Nothing demonstrates the insufferable nature of Washington politics more than the current debt ceiling debate — or rather, the lack thereof.
It is now official: The GOP is as fiscally conservative as it is socially conservative … which is more liberal than even the Democrats of last generation ever were.
The leaders of both parties in Congress and the supposed-Republican president all agree on the same goal — the problem is not the debt itself but the debt ceiling law designed to constrain the debt. Their only disagreement was over the minutiae of how to fool the people and dispense with the sheriff (the debt ceiling) rather than tackling the criminal (the immoral debt burden).
Rather than enact what any family would do at this dire juncture — a plan to get out of debt — the Swamp went looking for another blank check and limitless credit card. And they got it. The blank check passed the Senate 80-17 and the House 316-90.
Where’s the common sense? Where’s the empathy for our children and grandchildren?
Even worse, Trump is now reportedly forming an alliance with Democrats to abolish the debt limit law altogether. Such a move would eliminate the last effective tool to constrain government, reverse the mortgage of our children’s future, and lift the current burden of debt that is weighing down economic growth.
Our history is one of almost no debt
Before the modern era of politics, there was a bipartisan consensus to avoid debt like the plague. In his farewell address, George Washington exhorted the politicians to avoid “the accumulation of debt not only by shunning occasions of expense but by vigorous exertions … to discharge the debts … not ungenerously throwing upon posterity the burden which we ourselves ought to bear.”
James Madison warned that “public debt is a public curse, and in a Republican Government a greater than in any other.” Even the “big government” champion of the time, Alexander Hamilton, declared that “nothing can more affect national prosperity than a constant and systematic attention to extinguish the present debt and to avoid as much as possibly the incurring of any new debt.”
During the first 130 years of our republic, our political leadership more or less abided by this principle and strove to avoid or immediately pay off any debt. Even during times of war, which was practically the only time debt was accrued in significant amounts, the political leaders stepped up to the plate.
A huge debt was created by the existential threat of the War of 1812. Congress paid it off in its entirety by 1835. Most of the post-Civil War debt was paid off as well by the end of the 19th century. There was no need for the leash of a statutory debt limit, because there was no open-ended debt.
And this was all accomplished before the cash cow of the federal income tax began bringing in loads of revenue. The government actually followed the constitutional limits of enumerated powers. It focused mainly on national security, and any war was geared towards swift victory, not endless social work and refereeing civil wars of other civilizations. Entitlements were completely unknown.
It wasn’t until World War I when Congress had to raise substantial sums of money to fund the war effort that our nation began incurring general debt. And here’s the kicker: Commensurate with the growth of debt was an urgency to immediately impose statutory caps on the level of debt, which were enacted in 1917.
The leash of the debt ceiling worked towards orienting national priorities to comport with the enumerated powers of the federal government. So much so that by 1928, Calvin Coolidge was able to declare in his State of the Union address that “one-third of the national debt has been paid, while much of the other two-thirds has been refunded at lower rates, and these savings of interest and constant economies have enabled us to repeat the satisfying process of more tax reductions.”
The politicians just don’t care
Although the debt rose steadily over the ensuing decades, except for the anomalous period of World War II, the debt was at least kept in check. As late as the first term of George W. Bush, the gross federal debt was “only” 60 percent of GDP.
It wasn’t until this generation, when we allowed the federal government to take over every aspect of our lives and deviate from its enumerated powers in spectacular fashion, that the debt grew out of control. Now the debt will remain larger than our entire economy — indefinitely.
Now that Trump is giving the Swamp a blank check and a limitless credit card, the mortgage of our future will accelerate. The debt, which has been held back by the debt ceiling this year, will surge well beyond $20 trillion next week, like a flood breaching the levies. The debt could rise from 104 percent of GDP to 175 percent in just 30 years. That is where Greece is now.
And this is the present state of affairs. The future unfunded liabilities for our children and grandchildren measure in the hundreds of trillions — an unfathomable number. While interest on the debt is “just” $270 billion, that number will grow larger than the current size of the Social Security program within 10 years.
Imagine paying the equivalent of the current Social Security program every year to service dependency and government largesse.
The debt is a bigger economic killer than taxes
The debt is not just some abstract and unfathomable number important only to fiscal geeks. It’s not only an existential threat to the security of our future posterity, for which we evidently don’t care; it is already weighing down the economy now and has been for quite some time. It’s the silent yet ultimate tax on wages and consumers. We have now gone 11 consecutive years without a year of 3 percent growth.
Even at the height of the Great Depression, we only sustained four consecutive years (1930-1933) without such growth. According to the CBO, not only will projected GDP growth remain at a dismal 2 percent for the next 30 years, real GNP per person (a good measure of individual income) will grow by just 1.3 percent over the same period.
The reason we are not growing is because of the debt. Since January 2009, the current-dollar GDP (unchained) grew by 31 percent, while the gross federal debt grew by 87 percent! The latter figure is not coincidentally related to the former; it is the source.
Debt and dependency, as well as the underlying market distortions reflected by the programs driving the debt, misallocate resources and crowd out private investment. This in turn slows wages, offering people less incentive to work. Alexander Hamilton was quite prescient when he warned that “nothing can more affect national prosperity” more than stamping out debt. And he could never have fathomed the degree of debt we have today.
As I’ve noted many times, the government destruction of health care in America is the biggest driver of the debt and the biggest tax on the consumer — which is why it is completely backward for President Trump to capitulate on Obamacare, the budget, and, reportedly, the debt in order to clear the way for undefined “tax reform.”
While I’d love to see lower taxes, the reality is that our tax burden is relatively lower than most other times in modern history. It is not the emergency issue of our time dragging down the economy any more than its built-in drag in past generations. The debt is the issue of our time and is the main culprit causing economic stagnation. The market distortions and regulations associated with the debt-inducing programs are also a much bigger albatross around the economy than the tax system.
This is why the debt ceiling was so important. Whereas politicians are unwilling to debate the imperative of a single program, the debt ceiling was a massive roadblock that could force a national discussion on the entire budget — a debate on the true role of the federal government and its priorities.
And it was the perfect tool because, despite the scandalously false protestations from Treasury Secretary Steve Mnuchin and the political class, we would never default. Interest on the debt is $270 billion, well within our revenue range. It would always be paid. And that’s the point — it’s better to have this conversation now when the payments are relatively light, versus 10-20 years from now when they will be larger than today’s Social Security hole.
Anyone who opposes the concept of a debt ceiling should immediately admit that they are not fiscally conservative and are condemning our country to the future of Greece.
Author: Daniel Horowitz
Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.