It feels like only yesterday that I was writing policy statements for candidates running in the “tea party year” of 2010 stating the shocking fact that we had reached $13 trillion in debt as a nation so quickly. Republicans indeed succeeded in winning back the House at the end of the year, they won back the Senate in 2014, and they controlled the trifecta for the past two years. Now, the debt stands at $21.8 trillion, an increase of over $8 trillion in just eight years, and the trajectory is about to explode. Isn’t it time we finally ask what Republicans actually stand for other than low-tax socialism?
Not only do Republicans have a big decision to make on immigration in the final budget with control of the House, they also must confront the debt crisis they made worse rather than helped. The debt has grown $8 trillion since they took over the House, $3.8 trillion since they took over the Senate, and even $1.9 trillion just in the 22 months of trifecta control. Most of the growth (roughly 88 percent) in debt has come from the public share of the debt, not the so-called debt we owe ourselves. President Trump’s Office of Management and Budget introduced budgets cutting billions in spending, yet Congress went in reverse and increased spending in every category the president promised to cut. Sadly, the president’s veto pen is gathering dust.
Just for the first month of this fiscal year, the deficit topped $100 billion, on pace to easily bring back the trillion-dollar deficits of Obama’s first term. And to be fair, that was during a great recession. Now we have the most robust job growth since the late ’60s. Where’s the deficit coming from? Revenues were actually up $17 billion relative to last October. However, spending increased by $55 billion this October relative to October 2017. Annually, Republicans increased spending by $136 billion in FY 2017 over Obama’s last year in office and another $127 billion on top of that in FY 2018.
While the tax cuts obviously reduced some revenue that we would have received had rates remained the same, given the growth in the economy, we still took in more money last year than the year before. Even if you isolate the 10-month period since enactment of the tax cuts – January 2018 through October 2018 – and compare it to the equivalent 10-month period in calendar year 2017, we are actually $2 billion ahead on the revenue side. Again, revenues would have been higher on the corporate side if not for the tax cuts, but there is evidence that much of the increase in payroll tax revenue was due to job growth, which was fueled, in part, by the tax cuts themselves. The culprit is the spending, which has increased by $138 billion over the past 10 months.
We are now at the point where despite robust economic growth, the current dollar GDP of our entire economy is $20.66 trillion, almost $1.2 trillion smaller than the size our debt! Our debt will remain larger than our entire economy in perpetuity. According to some estimates, in 30 years from now, the debt will be over 175 percent of GDP, which is where Greece is now.
Yet rather than discuss any plan to cut spending and actually reduce the harmful footprint of government in the private economy, Republicans are talking about another tax package and more spending, totaling $54.7 billion. Tax cuts are good, but at some point, we’ve crossed the Rubicon where, if all Republicans do when in power is cut taxes, but at the same time they increase spending rather than cutting it, the tax cuts become counterproductive in many ways. Like many things in life, you can’t half-ass free market doctrine by having low taxes but keeping socialist programs and market interventions in place, because the mix of the two breeds crony capitalism/venture socialism at the corporate level and creates dependency among individuals without exposing them to the pain of higher taxes that are endemic of European socialism.
Until now, the low tax doctrine has been worthwhile, but any continued effort to only cut taxes while continuing to increase spending is counterproductive both policy-wise and politically.
In terms of policy, the debt is reaching a tipping point, because next year we will spend as much money just on interest as we spend on Medicaid. In five years, it will surpass military spending. The dead weight and misallocation of investment in the debt and treasury bonds is crowding out private investment and is ensuring that, despite the job growth, we are not realizing economic growth commensurate with the job market like we saw in the late 1990s and late 1960s. The more we are desperate to service the debt, the higher the interest rates will rise, which will attract even more investments into treasury bonds and away from private investment, creating a perpetual death spiral of more debt, higher interest rates, increased debt payments, and less private investment.
Which brings us to the political problems. Republicans are planning to lock in the spending levels of the FY 2018 omnibus, pass a massive $900 billion farm bill that has Obamacare-style market distortions of land and crop use and food stamps and more extra money on disaster spending – but all mixed together with a “tax extenders” package full of special interest credits for big businesses. This pattern of low-tax, high-spending socialism is creating the perfect climate for corporate bosses to use low taxes as their nourishment to then turn around and serve as the enforcers of cultural and economic Marxism for the Left on every other issue. The moral of the story is that you can’t half-bake free markets. It’s time to force Republicans to pick sides – either they support all of Coolidge’s free-market policies, or we will give them the full Bernie Sanders.
Corporate America has become the number one enforcer – even more effective than the media and academia – in promoting open borders, endless Middle East migration, weak-on-crime laws, anti-religious liberty policies, mindless multiculturalism, and the transgender agenda. Even on fiscal issues, they support the welfare state, Obamacare, and all the regulations that help them shut out competition. The one missing component from the Democrat portfolio is the tax issue. If the corporations empowered Democrats on that issue too, they couldn’t survive. Thus, they feast off the Republican lifeline against Democrats raising taxes so that they can promote the rest of the progressive agenda. And remember, government-run health care is the single biggest driver of our debt, and that is being fueled by big business.
The package of tax extenders Republicans plan to pass costs $54.7 billion together with more disaster spending. There are a number of handouts, such as the biofuels blending credit and handouts for electric cars, Big Wind, and NASCAR in the bill. Then there is the farm bill, which is the Obamacare of agriculture.
It’s time we promote free market reduction of government market interventions along with the tax cuts or no tax cuts at all. Trump needs to use his veto to enforce his budget proposals in addition to his immigration agenda. We need to plow forward with a holistic view of conservatism – fiscal, cultural, and security – as one unit. Split-the-baby conservatism leads to nothing but a perfect, holistic progressive hell. (For more from the author of “Half-Baked ‘Low-Tax Socialism’ Is Getting Us a Whole Progressive Hell” please click HERE)