A trillion here, a trillion there…
Is Congressional help benign and helpful... or irresponsible spending with no resources to pay?
Recently Congress and the President took bipartisan action and agreed on a $2.2 trillion stimulus package for the U.S. to address the effects of COVID-19. The bill passed virtually unanimously although many griped before voting, with even one member referring to it as “a big crap sandwich” due to the perceived non-Coronavirus related funding inclusions.
To be clear, it is not a big crap sandwich – although it does contain questionable items. This is a pandemic disaster of still yet to be seen proportion. We are all experiencing this together with fear, grief and uncertainty ahead of us. An aid package makes a huge amount of economic and humanitarian sense.
However, there are two ways of looking at the motivation and context for this package. The benign way is that our elected representatives came together quickly to extend aid in a time of serious crisis to a range of sectors and people at risk and in need in our country. They deserve our praise for their leadership.
The not-so–benign way is to see this as Congress (and the President) doing what they do best – spend money without the resources to pay. $2.2 trillion… we can all agree that it is a lot of money. It is half of the entire $4.4 trillion federal budget for 2019. But what’s a couple of trillion dollars when you can just borrow it and leave it to the future? According to the Congressional Budget Office (CBO), the U.S. public debt that we all owe as citizens is $17.8 trillion in 2020 which represents 80.9% of GDP. Adding another $2.2 trillion to the total makes it an even $20 trillion and 90.9% of GDP.
Reasonable people can disagree on the proper levels of spending or taxation. What is not reasonable and is in fact patently irresponsible is to continuously spend more than you can pay for and leave the bill to someone else.
It would take the average American about two years using ALL of their annual income to pay off their portion of the debt. (Note: The US Treasury tabulates a higher public debt by factoring in other intragovernmental borrowing but I use the more conservative CBO numbers here). This is the largest external public debt in the world. There are lots of effects of high debt but in general it impedes economic growth – sometimes described as “driving with the emergency brake on.”
How did the national debt get so high? Structurally almost every year, the budget that is agreed upon by Congress and ultimately signed by the President does not have enough revenue to cover expenses (the budget deficit). Since 1968, our federal leaders have produced a balanced budget (revenues equal to or higher than outlays) only four times in 52 years.
The annual gap between revenue and planned spending is currently 20% of the spending amount. This gap is covered with borrowing – up front at the beginning of the budget year. States (except for Vermont) are structurally more responsible and are not allowed to budget this way. They are required to adopt only balanced budgets with no borrowing at the beginning of the year. If an unanticipated deficit develops, borrowing becomes an allowable option later.
With essentially constant annual planned deficits, the federal debt has grown from $271 billion in 1957 and has never been reduced. Why can’t our political leaders get a handle on this? Easy answer of course: politics. But not the partisan kind.
When it comes to spending, almost every politician likes to do it, mainly because it makes people happy whereas raising revenue or cutting spending makes people unhappy. If you were a politician, would you rather have voters protesting your cuts or your tax increases or be invited to dinners with admiring partisan/special interest fans and receive ceremonial plaques? On a strategic level it makes sense because these satisfied groups now send you campaign donations. Once elected, the most important motivation is to get re-elected.
Consider the last hyper-polarized budget stalemate in 2018-2019 between Trump and Congress. The two sides couldn’t come to a consensus on spending priorities but they eventually “compromised” and funded both sets of priorities and borrowed the rest. That result is not the exception it is the rule. Reasonable people can disagree on the proper levels of spending or taxation. What is not reasonable and is in fact patently irresponsible is to continuously spend more than you can pay for and leave the bill to someone else.
Alan Calandro of Burlington is the former director of the state’s Nonpartisan Office of Fiscal Analysis.
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