majority Leader Eric Cantor, R-Va., took a tone similar to Daniels’s. In discussing Obamacare repeal in 2013 and the aftermath of last year’s election, Cantor in both cases blamed “an unwillingness to speak truth to power”—for politicians to tell their constituents facts their constituents didn’t want to hear.
Notably, Cantor’s exhortation for elected leaders to speak the truth didn’t include anything about the unrealistic and unsustainable fiscal promises politicians have made to their constituents for decades. In some respects, Cantor epitomized that problem, by his own admission nixing the chance of an entitlement “grand bargain” between then-House Speaker John Boehner, R-Ohio, and President Obama.
The rioting and violence at the Capitol a few weeks ago was both a horrific and tragic event in American history. Yet I fear the tumult throughout 2020 may pale in comparison to the not-too-distant future, when the American people finally realize their leaders have systematically lied to them for decades. To paraphrase the Book of Hosea, Congress and presidents have sown the wind—but on our current fiscal course, we all stand to reap the whirlwind.