The king of debt
Armstrong Williams | 10/24/2019, 2:07 p.m.
When President Obama nearly doubled the national debt, raising it by almost $9 trillion during his two terms in office, Republicans howled in alarm. Although interest rates were being kept artificially low by the U.S. Fed and global central banks in the aftermath of the Great Recession, there would certainly be a reckoning down the road when the bill came due.
So incensed were Americans by the profligate borrowing by the federal government that it caused a political revolt in the form of the Tea Party. Tea Party politicians took Congress by storm and demanded accountability for the fiscal irresponsibility our country had engaged in. Tea Party-affiliated politicians called on congressional Republicans to be willing to shut down the government in order to force congressional Democrats and President Obama to agree to deep cuts in spending and to repeal the Affordable Care Act. And, for the first time in decades, Congress refused to pass a continuing resolution (in lieu of a final budget deal) to raise the debt ceiling, which forced Government shutdowns in 2013.
One of the central tenets of the Republican Party has been a commitment to fiscal conservatism, which consists of three central prongs: low taxes, low debt and small government. America’s burgeoning national debt, sprawling government bureaucracy and incredible burden of liabilities—that is promises to pay in the future—seem to belie this set of ethics.
So, when President Trump agreed to lower taxes as part of his economic plan in 2017, most Republicans thought it was a step in the right direction. We believed it was good for the economy, and many signs—including our current state of full employment and robust stock market expansion—seem to bear that out. However, lowering the taxes only affects one side of the government balance sheet. In order to be done responsibly, lowered taxes have to be accompanied by lowering spending.
And that is something the president has woefully failed to do. As of 2019, the U.S. national debt at roughly $22 trillion reached 100% of our GDP for the first time in American history. Despite the fact that our economy generates an incredible 20 trillions dollars of wealth annually, we borrow at least that amount in addition to our income to finance our current expenditures. Were America a country without a reserve currency like Greece, we would already be facing an economic emergency. We once derided Obama as the king of debt. But at this point in his presidency, Trump seems to have happily inherited and continued the mantle.
The economic reasoning behind Trump’s decision to lower taxes without lowering expenditures is a particular form of economic voodoo that reasons that the ‘fiscal multiplier’ caused by putting more money back into people’s pockets will stimulate increased economic investment and consequently economic growth. That economic growth will produce increased tax revenue that exceeds the amount of the tax cuts themselves. This looks great in theory, but that is where it belongs. Because economic growth has not outpaced government expenditure over the past two years.