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Issues & Insights

It’s the Spending, Stupid

I&I Editorial

The current federal budget fiscal year still has two months to go, but the deficit is already bigger now than it was for all of last year, and heading to more than $1 trillion. Naturally, the Trump tax cuts are getting the lion’s share of the blame.

But the latest data on spending and revenues from the Treasury Dept. make it abundantly clear that it is out-of-control spending, not tax cuts, that are driving the deficit upward. Unfortunately, no one in Washington seems to care.

From October last year through July this year, total revenues climbed 3.4%. That’s faster than overall GDP growth, which means revenue growth is now outpacing the economy.

Corporate taxes climbed 3%, payroll taxes are up by more than 7%. Both are signs of a healthy economy and a strong labor force – which is exactly what backers of the tax cuts predicted would happen.

True, customs duties are up sharply as well, thanks to President Donald Trump’s tariffs, but they account for a relatively small portion of federal revenues.

Now take a look at the spending side.

Federal outlays have rocketed up 8% so far this fiscal year, compared with the same months last year. That means spending is climbing at about six times the rate of inflation.

A chunk of this is from the increase in Defense spending, which is up by close to 10% compared with last year.

But two-thirds of the entire increase in spending is due to just other three items in the budget: health care spending (Medicare, Medicaid, and Obamacare), Social Security, and interest payments on the debt.

In other words, it’s entitlement spending – and more specifically, health care spending  – that is driving up the deficit, not tax cuts.

What’s the response to this among our esteemed leaders in Washington? Nothing. No, worse than nothing. Another spending spree.

The latest bipartisan budget deal, which Trump signed earlier this year, hikes spending above its already projected growth levels by $320 billion over the next years. Defense spending got a boost, but only in exchange for an even bigger hike in domestic spending.

Meanwhile, every Democrat running for president is busy trying to find new ways to double or triple the size of the federal government, while pretending that it all can be paid for simply by making the rich pay their “fair share.”

The truth is that getting the deficit under control is not hard. It doesn’t require tax hikes, just a modicum of spending restraint.

As we noted in this space not long ago, there were two times in recent years when Congress managed to control its spending urges, and both times saw dramatic drops in the deficit. The first was after Republicans took control of Congress under President Bill Clinton. The second was when Republicans took control of the House under President Barack Obama. The numbers tell the story:

Overall spending growth averaged just 3% from 1994 to 1999. The economy boomed, and the budget went from a $255 billion deficit to a $236 billion surplus in just six years.

When Republicans regained the House in 2011, they again hit the brakes on spending, to the point where outlays were lower in 2014 than they were in 2011. The deficit collapsed from $1.3 trillion to $441 billion in four years.

Unfortunately, in every other year, neither party could control its urge to splurge.

Trump has promised to get tough on spending next year. That’s how it always works in Washington. Spend like a drunken sailor today, and promise to sober up tomorrow.

The problem is that with the national debt now topping $22 trillion, and scheduled to go up another $13 trillion in just a few years, tomorrow will be too late.

— Written by John Merline


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10 comments

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  • It has always been the spending. Politicians feel they need to spend money to get re-elected and getting re-elected is the only thing that matters to most of them.

  • Of course it is. Baseline budgeting has guaranteed that government grows. Almost 90% of the budget is on auto-pilot, never debated or even requiring Congressional action. As we age as a Nation this will only get worse.

    Unless our people can understand that wealth transfers, taxing one person and giving money to another, is evil and outside of the proper role of government, we are doomed. Considering the stranglehold on knowledge by the “education” establishment” I am not optimistic.

  • They are all crack (money) addicts. Some less than others, but the difference isn’t really that much. They love spending other people’s money.

  • Social Security is not an entitlement, everyone pays into it with each paycheck. That money is already ours.

    • Of course it is. The taxes collected for SS are spent immediately on those who were taxed. Not a single penny has ever been invested nor saved. Pretending that because politicians lied you actually paid into some sort of fund is obtuse at best, and incredibly dishonest at worst.

  • To paraphrase Ronald Reagan “this is an insult to drunken sailors. Sailors are spending their own money, government is spending someone else’s money.”

  • The foundation of this country, The American Constitution, has some defects. If these defects are not addressed, this great country is going to crumble. These defects could be greatly eliminated by an Article V Convention. The majority of the states (34) can call a convention for the sole purpose of fixing the defects. Such as a balanced budget amendment and term limits for Congress. Any amendment passed would have to ratified by a supermajority of the states (38). Once ratified, it becomes part of the Constitution regardless how the federal politicians feel. Google “Article V Convention”, educate yourselves and let your state’s administration know how you think, and, yes, feel.

    • Exactly what I was thinking. The congress is not willing to be responsible with our money, so we, the taxpayers, will have to see to it ourselves and force the issue. A balanced budget and term limits are the two best places to start. A constitutional convention will likely not stay focused on these issues, but we must try.

  • It is good to reduce the deficit, but please understand that when we talk about reducing the annual deficit we are only talking about “increasing” the national debt at a lower rate. How about reducing the National debt with “no” annual deficit?????

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