With Republicans like these, who needs Democrats?
Washington doesn’t have a party committed to spending restraint
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“A billion here, a billion there, pretty soon you’re talking about real money.” That quote is often attributed to the late Sen. Everett Dirksen. Whatever the provenance, the quote needs an update. It’s time to swap out “billion” and swap in “trillion” because from here on, it’s trillions as far as the eye can see.
That’s a relatively new thing. U.S. spending outlays did not breach the trillion-dollar barrier until the late 1980s, and we didn’t have trillion-plus deficits until 2009. But since then, the taxpayers have not seen a reversion back to merely nine-digit budgets and probably never will. That’s true for many reasons—aging demographics, rising interest rates, rising inflation, and the vicious cycle in which higher and higher proportions of the budget go to interest—which means more borrowing and more interest.
But perhaps the saddest reason to believe the trillion-dollar deficits may now be permanent is the almost complete collapse of the Republican Party as a serious force for restraint on government spending. The recent passage and signing of a $1.7 trillion spending package would not have occurred without significant Republican buy-in. Yes, there were the usual denunciations of the process by Republican leaders and pledges that next year, when they’re in control, things will be different. But who actually believes that anymore?
A shift of a few seats to the GOP amounts to different committee chairs, but a GOP willing to let this monster out of its cage will likely not produce any real reversal of direction with a few more votes. Let’s face reality. There simply is no party committed to real spending restraint in Washington. And although the GOP in the past has put some brakes on the spending, a generational shift has occurred and is, to some degree, accelerating. Big government spending grew under Donald Trump but didn’t start with him. In retrospect, George W. Bush was an unhesitant big spender, too. Although Reagan spent big, he seemed to treat increased spending as a necessary evil, reluctantly trading social spending for funding to win the Cold War.
Here is the new bipartisan consensus in Washington: gargantuan budgets with shortfalls plugged with excessive borrowing, and the whole thing financed by a combination of inflationary money creation and lending from foreign entities. It may not sound that way when you listen to politicians speak. But try hitting the mute button while watching C-SPAN and open the national debt clock in a separate window, and the truth will become evident.
What does this mean? It means that budgeting only has an escalator for now. The two recent giant leaps in spending were in response to emergencies, the Great Recession and the COVID-19 lockdowns (The Great Suppression). But even classic Keynesians believed that although the government should borrow and spend lavishly during emergencies, it should reverse course when the crises end. Nowadays, Washington never reverses on spending. Emergencies have ended and the spending has not returned to pre-crisis levels.
My friend Larry Kudlow often says that “Republicans are put on this earth by God to do one thing—cut taxes!” But while supply-side tax cuts are a good thing and can meaningfully change incentives, Milton Friedman was right when he said that it’s spending that matters the most.
Current borrowing is a giant tax on the future, and it threatens a future default. In an interview in 2003, Vice President Cheney told me that “Reagan taught us that deficit spending doesn’t matter.” With due respect, that’s not what Reagan taught us. He taught us that a demographically healthy country with debt-to-GDP ratio of only 20 percent could run large deficits if the policy environment is pro-growth. But none of those conditions hold true now. The harder truth is that debt doesn’t matter at all, right up until the moment when it is the only thing that matters. The GOP spending surrender means that the moment when debt is the only thing that matters may be coming even faster. We are spending ourselves into a disaster.
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