Saturday, February 16, 2019

Washington Has Again Diverted Our Eyes From Deficit

The Ugly Reality Of Our Spending
By linking recent budget talks to the controversy over building a wall Washington has again diverted the eyes of our nation away from the wild deficit spending taking place. After telling reporters that he was "not happy" with the compromise border-security bill which reportedly included only a small amount of the funding he requested for "a barrier," President Trump set aside his dissatisfaction and stated he would sign the bill anyway in order to avert another shutdown. Then, in rapid fashion, Congress passed and the president signed the pork packed deal by the Friday deadline so all the players could take their victory laps and claim democracy works.

The bipartisan agreement puts less money towards border security than Trump requested but, sadly, added to most other line items in the budget. The new appropriations package which combines seven different spending bills allocates $328.6 billion in discretionary spending a huge $54 billion increase from the White House's 2019 budget request. While some conservative members of Congress think the agreement spends too much the spending package which will fund the government through September 30th is nevertheless expected to be passed with overwhelming support from both Republicans and Democrats.

Remember in the overall scheme of things and the amount America spends each year the 5.7 billion Trump requested for wall construction is peanuts also it is fairly easy to make a case that America will get a good economic return on money spent on a barrier that will work 24/7 year after year. Most taxpayers, if asked, would see this as a far better investment than paying government workers to stay home week after week as we did during the recent partial government shutdown. 

While the president demanded $5.7 billion for his border wall, the deal reached includes just $1.375 billion for the wall, this means the President will carry through with his threat, or promise, depending on how you feel about the wall, of declaring a national emergency and pulling money from different areas of the budget. Speaker Nancy Pelosi has already warned this will prompt a lengthy legal challenge. This will cost the taxpayer even more money and continue to divert eyes and time from far more important issues and problems facing our nation.

Senator Rand Paul one of the very few politicians in Washington concerned about wild government spending and things such as border security wrote;  

    I’m disappointed with both the massive, bloated, secretive bill that just passed and with the president’s intention to declare an emergency to build a wall.
    I, too, want stronger border security, including a wall in some areas. But how we do things matters. Over 1,000 pages dropped in the middle of the night and extraconstitutional executive actions are wrong, no matter which party does them. 

The fact is the wall issue has taken our eyes off the deeper immigration problem of fixing a costly inefficient immigration system that the American Action Forum (AAF) found cost American business close to $30 billion in annual regulatory compliance costs, it has also pulled our eyes away from a soaring budget deficit. these and many other important matters are busy cutting away at the future of our youth. The bottom-line is that Washington has become a hostile and unfriendly environment for those interested in good governance.

Sadly, it is only massive this massive unsustainable deficit spending that is driving our economy forward. We are in the midst of a "false economy" and it is only by the grace of this huge deficit spending that we are not languishing at the bottom of a deep economic pit. The budget deficit is set to widen significantly in the next few years and in 2020, is expected to top $1 trillion even with healthy economic growth, according to new projections from the nonpartisan Congressional Budget Office. This means the national debt of around $22 trillion will soar to more than $33 trillion in 2028.

A trillion dollar deficit translates into America spending $3,333 more than it takes in for every man, woman, and child in the country. To clarify, this is each year and every year but also fails to include State and local deficits as well as a slew of "off book" promises and spending that are also being made. This spells big problems going forward if we do not begin to face up to reality and get in front of our problems we will soon find ourselves solidly behind the eight-ball. Today late cycle indicators are on the rise, moderating growth, tightening credit, declining earnings, the peak of consumer confidence, rising inflation and more. 

History shows government spending is a poor substitute for the free market when it comes to allocating capital to where it is most effective and it is not economic growth but simply a method of creating a false economy by borrowing from the future. Deficit spending is not a silver bullet without consequences and with each step forward we get closer to the end of the road. Does this mean we should be thankful for a dysfunctional government in Washington? I think not.    

1 comment:

  1. You acknowledge the fact it is deficit spending that is propelling the economy forward, everywhere in the world. Is there any other way out ? Could we get govt to accept all our debt and use low cost borrowing to pay it down, later they could get money from us in form of special taxes.