It’s time to talk once again about the giant looming problem that we all know is there and that we try to forget about — but which we make worse every year. That’s right: the debt. Treasury says we’re about to add another heaping chunk to the debt, and CBO says you can thank the recently passed tax bill:
It was another crazy news week, so it’s understandable if you missed a small but important announcement from the Treasury Department: The federal government is on track to borrow nearly $1 trillion this fiscal year — Trump’s first full year in charge of the budget.
That’s almost double what the government borrowed in fiscal year 2017.
Here are the exact figures: The U.S. Treasury expects to borrow $955 billion this fiscal year, according to a documents released Wednesday. It’s the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year.
Treasury mainly attributed the increase to the “fiscal outlook.” The Congressional Budget Office was more blunt. In a report this week, the CBO said tax receipts are going to be lower because of the new tax law.
In December, in a lengthy and detailed post opposing the tax bill, I warned you this was coming. I’ll quote myself at length, which I grant myself permission to do:
For years, I have warned about the coming crash of the government debt bubble. You can’t go on borrowing like your drunk uncle Joe forever without the ultimate result being inflation and lots of it. And what’s the main thing that will jump-start the crash? Interest rates rising above their unnaturally depressed level. Bad news! That has already started to happen.
And as interest rates rise, and spending continues out of control, an ever-increasing chunk of the national budget will be devoted to interest payments. This will squeeze out other priorities and choke the private sector. Ultimately, our children are going to be paying for all this, one way or another — either in the form of higher taxes, or inflation. Given the cowardice of government officials, it’s going to be inflation. And it’s going to be bad.
And while our main problem is spending, and not taxes, this bill makes the problem worse.
. . . .
You can’t count on tax cuts to pay for themselves. These tax cuts are overwhelmingly likely to add to the deficit and debt. At a time when the national debt just passed $20 trillion, this is incredibly irresponsible. Moreover, those Senators who raised concerns about the debt were steamrolled, while others who usually worry about the debt said not a word. So the bill sends a signal that the real problem — out of control spending — will never be addressed. And that has potentially tragic consequences for our country.
My post explained in detail why the tax cuts cannot be relied on to “pay for themselves.” I took the reader in detail through the argument, with quotes from Arthur Laffer disciples and other free marketeers, but the summary is that nobody has ever claimed that it is inevitable that revenues increase by the same amount that tax cuts decrease them, and it usually doesn’t happen that way.
So, while partisans will talk about the wonderful growth we will experience under the recently passed tax law — and we will experience some — we are going to see more debt. We knew that. The Treasury Department and CBO statements just confirm what we already knew.
Now that it’s Republicans increasing our debt, partisans don’t care. (This will change again under President Kamala Harris. I know, the phrase makes me shiver too, but pendulums tend to swing both ways.) But members of both parties have children, and it’s the children who are going to pay.
Hooray for our “conservative” Republican party!!!