Unless Trump dusts off his veto pen, he will be the debt king

· July 24, 2018  
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Pulling debt boulder up a mountain
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GOP lawmakers are currently entertaining tax cuts 2.0, but why is there no discussion of spending cuts 1.0?

Lost in the uproar over Putin last week was the White House’s projection that the annual deficit for this coming fiscal year, beginning in October, will top $1 trillion — despite a booming economy.

After signing the terrible omnibus bill in March, the fourth major budget capitulation of his presidency, Trump promised, “I will never sign another bill like this again. I’m not going to do it again.” We were told that this was needed in order to beef up our military spending. So what is the excuse for Congress to continue the non-defense spending binge again for FY 2019, and why is the White House not issuing a veto warning?

The coming GOP spending binge

This week, the Senate is packaging four spending bills together into a “minibus.” The bill funds Agriculture, Transportation-HUD, Financial Services, and Interior-Environment. The total cost is $154.2 billion, continuing the spending levels of the omnibus and even increasing spending for departments like HUD. These are all non-defense departments against which Trump should be brandishing his veto pen unless the spending levels are brought into line with his budget proposal.

His original budget promise was to cut $1.5 trillion in non-defense discretionary spending and $1.7 trillion in entitlement spending over a decade. This past year’s proposal was much more modest, but still much better than what Congress is planning. Look at the difference between the Senate’s spending levels on some of the key departments and agencies vs. the levels in Trump’s budget proposal:

How does the president expect to accomplish a fraction of his budget priorities if he refuses to threaten a veto against these spending bills? Not only are the budget bills the only way for Trump to implement his immigration policies, they are the only way for him to slow the runaway deficit, which is slated to be worse than under even Obama.

The tax cuts were nice and clearly contributed to job growth and higher disposable income. Overall, tax revenues are actually up $33 billion for the first nine months of this fiscal year relative to last year. Even if we factor in the time when the tax cuts were implemented (in January) relative to this time in FY 2017, we are still $4 billion ahead. While the revenue will obviously diminish over time relative to the baseline we would get with such job growth, the loss of revenue is nowhere near the CBO’s predictions that we would lose $144 billion in this fiscal year alone, $271 billion in the next fiscal year, and a total of $1.5 trillion over 10 years. Also, they calculate revenue loss relative to an increased baseline resulting from economic growth, which is circular logic because we likely wouldn’t have this degree of job growth if not for the tax cuts.

Now, contrast this to the fact that we spent $118 billion more during the first nine months of this fiscal year, compared to last year. The tax cuts were great, but it would be suicide to create another hole in the deficit without cutting spending.

Then there is the $867 billion statist farm bill. The House and Senate have convened a conference committee to iron out the differences between the chambers. What are the differences? The Senate bill codifies Obama’s level of food stamp spending and even grows the price-fixing agriculture subsidy programs that distort our food markets. The House bill does the same except it has a work requirement for a tiny slice of the population … but then institutes a job training program that costs as much as the savings from the work requirements!

And yet, the president has praised the farm bill. He clearly needs a new legislative team. Otherwise he is slated to become the ultimate debt president.

Oh, and let’s not forget that Republicans plan to bring up another flood insurance extension, without debate, through the suspension process as a “non-controversial measure.” This non-controversial measure will leave us more than $25 billion in the hole for another structurally deficient program.

The debt is not an issue Trump can ignore

  • With interest rates rapidly rising, just the interest on the debt will surpass the cost of our military spending in five years and the federal share of Medicaid in two years.
  • This in turn will create a rush for domestic and foreign creditors to purchase our debt and Democrat votes rather than investing the capital in manufacturing. This is a big reason why, despite the job boom, we have unprecedented low economic growth for a time of “prosperity.” The debt is a problem now, not just in the future.
  • It is hampering our ability to deter enemies. Because we refuse to cut domestic spending and stop inflating the health care and education cartels, or even rethink our nation-building in the Middle East, we have no money left to fix our rotting nuclear systems and invest in more missile defense to deter our enemies. Also, we need to spend more on border security, but Trump has a harder time making the case without cutting spending elsewhere.
  • Trump seems to be concerned with a $300 billion trade deficit with China. He should, therefore, be even more concerned about the $1.2 trillion fiscal deficit we have with China. In total, foreign nations own $6.2 trillion of our debt, but the biggest shareholder is China. China is buying our dependency and debt rather than our products and services, thereby exacerbating the real trade deficit with the fiscal deficit and laying the groundwork to choke us off in a military conflict.

If not now, then when? He will never get anywhere near 60 votes in the Senate, even during a potential second term. And he will dramatically increase his chances of winning both the midterms and in 2020 if he finally forces a fight over budget and substance. This will also give him a much-needed distraction from the political hits on the Mueller investigation. But he will never succeed if he fears a government shutdown.

In short, Trump cannot make America great again without addressing the debt. And he will have no leverage to do so without making his veto pen great again. Once he uses that veto pen, he also holds the biggest bully pulpit of all time to drive the message home.


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Author: Daniel Horowitz

Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.