Kevin Judge | July 13, 2018
When Trump and the Republicans passed their tax cut bill for this year, there were dire predictions that the cuts would deny the government needed revenue and balloon the deficit.
Well, one out of two isn’t bad! 
According to the Feds this week, the US government is being flooded with rtax revenue but nevertheless is drowning in debt. Through the end of the 3rd quarter, tax receipts to the Treasury are running at an all-time and a healthy 6% over last year. That’s the good news.
The bad news is that budget deficit for 3 quarters, which requires new debt to finance, has already exceeded the total for all of last year. Republicans have argued that the only practical way to deal with the looming debt crisis is to get the economy growing and increase revenue. They point to the 90’s when budget restraint along with a booming economy resulted in budget surpluses.
Unfortunately, there is no will in Congress or interest in the White House for constraining spending. Far from it. Earlier this year they past a monstrosity Congress refers to as an “Omnibus Spending Bill” that blew the doors off the spending constraints Congress agreed to during the Obama years. Known as “sequester”, Congress agreed on spending limits for so called “discretionary” spending, everything except the entitlement social programs.
There were several problems with the sequester. The first is that discretionary spending leaves out the 60% of the budget that is “mandated” such as payments to those who qualify for Social Security, Medicare and Medicaid. The rub is that an aging population and a dearth of births, simple demographics make these the fastest growing portion of the budget.
The second is that the cuts fall evenly between the Department of Defense and all other discretionary spending. The DOD has been about one quarter of all spending but is about half of discretionary spending. That makes the cuts fall heavily on the military, a major reason the Republican were willing to break the sequester.
Significantly, the sequester cuts were applied by department and percentage, without any consideration of priorities. That at least partly explains the increase in major accidents in the Navy and aviation services. Naval disasters, air craft crashes and a lack of military rediness is being blamed on cuts in training and shortages in spare parts.
This is not a way to run a government. Then again, it was the first spending constraint in a generation and did result in a declining deficit even in the face of a sluggish economy. Despite being currently robust, the economy faces looming headwinds in the form of inflation, the cost of the Trump trade policies and rising interest.
The rising interest rates may be the real trigger of a debt crisis. We have not felt the full pain of decades of debt financed government because of historically low interest rates. If rates merely return to historic norms, say 6% on the 10 year Treasury, the cost of financing could be crippling.
Republicans like to cut spending and both parties love spending, albeit with different priorities. Spending constraint will require leadership from President Trump.
Donnie boy, if you want to keep the economy growing and keep making America great you gotta tackle spending. It is hard, but it will get harder every day you wait. As an old auto repair commercial used to say “Pay me now or pay me later!”