Saturday, February 13, 2016

Memo to GOP budget chairmen: National debt will explode under your presidential candidates

Among the lesser-known facts of the Obama presidency is this: inflation-adjusted federal spending is lower now than when Barack Obama first took the oath of office. Nevertheless, after seven years of flat-spending and declining deficits, the Republican budget committee chairmen in the House and Senate dismissed Obama's $4 trillion fiscal year 2017 budget proposal sight unseen. More shameful still, Rep. Tom Price (R-GA) and Senator Mike Enzi (R-WY) are taking the unprecedented step of refusing to hold any committee hearingson Obama's budget request. Enzi explained his shocking snub this way:

"It is clear that this President will not put forth the budget effort that our times and our country require. Instead of hearing from an administration unconcerned with our $19 trillion in debt, we should focus on how to reform America's broken budget process and restore the trust of hardworking taxpayers."

If Senator Enzi is so concerned about the national debt, then he better have some serious conversations with his Republican Party's 2016 presidential candidates. After all, every one of them is proposing gigantic tax cut windfalls for the richest Americans, giveaways that will add trillions of dollars in new deficits over the next decade.

As the record since Ronald Reagan shows, the only certainties for Republicans are debt and tax cuts. But pretending otherwise, as I explained in November ("The Republicans' Dynamic Deception for 2016"), the GOP field continues to peddle the "tax cuts pay for themselves" myth to the faithful:

Among many others, Citizens for Tax Justice doesn't share the supply-siders dynamic faith. The CTJ's analyses forecast that Marco Rubio will drain $11.8 trillion from the Treasury over 10 years. Jeb! Will siphon off $7.1 trillion! (Bear mind that total federal spending over the next decade is projected to be $41 trillion.) As Vox explained, Ted Cruz's combination of a flat tax and a value-added tax (VAT) is the most regressive of them all. The top contenders provide mammoth tax cuts to the richest one percent of Americans. And the GOP field does all of this even as they demand a balanced budget amendment to the Constitution and some refuse to raise the debt ceiling.

The case of Florida Senator Marco Rubio, whose scheme John Barro rightly dismissed as a "Puppies and Rainbows Tax Plan," is particularly instructive. To achieve the balanced budget Senator Rubio demands, President Rubio would have to slash federal spending by up to $21 trillion—that is, by more than 40 percent—over the next decade.

Here's why: In its most recent forecast, the nonpartisan Congressional Budget Office (CBO) estimated that the federal government would run up $9.4 trillion in new deficits between 2017 and 2026 as spending ($51.4 trillion) outstrips tax revenue ($42.0 trillion). But according to an analysis by Citizens for Tax Justice, Marco Rubio's tax proposals would drain $11.8 trillion from the U.S. Treasury during the same time frame. (On top of that, Rubio wants to increase defense spending by at least $1 trillion over 10 years.) The result, as Jonathan Chait previously explained in "Why Rubionomics Is Even Crazier Than You Think," is a mathematical impossibility:

Over the next decade, Washington is projected to collect $41.6 trillion in revenue under current policies. Rubio would reduce that to about $30 trillion. Rubio proposes to increase the defense budget -- but, for the sake of generosity, let us assume he merely keeps the budget at the current levels he decries as "setting ourselves up for danger." He likewise promises not to touch benefits for current or near-retirees, leaving those programs unavailable for cuts over that time. According to figures from the Center on Budget and Policy Priorities, expenditures on defense, Medicare, Social Security, and mandatory interest payments on the national debt will total $30.7 trillion over that period -- and that's without accounting for any other functions of the federal government at all. So Medicaid, veterans' health insurance, transportation, border security, and education, not to mention the entire federal anti-poverty budget other than Medicare and Social Security, would have to go. Oh, and Rubio has also called for an amendment to the Constitution requiring a balanced budget every year.

Making matters worse, President Rubio would have to start draconian spending reductions immediately. That's because as far back as 2011, Senator Marco Rubio insisted he would never support another increase in the debt ceiling. That March, the new freshman senator from Florida didn't just demand a balanced budget amendment. As he wrote in a Wall Street Journal op-ed titled, "Why I Won't Vote to Raise the Debt Limit":

"I will vote to defeat an increase in the debt limit unless it is the last one we ever authorize and is accompanied by a plan for fundamental tax reform, an overhaul of our regulatory structure, a cut to discretionary spending, a balanced-budget amendment, and reforms to save Social Security, Medicare and Medicaid."

The inescapable outcome of Rubio's full set of demands is that the United States would either default on its debt or experience an economic calamity—or both. Even if Congress managed to avoid breaching the debt limit by somehow slashing $21 trillion from the $51 trillion in currently forecast spending, austerity of that magnitude would usher in the worst financial freefall since the Great Depression.

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Even the conservative Tax Foundation acknowledges the GOP’s red ink problem.

If the next president of the United States is one of the Republicans now battling it out for their party's nomination, chairmen Price and Enzi face a crisis similar in kind if not degree. Nevertheless, even before they saw it the two promised they wouldn't have anything to do with President Obama's final budget request:

"Rather than spend time on a proposal that, if anything like this administration's previous budgets, will double down on the same failed policies that have led to the worst economic recovery in modern times, Congress should continue our work on building a budget that balances and that will foster a healthy economy."

If this all sounds familiar, it should. As Vice President Dick Cheney put it in 2002, "Reagan proved deficits don't matter." Unless, of course, a Democrat is in the White House.

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