For years Libertarians, and a select few Republicans have been talking about this countries out of control spending problem, and our massive debt. On Tuesday morning House Republicans introduced their 2018 budget, which if passed as is tomorrow morning, would give Republicans like Paul Ryan a “win,” but would do little to help this country in the long-term.
The House plan would slash federal spending by $5.4 trillion dollars over the next decade. While cutting spending on mandatory programs, like medicare and medicaid by $4 trillion over that same period of time. If passed as is, the budget would pave way for Republicans to attempt to overhaul our tax code for the first time since 1986.
Overhauling the tax code has been talked about for years, but has gained little traction, and it is unlikely that Republicans will be successful in their endeavors this time for a few reasons. First, the budget would have to pass both the House and the Senate, with no changes; which seems unlikely. Second, this congress has given us no reason to believe they are serious about fiscal change; especially after they failed to repeal the taxes created by Obamacare, which Republicans in the House and Senate both said would be vital to overhauling the tax code.
Despite that, Paul Ryan has pushed forward; calling for less tax brackets, switching to a territorial tax system, and repealing the “Alternative Minimum Tax” which, when passed, meant well, but has damaged the middle class,
[the AMT] was designed to keep wealthy taxpayers from using loopholes to avoid paying taxes. But because it was not automatically updated for inflation, more middle-class taxpayers were getting hit with the AMT each year. Congress traditionally passed an annual “patch” to address this until, in January 2013, as part of the “fiscal cliff” deal, they passed a permanent patch to the AMT.
What the budget doesn’t contain, however, is any cuts to defense spending. In fact, the budget calls for $621.5 billion in national defense spending, up from $598 billion in 2016. Just for comparison, the next biggest defense budget in the world last year was China, at $146 billion.
Hawks on both sides of the aisle see the increased defense spending as a good thing. They don’t care that we spend more than any nation on earth on defense, as long as they save face with the military. This is despite the fact that the Defense Business Board found $125 billion dollars in administrative waste related to defense spending over the next five years. Legislatures could have easily cut this spending without closing a single base, or putting this nation at risk, but playing politics is more important than economic collapse.
The proposed spending cuts are a drop in the bucket, when considering we have nearly $20 trillion in national debt. The Congressional Budget Office seems to agree, and has released a particularly grim outlook for our economy over the next 10 years. The American Enterprise Institute describes why the CBO’s report is so troubling;
“ [the] baseline — a forecast of federal revenue, spending, deficits, and debt — assumes current laws and policies will remain as they are today for the next 10 years. President Trump has modified a small number of relevant budgetary factors since taking office, particularly the level of defense spending in 2017. But, for the most part, CBO’s projections reflect the policies put in place during the tenure of the Obama administration.”
The cuts proposed by Republicans are like a Kardashian: aesthetically pleasing, but ultimately worthless. In 2018, the CBO expects the deficit to be $563 billion, down from an expected $693 billion in 2017. However, by 2027, the CBO expects the deficit to rise to $1.5 TRILLION which would be an expected 5.2% of our GDP. The projected deficits will push federal debt to 90% of our GDP by 2027, up from 39% in 2008. Considering that from 1983 until 2008 GDP grew at an average of 3.3%, and in 2019 and 2020 the CBO expects GDP to grow at just 1.5%, our economic future looks grim.
While the outlook is just a prediction, it’s hard not to be a little pessimistic about the whole situation. If we want to affect real change, and truly make America great again, then we need to make an effort to elect politicians who are unafraid to make painful, unpopular decisions. In his classic book on economics; “Economics in One Lesson,” Henry Hazlitt demonstrates the need to look at the long-term outlook of every policy decision we make, even if it makes us worse-off in the short term. Unfortunately, we live in an age where politicians are constantly campaigning, kicking the can down the road for someone else to deal with later. For a society so hell-bent on leaving the earth in better shape for our children, we sure seemed to have forgotten that we will also leave them our economy.