There's No Such Thing as 'Free Money' or Meaningless Deficits
As debt soars, federal payments to service the debt will crowd out the government's core spending responsibilities.
Most people probably have seen those TV advertisements featuring an obnoxious pitchman wearing a brightly colored suit covered in question marks. He jumps around frenetically, waving his hands, and announcing that the government is giving away lots of "free money." Matthew Lesko's websites help people tap into a sea of federal grants and loans. You can even talk to a "free money coach" to show you how to do it.
That's probably a good business opportunity in a country where the government spends $4.7 trillion a year. That's trillion with a dozen zeroes. It's 1,000 times a billion, which is starting to approach real money. It could take thousands of years to simply count to 1 trillion. The Lesko approach—free cash for everyone—has long been the strategy of Democratic politicians, but now it's the official fiscal policy of Republican politicians, too.
I sensed trouble when conservative radio pitchman Rush Limbaugh recently told a caller, "Nobody is a fiscal conservative anymore. All this talk about concern for the deficit and the budget has been bogus for as long as it's been around." I couldn't disagree if his point were that no political leader really has ever been serious about it. But Rush has also pooh-poohed years of deficit scares. "(W)e're still here, and the great jaws of the deficit have not bitten off our heads."
Apparently, Rush was softening up the conservative base for what would come next. Shortly after his comments, President Donald Trump agreed to a two-year budget deal with Democratic lawmakers that increases spending by $320 billion and obliterates existing discretionary spending caps. One budget watchdog explains that the deal will increase debt levels by $1.7 trillion over the next decade. "Trillion-dollar deficits are back, and they're here to stay," lamented the conservative Heritage Foundation.
The president once promised to reduce the nation's $18 trillion national debt, but instead is helping push it beyond $22 trillion. Everyone's a hypocrite now. Limbaugh and most conservatives had decried the soaring debt when Democratic President Barack Obama was in office, but now it doesn't seem to matter. Many liberal commentators are blasting Republican Trump's profligacy, but were unconcerned about such spending when their guy was in office.
Some Republican senators and members of the House Freedom Caucus blasted the deal. But there's little doubt the budget package will pass. Both parties like to spend money. Republicans are happy that the agreement boosts military spending and they are uninterested in cutting entitlement dollars. The entire Democratic agenda is about spending more money, so they're not about to complain about a record-setting budget.
With both sides so invested in government spending, it's not surprising to hear the revival of those old arguments that deficits don't matter. On the Left, Sen. Bernie Sanders (I–Vt.) and others are championing economist Stephanie Kelton, who argues that lawmakers should "avoid fruitless battles over the debt ceiling" and should "acknowledge that the deficit itself could be deployed as a potent weapon in the fights against inequality, poverty and economic stagnation."
On the Right, former Vice President Dick Cheney famously said that "deficits don't matter." Such conservatives weren't interested in using federal spending to fight poverty and inequality, but they didn't want growing deficits to curtail their military efforts in Iraq or quash their desire to step up tax cuts. His ideological heirs now argue that deficits are fine as long as interest rates are low and the Gross Domestic Product keeps growing.
Sorry, but deficits and debt do matter. There's no short-term crisis, for sure, but debt "will depress economic growth over time and could potentially lead to a fiscal crisis if borrowers lose faith in the country's ability to pay," explained Yuval Rosenberg in The Fiscal Times. Furthermore, he notes, debt hampers government's ability to react to real emergencies "such as recessions, wars or natural disasters." As debt soars, federal payments to service the debt will crowd out the government's core spending responsibilities.
It's morally reprehensible for current lawmakers who, to quote Limbaugh back when he was concerned about such things, are spending so recklessly "that it is destroying the future of your kids and grandkids." That's the key point. You could borrow an immense amount of money to upgrade the kitchen and take Hawaiian vacations and then claim that it doesn't matter as long as you can cover the monthly interest payment. But that's a road to eventual ruin.
Some debts can't be helped—e.g., capital expenses—but look at the nonsense that our massive federal budget is funding. Easy debt drives easy spending. It enables our government to do things it shouldn't do, such as wage unnecessary wars and create boondoggles like the Green New Deal or a space force. Deficit spending creates constant pressure for tax hikes.
We shouldn't spend what we don't have. Despite those TV ads, there is no such thing as "freeeee money."
This column was first published in the Orange County Register.