We always knew Republicans don’t care about debt and have no intention of cutting spending. But at least they could have used the deficit to make the tax cuts permanent and further fuel economic growth. Instead, they made government spending permanent and increased spending to unconscionable levels.
The beatdown in Washington last week was so swift that many of us couldn’t find time to catch our breath and analyze the consequences of this bill. Taken in totality, this bill ensures that we will never recover from the debt crisis.
With the economy finally fully recovering almost a decade after the deep recession, we had a chance to make the right plays and possibly stave off the Greece-like fiscal crisis awaiting us. Between the effectiveness of the Budget Control Act, the growing revenues from economic growth, and the supposed willingness of the White House to call for cuts to discretionary spending, we had a chance to rein in our economic disaster and even finally tackle welfare and health care. But the GOP threw it all away.
Here’s how it’s even worse than we thought.
1) You might have heard that spending is increased by $296 billion for two years, but it’s much worse than that. The total spending in this bill is really $419 billion. The supposed $100 billion in spending offsets are not even gimmicks; they actually don’t exist. Not a single one of the offsets is legitimate. For example, the largest offset (worth $35 billion) was a promise to continue sequestration until 2027, though it officially expires in 2022. But Congress is paying for the immediate abolishing of sequestration while promising to enact it later, when not a single person believes it will happen. Also, they insanely project that extending SCHIP will save money!
And this is just for two years. Politically speaking, Republicans have abolished the BCA forever, which means that spending will likely increase by close to $2 trillion over the next 10 years – above the current unsustainable baseline.
2) The increased health care spending will ensure that we never restore a consumer-driven market and therefore never fix the debt crisis. And the numbers are a lot worse than the budget score suggests. Once Congress agrees to continue all of these programs despite keeping Obamacare, that means they will continue forever, not just for two years. Same thing with the tax handouts to green energy. The tax cuts were a prime opportunity to end these loopholes, but now there is no chance they won’t get extended in perpetuity.
3) Given that the spending offsets will never materialize, this bill will add well over $100 billion in net interest payments over the next 10 years to service the higher debt. The Committee for a Responsible Federal Budget estimates, “If temporary provisions in the bill were made permanent, the ultimate cost could increase to $1.7 trillion, or $2.1 trillion including interest, and increase debt to 105 percent of Gross Domestic Product (GDP) by 2027.” It’s important to remember that this is just the public share of the debt. Gross debt (including money “we owe ourselves,” but are still responsible to pay, such as Social Security and pensions) already stands at 104 percent of GDP and in 30 years will be over 175 percent, according to some estimates. That is where Greece is now.
4) Here’s the kicker: In just nine years, interest on the debt will rise from about $300 billion to over $800 billion because of rising interest rates. That is more than the current cost of Medicare. This is why we must fix the crisis before rates return to historical norms. Americans whose eyes droop at any discussion of the debt don’t realize that the debt is hurting us now. The reason we can’t enjoy a stable bull market amidst the good economic news is because the good economic news portends higher interest rates. That in itself shouldn’t be a bad thing, but because rates were set so artificially low for an unprecedentedly protracted period of time, in part to service our debt on the cheap, it is now coming back to bite us in a good economy. By going on a spending binge with interest rates rising, we are essentially accelerating the debt Armageddon to within 10 years, not 30 years.
President Trump promised we would grow our way out of the debt crisis. With solid tax and regulatory policy in place, Trump could have made that a reality by using the momentum to push free market health care and welfare reform. Now we are done. There is no way the economy can ever grow quickly enough to keep up with the health care dumpster fire and interest on the debt. And this is before we factor in the $200 billion being proposed to sink into the failed federal transportation system that will somehow magically produce another $1.3 trillion for roads across the board.
The saddest irony of all? Everything under the sun was funded in this bill … except for the border wall. #Priorities.
Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.