Wake up: The current fiscal free-for-all is untenable
America’s debt problem won’t go away on its own. As our co-chair, Leon Panetta, regularly says: Change will come either through leadership or through crisis. For years, I have been optimistic that leadership would win the race. Recent events are making it increasingly difficult to hold onto that optimism.
This past year was a fiscal bust. President Trump took office faced with a daunting fiscal challenge, but the legislation he and Congress have enacted so far has only worsened the federal government’s unsustainable budget outlook.
{mosads}Legislation signed this past year is projected to add roughly $2.1 trillion ($1.7 trillion if we account for likely economic growth) with the massively unaffordable tax cut accounting for 80 percent and war and disaster spending counting for the rest.
In a time when the economy was moving along impressively, there was zero justification for borrowing instead of paying for these policies.
Did we need tax reform? Absolutely. Did we need to do it by borrowing $1.5 trillion and leaving almost all the existing tax breaks in place? We most certainly did not.
As a result, the debt held by the public as a percent of GDP is now projected to be close to 100 percent of the economy at the end of a decade.
Republican lawmakers, who have been calling for years for a budget that would balance over the decade if not sooner, are now faced with the need to find $6.7 trillion in savings in the budget to achieve that goal — an already incredibly difficult task they just made more difficult by moving more than $2 trillion in the wrong direction.
My strong belief is that they will not be able to pass such a budget, demonstrating even further the irresponsibility in passing the tax cut, and that if they do, they will come nowhere near to sticking to it. I hope to be proven wrong.
Indeed, congressional leaders have already signaled that they may not even attempt to pass a budget resolution or pursue reconciliation instructions for deficit reduction. Deciding not to pass a budget at all would be fabulously irresponsible at a time when we so desperately need a plan to help bring the debt down.
The terrible 2017 seems to be laying the foundation for a terrible 2018. It goes without saying that shutting down the government is a child’s way of dealing with difficult decisions and the need to compromise. But in the short-term spending bill keeping the government open for three weeks, they included $31 billion more in tax cuts. Wait what, more unpaid tax cuts?
Welcome to the new fiscal-free-for-all.
A huge unpaid-for tax cut is unlikely to be followed by measures to improve the situation, which should include scaling back some of the tax bill and/or adding pay-fors, but rather will probably lead to more borrowing.
The budget deal being negotiated by congressional leaders and the administration right now would increase defense and non-defense discretionary spending substantially, reportedly well beyond simply reversing the reductions from the sequester.
Furthermore, it would add even more spending, including possibly: funding for the border wall; more emergency spending; spending for the opioid epidemic and homeland security; a bailout for multi-employer pensions; and funds to stabilize the Affordable Care Act and other health-care money.
In addition, even with huge tax cuts last year and more tax cuts in the recent continuing resolution, there could be even more tax cuts with renewed tax extenders.
This package could end up costing a whopping $400 billion if it is not paid for, resulting in an annual deficit impact comparable to the tax reform legislation enacted last year.
Now more than ever, this country needs strong leaders who are willing to enact policies to put this country on the right fiscal path. If not, change may very well come through crisis.
Maya MacGuineas is the president of the bipartisan Committee for a Responsible Federal Budget.