Divided Government is What We Need to Balance the Federal Budget
The greatest frustration for me as a fiscal conservative is that Republicans only seem to care about fiscal responsibility when a Democrat is in the White House. The last time a Republican president balanced the federal budget was… [Pause. Take a second to guess.]
- George W. Bush: Wrong
- George H.W. Bush: Wrong
- Ronald Reagan: Wrong
- Gerald Ford: Wrong
- Richard Nixon: Wrong
- Dwight D. Eisenhower: Correct
Overall, every Republican president since Calvin Coolidge has added to the national debt. According to Daniel Patrick Moynihan from the NYT, the Reagan Administration purposely ran up the national debt to justify cutting government programs…
“The Reagan Administration came to office with, at most, a marginal interest in balancing the budget — contrary to rhetoric, there was no great budget problem at the time — but with a very real interest in dismantling a fair amount of the social legislation of the preceding 50 years. The strategy was to induce a deficit and use that as grounds for the dismantling.”
The article continued by quoting President Reagan’s first televised address…
“There were always those who told us that taxes couldn’t be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.”
Ultimately though “their extravagance” wasn’t cured and instead, the federal government has continued to grow in size and with it — the national debt, which currently sits at $26.70 trillion. In the time it takes you to say $100,000 dollars — $100,000 has been added to the debt.
During the 1980s we also saw the rise of supply-side economics where many Republicans bought into the myth, “tax cuts will pay for themselves.” Using American history as our guide though we can say this has never happened. Never! But I suppose it could work next time?
A more rational Republican base would require their politicians to cut government spending before cutting taxes in order to not have a budgetary deficit and then if Republican politicians are correct by some miracle of history that “tax cuts will pay for themselves” then in the following year they could use that newfound surplus to increase government spending on something they like such as defense, or cut taxes for the wealthy, or pay down the national debt so America can have enough of a rainy day fund to weather the next big recession or national catastrophe. Economists say the only way a tax cut could pay for itself is if the effective income tax rate was above 60%, but according to the Tax Foundation the highest effective income tax rate in American history the 1% paid was about 45% in 1943.
In 2009, Obama said, “I’m pledging to cut the deficit by half by the end of my first term in office,” which he didn’t achieve. He tried again in 2013 whereby Obama offered to make cuts to Social Security and Medicare and a host of other government programs in exchange for tax increases on the 1%, but Speaker of the House John Boehner and Senate Majority Leader Mitch McConnell refused to consider any bill that would include closing tax loopholes for millionaires and billionaires. No joke.
Moral of the story: the modern Republican party cares more about tax cuts for the rich (Trump’s first legislative priority) and massive spending on the military-industrial-complex over fiscal responsibility.
Mitch McConnell justified his position by saying that tax increases will not reduce the debt; he believes only reforming the three major entitlements that take up 70% of the federal budget will be able to so in any meaningful way: Medicare, Medicaid, and Social Security.
Mitch McConnell has said multiple times though that he doesn’t think entitlement reform could be solved with one party controlling the federal government. In 2016, Speaker of the House Paul Ryan wanted to reform entitlements, but Mitch McConnell refused, preferring to wait until their was “divided government” again so both parties could take responsibility for doing something unpopular…
“Divided government is actually the best government. It’s the best time to tackle really difficult things, because it requires both sides to buy into it to make progress.” — Mitch McConnell, 2016
But here’s the deal: if Mitch McConnell believes divided government is the only way to bring down the national debt, but then he refuses to raise taxes a single cent on the 1% then how does he expect to make a deal with Democrats? Democrats will inevitably demand some tax increases in exchange for some spending cuts, but Mitch McConnell wants to have it 100% his way in a divided government. Since that’s impossible we’ll continue to have a ballooning national debt so long as Mitch McConnell is Senate Majority Leader.
The only time we balanced the federal budget in modern American history was in 1996 with a Democrat in the White House and a Republican Senate and House. We could have at least put America on the path toward balancing the federal budget in 2013, but it wasn’t the Democrats who got in the way it was the Republicans. Facts are facts.
Since 1965, divided government has led to a slower increase in federal spending (1.5%) vs. united government (3.4%) so at least if the parties can’t compromise then they’ll both limit the other’s ability to do too much damage with a Chinese credit card via giving subsidies to their side’s favorite special interest groups (In the 1980s we also saw the rise of another disturbing trend where corporations started lobbying for more regulations and subsidies. Big business loves big government. The greatest example of this is the Affordable Care Act).
As a side note, some people don’t understand why the national debt matters. There are many reasons, but the easiest one to explain is the interest on the national debt we have to pay every year. In 10 years it’s projected we’ll have to pay $1 trillion dollars on the interest of the debt alone! This means over 15% of our federal budget won’t be going toward defense, infrastructure, education, social security, healthcare, or even paying off the national debt. It will be going toward interest payments! To put it into perspective, the United States has the most national debt in the world and third in relation to GDP (behind Japan and Italy) among the world’s top 20 economies.
To get out of this fiscal mess, Republicans and Democrats need to work together. I don’t foresee this happening anytime soon in our hyper-polarized political climate, but for the sake of our future we need to get our financial house in order so our government doesn’t collapse under the weight of its debt obligations. A house divided cannot stand.