Making the Federal Government Lean Again

With trillion-dollar deficits on the horizon, now is the time to start talking about government austerity.

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Congress
Bill Clark/CQ Roll Call/Newscom

We are not in a full-scale war. We are not in a recession or fighting a high unemployment rate. But the federal government is spending as if we were a teenager with a parent's credit card. Trillion-dollar deficits are coming back soon, so this is the perfect moment to start talking about government austerity.

According to the Congressional Budget Office, even before taking under consideration the budget impact of the Tax Cuts and Jobs Act and the added spending from the budget deals, we are about three years away from the next $1 trillion deficit. Also, this year, the Department of the Treasury will inevitably have to borrow hundreds of billions of dollars to pile on top of our already eye-popping $20.6 trillion of gross debt, which is public debt plus the debt the federal government owes to other accounts, such as Social Security. That's over 100 percent of our gross domestic product. It will also have to request yet another increase to its borrowing limit.

Strikingly, President Donald Trump made zero mention of the debt or the growing deficits during his State of the Union address. However, he didn't fail to ask for new spending on infrastructure, another job training program to be added to the dozens of existing and inefficient ones, immigration enforcement, and a wall on the southern border. And he asked for more defense spending than he is currently allowed to have.

There was no mention of how we would pay for all of that stuff, and he even mentioned more tax cuts. (Obamacare taxes, I am looking at you.) For those reasons, it's high time to ask that this administration and Congress make the federal budget lean again.

At this point, many of you may think I am delusional. Indeed, a look at budget numbers reveals that when Republicans are in control of Congress and the White House, special interests that feed at the teat of government have nothing to fear. Government continues to grow. You get some tax cuts and a few military operations but no spending cuts or reforms to the entitlement state. In fact, you may get a new entitlement program, such as Medicare Part D or paid family leave.

Nonetheless, it is worth trying to fight for fiscal responsibility by reminding elected officials that debt and deficits aren't good. They're expensive. They slow the economy over time. They make it more difficult to respond to true emergencies. And they make it likelier that tax cuts will be undone in the future. They are also unfair to the future generations that will pay for them with lower growth, fewer jobs and higher taxes.

The great news is that if lawmakers decided to do the right thing, we would know what to do. There is not only a large amount of literature but also a consensus among economists about what fiscal adjustment packages are the most effective at reducing the debt-to-GDP ratio with the lowest level of short-term costs.

First, based on past experiences in developing countries, we know that spending-based adjustments are more successful than tax-based adjustments at reducing the debt-to-GDP ratio. They also last longer.

Second, consolidations based on spending cuts are more effective if they focus on reforming entitlement programs. Spending-based adjustments, unlike tax-based ones, also lead to long-term growth.

Third, spending-based packages can sometimes encourage economic growth in the short term. Tax-based ones never do. Even the International Monetary Fund recognizes in its research that when spending-based adjustments impose a short-term slowdown, the declines in consumption and GDP are three or four times smaller than tax-based fiscal consolidations. These findings were confirmed in a recent paper by Harvard economist Alberto Alesina and his co-authors.

Now, the more depressing part of this body of research is that a vast majority of the fiscal adjustment experiences end up as failures because politicians choose to raise taxes rather than cut spending. Maybe that's because they continue to be more committed to the special interests benefiting from the government programs—e.g., seniors—than to the long-term health of their country.

Whom are American politicians loyal to? Let's hope they decide to pick fiscal sustainability over special interests.

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40 responses to “Making the Federal Government Lean Again

  1. I am delusional

    We know it’s just an act for literary purposes.

  2. Oh joy, we get “a few military operations” when Republicans are in control.

  3. Perfect example of why I’m convinced the “fiscal responsibility” talk of Republicans is complete BS, the same as the “civil liberties” talk of Democrats. It all comes down to helping your supporters (the major donors among them) and hurting the other party, and the greater good be damned.

    1. Spot on!

  4. How about cutting the anti-libertarian media bribery language Nixon’s Congress injected into the IRS code? TITLE VIII ? FINANCING OF PRESIDENTIAL ELECTION CAMPAIGNS?, in SECTION 801. PRESIDENTIAL ELECTION CAMPAIGN FUND ACT is the use of naked force to pay the media to mention only entrenched 19th-century looter parties. The plan was doubtless to dangle stolen cash to attract venal infiltrators into the Libertarian Party NOT to further freedom, but to try to gorge at taxpayer expense. It hasn’t worked. LP voting share is a hockey-stick discomforting to sanctimonious fascists and smarmy socialists alike, but proof nevertheless that bribing the media to ignore our platform has not worked.

    1. The media can mention other parties, as long as they mock them.

  5. Trillion-dollar deficits are coming back soon, so this is the perfect moment to start talking about government austerity.

    You can talk all you want but it ain’t gonna happen in a democracy like ours. Borrowing as much using unsecured, unenforceable loans is rational behavior, both for politicians and voters. The only people who can realistically set limits on irresponsible borrowing are the lenders. Who are the lenders to American government? About half is the American government itself, so much of this is a giant shell game. Much of the rest is institutions and foreign governments.

    The reason to reduce spending isn’t mounting government debt, it’s the fact that government spending per se is harmful, and that high spending necessitates high taxes in the short term.

    1. “The reason to reduce spending isn’t mounting government debt, it’s the fact that government spending per se is harmful, and that high spending necessitates high taxes in the short term.”

      Government spending, by definition, involves coercion. Therefore government spending is not an exchange of goods between free and interested parties. It therefore does not increase the wealth of mankind and in all likelihood reduces it.

  6. Sadly, I am really giving up on any hope that less spending and smaller government will ever happen. There is just no political incentive for it and any politician who tries is either deemed a fringe lunatic or quickly run out of office. At this point we are really looking at the continued increase in spending and growth of government until it falls apart. Unfortunately, when the populace is given the option of getting things for “free” or having to pay for them, they will always choose free, be it someone who is homeless, the subsidized rancher and farmer, or the billionaire CEO of Tesla; “free” giveaways will always be more popular.

    1. Yes nothing is a bigger political loser than spending cuts. Rising rates on the debt will blow the budget out even faster. Then 2 sides will point the finger of blame at each other and then come to an agreement in the name of bi partisan cooperation as they did yesterday to spend more.

  7. Lean again? When was it lean?

    1. 1776.

      1. Finally, someone with an applicable date.

        1. I prefer my date. 1775 means we’re still under the monarchy. 1790 plus is over the Constitution. 1776 has no monarchy, no Articles of Confederation, no Constitution. All we got is the states sending money and supplies to the revolutionary army.

          1. Right, no Constitution and no federal government, so the federal government could not have been lean in ’76. GOTCHA

    2. Sometimes it leans a little to the right, sometimes a little to the left, but always forward…to the cliff.

      1. …And twirling, twirling, twirling towards the future.

    3. There was a true federal surplus under president Andrew Jackson – all the debt was paid off and there was money left over! Then, about 3 years later, a terrible economic depression occurred. The next five times there was a federal budget surplus (there have only been 7 total), the country experienced an economic depression within 2-3 years. The 7th time was the Clinton budget surplus. Some suggest that the tech stock bubble, followed by the real estate bubble, with the Fed being too lose were the reasons the previous pattern took a bit longer – then we had the Great Recession.

      Correlation does not prove causation, but it is interesting.

  8. W floated a trial balloon of reforming social security. He was roasted for it.

    Trump is floating trial balloons on lifetime caps for Medicare.

    That makes excellent economic sense but enforcement will be impossible.

    1. He should float a trial balloon to fucking nuke Medicare from orbit. Fucking do-gooderism bullshit is going to bankrupt us.

      1. Medicaid definitely. Medicare should be privatized.

    2. W’s balloon wasn’t even that offensive. Heaven forbid people be able to set aside some of their own money for retirement.

      Now, that said, I’d never put money into that program if I had a choice. There’s a 100% chance that it will be raided by feds in the future, and folks without tinfoil hats might actually trust the government to not literally steal their livelihood.

      1. I would prefer to have both sides of SS to invest as I please.

  9. The same people have been saying the same thing for decades. Nobody is going to care enough until it hurts people personally.

    I do like how every single fucking time the Republicans have all three braches, they spend a shitload of money. Fucking parasites.

  10. With trillion-dollar deficits on the horizon, now is the time to start talking about government austerity.

    Austerity is like Kryptonite to luminaries like Paul Krugman.

    1. “Austerity is like Kryptonite to luminaries like Paul Krugman.”

      Leftist lunkheads like Krugman don’t even know what austerity actually is.

      They screech “austerity” if some budgeted rate of spending increase is reduced in any way despite the fact that spending is still increasing on an absolute basis.

      1. I love it when politicians call decreases in spending increases cuts. Raising a budget by 10% instead of 20% is not a cut, dipshits.

        I don’t actually love it. I fucking hate it.

        1. “I love it when politicians call decreases in spending increases cuts”

          They know they can count on the lapdog media to slavishly parrot the same thing.

    2. Takes more than talk … which is all that modern libertarianism seems capable of.
      Yet more anti-gummint slogans and soundbites for the tribe … totally devoid of any solutions.

  11. so this is the perfect moment to start talking about government austerity.

    But People will die.

    1. If we could only increase the budget by infinity percent, no one would ever die again.

  12. Well, at least one libertarian-ish politician is in favor of Trump’s idea of a military parade:

    “Though the martial image of high-stepping soldiers is not one I tend to associate with our nation’s Founders’ distrust of a standing Army, I’m not against a victory celebration. So I propose we declare victory in Afghanistan, bring home our 14,000 troops and hold a victory parade.”

    http://www.foxnews.com/opinion…..first.html

  13. Why would the feds cut spending based on the loose restrictions that the electoral process places on them? Would you stop spending money that flows into your pockets ? What fiscal pressure is there to cut spending free money ?
    Businesses have to be forced to cut back if consumers do not buy their products. The only way the feds will be forced to face reality is if taxpayer consumers have a choice, and decide to keep their own money.
    TAX HONESTY has questioned the income tax system as a rogue system that simply does not follow the actual law for decades. But the predominant strategy for PATRIOTS has been the don’t file, don’t pay strategy that the federal judges will not accept. Until 2003, when a libertarian from Michigan realized that cooperation with the withholding system and then, if you did not earn money from the exploitation of a federal privilege, file educated returns. LO AND BEHOLD, thousands of Americans who have followed his example have received full refunds of all withholdings, including state and federal both income and payroll tax withholdings.
    The libertarian conservative establishment has so far missed the opportunity to understand the meaning of the 16th Amendment and the Taxing Clauses. They have a golden opportunity to open the minds of the young and show them how the Constitution and laws actually provides them with choice in taxation. SAD! http://www.losthorizons.com

    1. Why was I so certain that your link would go to one of the wackiest conspiracy sites on the planer.

      UNdelegate. Give voters indirect control, over total spending. Indirect because Congress can then set priorities within a fixed total

      Pro-liberty libertarians were proposing solutions like that in the 70s and 80s … before anti-gummint goobers destroyed the liberty movement.

  14. You heard it here first…and that’s the last time you’ll hear it. Got back from talking with a retirement planner who thinks single-payer healthcare is just around the corner. Might want to get another opinion. Either that or move to Switzerland. Hard to say if its the accumulated debt that will kill the country of the delusions of the people inhabiting it.

  15. Complaining about a problem,
    without posing a solution,
    is whining.

    Theodore Roosevelt

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