Politics & Policy

Debt and Deficits Are Sky-High, and the Fiscal Hawks Have Flown Away

Dollar bills at the Bureau of Engraving and Printing in Washington, D.C. (Reuters photo: Gary Cameron)
Congressional leaders will find their treasured tax reform soon undone if they fail to control spending.

So far, Republicans in Congress haven’t notched many legislative successes in the first year of the Trump administration. Their last great hope now is tax reform.

But the nation still is without a budget, with lawmakers needing to cut a deal on federal spending for this fiscal year. And, if Thursday’s reports are true, those putting together that vehicle are preparing to take a wrong turn on the road to fiscal responsibility.

Congressional leaders and the White House reportedly want to move ahead with a two-year budget deal that would conveniently put off any further decisions on debt and spending until after the 2018 midterm elections. In the process, they would raise statutory spending caps by about $182 billion, an amount that would be offset only partially, if at all.

What’s driving lawmakers to blow through budget caps established in the Budget Control Act? There is bipartisan support for a big spending increase to build up our military. Beyond that, some Republicans will object if the deal does not include funding for Trump’s long-promised border wall. As for the Democrats, they are all but sure to object to any deal that doesn’t match defense-spending increases with equal increases for domestic programs.

What’s missing from the discussion are the fiscal hawks who have helped to ensure that every other budget-cap deal struck since 2011 included spending offsets. Where have they flown?

Thursday’s news shows how far Republicans have fallen off the wagon of fiscal sobriety since the days of Newt Gingrich’s welfare reform, or even since John Boehner’s House, which pushed through the Budget Control Act just a few short years ago. Instead of making spending control a priority, congressional Republicans seem on the verge of making the spending problem even worse.

Political reality is often more nuanced than complaints, and we should be careful about throwing stones. After all, President Trump has embarked in earnest on an important agenda to roll back the regulatory state. No one should forget the successful nomination of Neil Gorsuch to the Supreme Court. And perhaps the current tax-reform plan will power through political obstacles and ultimately prove that the practical risk of hiking the deficit too much was surmountable after all.

Economic growth is being held back because lawmakers will not agree to curb spending, and they are forced to hedge tax reforms instead of fully releasing our nation’s economic potential.

But really, is this what Republicans stand for in 2017? Refusing to repeal Obamacare as promised, ignoring the growth in unsustainable entitlement spending, and citing the need to protect national security and provide for our troops but using that as an excuse to bulldoze the only spending limit erected in a generation?

The consequences of runaway spending and debt are well known. They crowd out private investment, strain the economy, and risk full-scale fiscal crisis as the bloated U.S. budget treads on thinning ice. Every independent analysis repeats those warnings again, and again — only to be ignored.

If the threat of a fiscal crisis isn’t enough to make Republicans take the issue seriously, you’d think their experience this fall trying to pass tax reform without blowing up the deficit would. If what they’ve produced isn’t the once-in-a-generation tax plan that conservatives were rooting for, we can blame the bipartisan spending problem. If this plan is too timid, it is because lawmakers’ hands are tied by sky-high deficits and debt. Economic growth is being held back because lawmakers will not agree to curb spending, and they are forced to hedge tax reforms instead of fully releasing our nation’s economic potential.

It remains to be seen whether a unified package will end up on the president’s desk. Meanwhile, congressional leaders find themselves in a difficult spot, pinching every penny and forced to push politically dicey provisions to reduce the deficit impact of the tax bill, because spending is too high to do otherwise. All the while, they ignore the risk that their treasured tax reform will soon be undone if they fail to control spending and the deficit.

The way out isn’t complicated. The Budget Control Act is not perfect, but it has worked, reining in spending from all-time highs in the Obama years. It has also shown the potential for well-constructed fiscal rules to incentivize better budget management — something that’s essential to the work of pulling the U.S. back from the brink of fiscal crisis.

To see Republicans instead turn around and march in the opposite direction would be a severe disappointment indeed.

READ MORE:

Entitlement Reform Required for Tax Reform

Deficits Still Matter: Republican Tax Proposal Disappoints

Entitlements Spin out of Control, Economic Death Spiral

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