Fiscal Follies
From Left to Right, fuzzy math and magical thinking rule
An item in The Free Press caught my eye the other day: The Congressional Budget Office is estimating that the federal government budget deficit for 2024 will come in at $1.8 trillion. This is a fact of some significance given the many goodies that presidential candidates Donald Trump and Kamala Harris are promising to shower on the American people. And it so happens that neither of them has the slightest idea how all the free bangers and mash are to be paid for.
When that awkward question comes up, Harris falls back on a familiar progressive bromide. She’s going to get the money by making the rich pay their “fair share.” Not mentioned is the fact that the wealthy and the well-to-do already pay a more than fair share. That’s because America has one of the most progressive tax codes in the world. The top one percent of income earners pays over thirty percent of all income tax collected annually. The bottom fifty percent of taxpayers shells out just over two percent of the total. The income tax rate for the top one percent is around twenty-six percent—eight times higher than the rate at which the bottom fifty percent is taxed.
Harris, in short, is talking nonsense. I won’t call her a liar, however, since I’m not at all sure whether she has the slightest understanding of basic economics, much less the ins and outs of the federal government’s budgetary processes.
But let’s assume that if she’s elected president, Harris somehow manages to get Congress to raise taxes on those selfish rich people—and on greedy corporations, of course! The grim fact of the matter is that no conceivable tax hike can bring in enough money to erase the huge budget deficit mentioned above, much less cover the two or three trillion that Harris proposes to spend. That’s just a fact, and not all the blather of the Bratgirl Admiration Society can change it.
Meanwhile, over in MAGA Land, Trump too is talking nonsense. The goodies that he promises take the form of tax relief: abolishing taxes on tips, overtime, Social Security, etc. Like Harris’ big-spending fantasies, this would send the deficit soaring. How does Trump propose to bring it down to earth? From time to time, we hear the usual line about cutting wasteful spending & etc.—roughly equivalent to Mr. & Ms. Flyover America looking for change under the sofa cushions to make the monthly mortgage payment. If, for example, all foreign aid was stopped, around $67 billion would be saved. If that sounds like a big deal, recall that the annual budget deficit is in the neighborhood of $2 trillion—and rising.
The primary deficit driver is entitlement spending, also known as mandatory spending, which grows year by year, with no ceiling in sight. In 2023, entitlement spending accounted for fifty-five percent of federal government expenditures: around $3.4 trillion. This figure does not include debt service, but it should, because annual deficits and the national debt are downstream from entitlement spending. The national debt is around $36 trillion (and rising). Last year, interest payments on the debt totaled $658 billion: eleven percent of total federal spending.
But if there’s one thing that American politicians prefer not to do, it’s donning their green eyeshades and sharpening their #2 pencils. The federal budget deficit is out of control because our fearful leaders, with Harris and Trump out in front, refuse to confront reality—the reality being that fundamental reform of entitlement programs is the only way that America can avert fiscal disaster. Instead, they champion fake solutions.
When they take a break from denouncing evil rich people, progressives—never at a loss for stupid ideas—have embraced New Monetary Theory (the fiscal crisis isn’t really happening) and have proposed to make the deficit vanish by minting a $1 trillion platinum coin (the government can create wealth out of thin air). On the Right, populists and natcons indulge in similar flights of fancy: Just cut off aid to Ukraine, deport a couple of million illegal aliens, and all will be well!
Kamala Harris and Donald Trump both pretend that they have an “economic plan.” Don’t believe it. Don’t believe the argle-bargle about small businesses and tax-free tips. There are no plans. The candidates are shining us on—in hopes that when the inevitable crash comes, someone else will be sitting behind the Resolute Desk.
"How did you go bankrupt?"
"Two ways. Gradually and then suddenly."
Hemingway.
Nobody really knows, but Paul Kennedy gave some insights into how bankrupt empires decay.
Won't be pretty for Americans, especially poor Americans.
It's a little unfair to blame the presidential candidates for telling us lies about debts and deficits. If they told us the truth, they'd never end up as the nominees of their parties. The fault is not in our stars, but in ourselves. We elect what we want to hear.