On the up and up: why Congress isn’t doing anything about the federal deficit

  • The federal deficit will spike from $779 billion to $1.37 trillion over the next decade, but President Trump didn’t mention it in his state of the union address.
  • Any serious deficit reduction is bound to be politically unpopular, since it means either raising taxes or scaling back the largest entitlement programs.
  • Even though Congress has made small deals in recent years to lower the deficit, right now it’s moving in the opposite direction, experts say.

The federal deficit — the difference between how much the government spends and how much it collects in taxes — will spike from $779 billion to $1.37 trillion over the next decade, according to the Congressional Budget Office’s most optimistic projections. But you’d hardly know it listening to the rhetoric from leading lawmakers in Congress this year.

The issue has become something of a political paradox. Deficit reduction ranks at the top of voters’ priorities, according to a recent Morning Consult-Politico poll, with 75 percent of registered voters ranking reducing the annual budget deficit as a top priority or an important priority. That tops hot-button issues like health care reform (73 percent), addressing climate change (54 percent), and new gun restrictions (51 percent).

President Donald Trump, however, did not even mention the national debt or deficit in his state of the union address or give even a rhetorical nod to the need for fiscal responsibility. In fact, when Trump previewed his speech for a group of supporters and was asked by an ally about whether he’d mention the national debt, acting White House chief of staff Mick Mulvaney reportedly replied that “nobody cares.”

Why the silence on the issue? And why has Congress, in the face of growing warnings about the long-term unsustainability of the federal government’s current spending trajectory, never come close to enacting any grand deficit reduction bill since the Simpson-Bowles plan fell apart in 2010?

“In my experience, regardless of conservatives or liberals coming into Congress, everyone very quickly gets socialized into business as usual,” James Wallner, a senior fellow at the R Street Institute and a former legislative director for Pennsylvania Republican Sen. Patrick J. Toomey, told CQ-Roll Call. “Thereby no one rocks the boat, no one forces the difficult debates over the controversial issues, no one does any of that stuff.”

The debates are difficult due to the fact that any deficit-reduction measure is bound to be politically unpopular (at least in the short term). That’s because it would require increasing taxes, reducing spending on valued entitlement programs like social security and medicare, or some combination of the two. With social security and medicare poised to become the primary drivers of the federal deficit over the next decade as Baby Boomers reach retirement in growing numbers, those three areas are the only significant levers lawmakers can pull.

During the Obama Administration, Republicans in Congress consistently made deficit reduction a priority. Former House Speaker Paul Ryan rose to prominence in the party in large part by championing the issue and portraying Republicans as the party of fiscally responsible governance. However the GOP-controlled Congress during the Trump presidency did little to address the issue, instead choosing to significantly cut taxes while showing little appetite for corresponding spending cuts.

With Democrats now controlling the House, the chance of Congress coming together on a grand budget deal to address the deficit is effectively zero, Brian Riedl, a senior fellow at the Manhattan Institute, told Grassroots Pulse.

“The view on Capitol Hill is the Republicans just want to cut taxes, and the Democrats want to go on a $50 trillion spending spree,” he said. “Which means we’re more likely to see Congress come together to increase the deficit than to cut it.”

In the meantime, groups like the Peter G. Peterson Foundation, the Committee for a Responsible Federal Budget (CRFB), Americans for Tax Reform, and many others continue to urge Congress and the President to take deficit reduction seriously.

“Neither party can afford to ignore the consequences of debt and failed leadership. Our nation’s red ink is headed toward record levels, with interest payments on course to exceed all spending on children or all federal Medicaid spending next year and match total defense spending by 2024. Our debt trajectory will crowd out important public priorities, slow wage growth, leave us less able to respond to the next recession, and increase the risks of a financial crisis,” CRFB Co-Chairs Governor Mitch Daniels, Secretary Leon Panetta, and Congressman Tim Penny warned in a statement last week.

The CRFB statement went on to urge lawmakers to find common ground on deficit reduction, such as closing loopholes in the new tax code or reducing the costs of prescription drugs and other health care services.

CRFB frequently publishes lists of options for reducing the deficit and highlights the ones that can get bipartisan support. When the 2017 House budget called for $200 billion of savings, for instance, the group compiled a list of savings measures highlighting spending reductions shared by both Trump’s and Obama’s proposed budgets, the idea being that tackling common-ground measures could pave the way for more meaningful deficit reduction measures.

While Congress has occasionally come to together over the past decade on small deals reducing discretionary spending or smaller entitlement programs, Riedl notes that it’s going in exactly the opposite direction right now, having voted last year to increase discretionary spending by $300 billion over two years.

“The Republican view has long been ‘If the Democrats aren’t willing to touch spending, we’re not willing to touch taxes.’ And so there’s not even hope for small reforms at this point,” he said. “If anything, I think those of us concerned about the deficit are playing defense and just trying to stop Congress from passing legislation to make it worse.”

Historically, budget grand deals tend to occur when there is a crisis forcing Congress to make difficult decisions. Riedl predicts that rising deficits will eventually trigger a crisis of rising interest rates, which will slow the economy and start hurting everyday American families.

“It’s hard to predict when,” he said, “but at some point the bond market will panic, and that will lead to a cascade of events that will force Congress to get its house in order.”

Some say economists’ continued warnings that out-of-control deficits will spark an economic crisis risk creating a “Chicken Little” effect. After all, the economy overall is strong, interest rates and inflation rates are low, and there are no outward signs of an imminent crisis despite increased warnings in recent years.

“The problem is that people have been warning about this for more than two decades, and there have been no economic consequences,” Tom Kahn, a former longtime Democratic staff director of the House Budget Committee, told CQ-Roll Call. “As a result, warnings like that run into a very skeptical audience of people who respond that we can continue borrowing without a problem. And those who issue the warnings feel like Chicken Little.”

Image Credit: Photo by Pepi Stojanovski on Unsplash

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