Will America sink or swim? It's time for U.S. lawmakers to decide.
The Wall Street Journal reported Wednesday that the federal deficit is expected to top $1 trillion next year, dealing a major blow to fiscal conservatives who argue that lower taxes alone can reduce the deficit and debt. It’s a formula that has been tried before - and failed miserably. Yes, lower taxes are part of the overall formula to reduce the federal deficit and debt. However, tax cuts alone cannot eliminate the billions of dollars in yearly deficits and more than $20 trillion in overall debt that the U.S. holds.
The key to getting rid of red ink is lower taxes paired with significantly lower federal spending. To its credit, the Trump administration has eliminated much of the pork in the federal budget that previous administrations - both Republican and Democrat - were unwilling to tackle.
However, even the Trump administration’s draconian cuts will be insufficient to weaken the force of the fiscal flood that will occur if lawmakers and administration officials do not soon become willing to drastically reduce federal receipts in addition to increasing tax revenues.
Think back to former President George W. Bush’s administration. The Republican president signed legislation drastically cutting taxes for most Americans. The problem with those cuts, however, was that they were not accompanied with large enough cuts to federal spending to offset the loss in revenue. That’s not to mention the fact that shortly after the Bush tax cuts, America was thrust into a costly war, which added trillions more to the federal expense column.
The result was annual trillion-dollar deficits and an ever-rising federal deficit that President Obama was able to lower through dramatically raising taxes, but still unable to eliminate entirely. It has now been nearly a decade since George W. Bush left office, and the country once again faces soaring deficits not seen since the last Republican presidential administration.
This was not supposed to happen. President Trump, in his first joint address before Congress in 2017, said his tax cuts would be paid for gradually by a “revved-up” American economy. He cited the meek 2 percent Gross Domestic Product (GDP) growth under President Obama and said that by raising the annual growth rate to 4 percent or higher, the tax cuts would pay for themselves. But while the rate of GDP growth has risen since Trump assumed office, it has yet to climb to the 4 percent level that Trump promised. And keep in mind that the Trump administration’s are the most aggressive tax cuts to take effect since Ronald Reagan.
The fact is, as I wrote for TheBlaze following Trump’s first joint address before Congress last year, it is impossible for Trump and federal lawmakers to reduce the federal deficit by any significant margin without taking drastic action regarding current federal entitlements.
The conservative Heritage Foundation estimated in a report issued in 2014 that 85 percent of the rise in federal spending between 2014 and 2024 is attributable to Social Security, Medicare, Medicaid and interest on the national debt. Without drastic reforms to these programs, specifically, it is impossible to make a significant dent in the overall federal deficit or debt.
Trump, however, has so far indicated an unwillingness to touch federal entitlement spending, telling supporters at a campaign rally in 2016, “I am going to protect and save your Social Security and your Medicare. You made a deal a long time ago…I will do everything within my power not to touch Social Security, to leave it the way it is. I want to leave Social Security as is, I want to make our country rich again so we can afford it,” the New York Times reported in November 2016.
To Trump’s credit, in his FY 2019 budget blueprint, he did seek $2 trillion in cuts to Social Security, Medicare, and Medicaid. Most of these proposed cuts came in the form of reversing the Medicaid expansion that was part of Obamacare. However, it was not until after Congress passed a two-year spending bill that Trump proposed these entitlement cuts, making them “largely irrelevant,” as Politifact put it. Furthermore, these cuts would have been offset by block grant funding matches to individual states, meaning the cuts likely would not have been actual “savings” anyway.
With all due respect, Mr. President, we are now nearly halfway into the first term of your presidency and, while millions of Americans have more money in their bank accounts than they did under your predecessor, the outlook on the federal deficit and debt is gloomier than before you assumed office. Mr. President, please listen to your own supporters at the conservative Heritage Foundation and look at how Social Security, Medicare, and Medicaid can be reformed to save the country from an existential debt crisis.
Several years ago, we witnessed a threatening fiscal situation in Greece. Greek lawmakers who were unwilling to address their unsustainable way of life before the debt crisis were eventually forced into making draconian cuts anyway. Lest America become like Greece at the height of their debt crisis, American lawmakers must recognize the absolute necessity of reforming current entitlement programs before it is too late.
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