Another GOP President Balloons the Deficit

Facing the Democratic “#Resistance,” President Trump has jumped into the arms of congressional Republicans and is following the old GOP pattern of tax cuts, military hikes and ballooning deficits, as Ivan Eland explains.

By Ivan Eland

The White House is now planning a humongous ten percent hike in defense spending, while making comparable deep cuts in domestic government programs—excluding big entitlement programs, such and Medicare and Social Security, which President Trump has promised not to touch.

President Donald Trump being sworn in on Jan. 20, 2017. (Screen shot from Whitehouse.gov)

During his campaign, the president also talked about a massive $1 trillion infrastructure program and just recently pledged again to spend “big” on it. Finally, he plans to slash taxes significantly. Those who have been paying attention for a while could be excused for having a sense of Republican deja vu—expanding government deficits leading to rapidly expanding national debt.

When Ronald Reagan came into office in 1981, his plan included the contradictory goals of massively increasing the Pentagon’s budget, cutting  income taxes substantially, and balancing the budget. However, his defense budget hikes and initial tax reductions ballooned the federal budget deficit so much, especially since proposed domestic spending cuts didn’t work out so well, that he had to raise taxes six out of eight years as president.

Thus, contrary to popular belief, Reagan had the smallest net tax reduction during his presidency of any post-World War II Republican. In the end, despite his reputation as an advocate for small government, his splurge in government spending increased the size of the federal government as a portion of GDP, and he was first among post-World War II presidents in debt accumulation as a percentage of GDP.

Similarly, George W. Bush racked up huge deficits and debt by following the Reagan precedent of instituting “fake tax cuts”–that is, tax cuts while increasing government spending, which leave budget deficits and debt for future generations to pay off with interest and may even require the inflationary printing of money to finance them.

Bush spent heavily by prosecuting two wars in the greater Middle East (Trump recently estimated the total money wasted so far in those long wars at $6 trillion) and expanding the benefits of an already financially rickety Medicare program.

Ignoring the Deficit

When Bush’s powerful vice president, Dick Cheney, famously said “deficits don’t matter,” he must have meant politically — voters like their taxes reduced but not the government programs on which they have become dependent — rather than economically. Federal budget deficits and resulting expanding government debt can strangle economic growth by “crowding out private borrowing” and increasing inflation.

The only difference between President Trump and those other two big-spending Republican chief executives is that Trump hasn’t even really bothered to mouth the rhetoric of “small government.”

The crowd at President Trump’s inauguration on Jan. 20, 2017. (Screen shot from Whitehouse.gov)

His massive infrastructure spending scheme and his promise not to cut politically popular mandatory spending programs (entitlements), which are projected by the conservative Heritage Foundation to represent 64 percent of the federal budget by the year 2020, are evidence of his profligate tendencies. Tax cuts are also always popular, especially with the Republican political base, and are fine if spending is cut first—so deficits and debt don’t rise.

If history is any guide (and it is), politicians likely will prove successful at cutting taxes and raising defense, law enforcement, and veterans spending, but will not be very adept at cutting other domestic spending (under Reagan and Bush it expanded substantially). Many of these programs have politically powerful constituencies, some of which are Republican, who will push back.

The area most puzzling is Trump’s dramatic proposal to increase the defense budget by a whopping 10 percent. Where’s the increase in foreign threat to justify such spending? The United States has been successful in constricting ISIS in Iraq and Syria by cheaply funding and supporting local forces battling the group.

If, as Trump alleges, the most capable military in human history is “depleted,” which is seriously doubtful, it is because of long, costly, and futile wars in the greater Middle East that, during the campaign, he implied that he wanted to avoid in the future. If the military gets even more money from the president, there will be even more impetus to send it abroad to fight such counterproductive wars that generate more blowback terrorism at home — thereby lessening U.S. security.

The United States already spends more on defense than it did on average during the bad old days of the Cold War, when the Soviet Union could have plausibly posed an existential threat to the country. ISIS pales in comparison and certainly doesn’t pose such a potent threat. As for potentially hostile nations, the United States already spends on defense what the next seven countries do combined, including China and Russia.

Thus, if Trump’s huge increase in defense spending is combined with a massive hike in infrastructure spending, no reduction in entitlement programs, likely disappointing spending cuts in non-entitlement domestic programs, and a substantial tax cuts, then federal budget deficits and the resulting national debt will again balloon—likely leading to a considerable drag on the economic growth that Trump has promised.

Ivan Eland is Senior Fellow and Director of the Center on Peace & Liberty at the Independent Institute. [This article first appeared as a blog post at The Hill, http://thehill.com/blogs/congress-blog/economy-budget/322596-here-we-go-again-yet-another-debt-expanding-republican .]

16 comments for “Another GOP President Balloons the Deficit

  1. LJ
    March 21, 2017 at 19:08

    If Trump gets an infrastructure package it will be good for this country because we need to do some maintenance on bridges, dams. etc. This serves the body politic and the general well being of the country even if it increases the deficit. Tax cuts are the main driver of the debt along with Regime changes in the last 18 years. These do not serve the people, it is bad debt that deflates the value of our currency. Constant trade deficits, exports of jobs, …in the long run there will be blowback. This article really isn’t about economics but why should it be, Economics is not really a science anyway. It’s an excuse. . I did like the reference to Dick Cheney. Ours really is a great country . Where else can a D+ student become Vice President or CEO of a corporation like Halliburton and then go hunting and shoot his friends instead of game and then still get quoted when he says such stupid stuff. Only in America. What this article does not mention is that unmanageable debt to the world’s reserve currency and ad hoc, voodoo economic fixes at Central Banks can and will eventually have a disastrous effect on the people of this nation. So too will spreading the e defenses of our Empire too thin and having to rely on mercenaries and bribes to project our dominance, like the Roman Empire did, well, this is not a recipe for success.

    • Seer
      March 23, 2017 at 01:37

      There is not enough future demand on our existing infrastructure in which to warrant extensive spending. Aging demographics. The future is not, and will not be like the past.

      Yes, stuff is crumbling. Is it, however, going to be highly required in the future, when less and less people are traveling? The environmental controls, though I am mostly not opposed, only make this worse: I’d have to say that the Republicans don’t necessarily hate the environment, it’s just that by cutting into environmental regulations they can be seen as “saving” jobs: in the long run it amounts to no more than a pathetic attempt.

      Most companies aren’t investing in scaling up. They KNOW. Best that they can hope for is to outlast competitors: sadly, there is no other option than consolidation.

      The SYSTEM requires perpetual growth. This is not mathematically possible.

      The biggest foe isn’t debt, it’s growth.

    • LJ
      March 23, 2017 at 13:44

      Agreed seer. Hear this, I remember Governor Jerry Brown, no the real one not the mean old clone who is now making speeches about growth to scientists and the Democratic core bragging that California (is outperforming Texas in terms of economic growth and job creation (He did not mention the real estate bubble) ,,,, anyway, I remember the real Jerry talking Lifeboat Earth and Small is Beautiful. The real Jerry did not get a standing ovation in fact he got marginalized and trivialized then exiled to the DNC and finally Oakland where he underwent a 10K transformation and reemerged > The mean old clone. He received a three minute standing ovation for the aforementioned speech a couple months ago and was lauded as the standard bearer of the pro environment Dems and the Voice of reason and good governance. I could not make this up. Of course endless growth whether economic or Malthusian is untenable. Life forms are bore they grow they maintain stasis for a time then they die. Sad but true. On the other had Corporations are people now-a-days and they are not limited by trivial concerns of life , death and mortality. I grow tired,. What will happen when Jerry abandons California due to the vicissitudes of Age? No matter if we can outperform Texas everything will be swell.

  2. LJ
    March 21, 2017 at 15:26

    The increase in all manner of debt during the Obama Years was one of the thing Barack got a flyer on. . The GW Bush tax cuts which Obama made even more permanent along with increased Military Spending and several other inputs guaranteed that the National deficits were once again going to grow from 2018 onward, I do not really care. The debt is so huge now that it can’t be corrected. It is not a partisan issue. . Trump is not in control of the deficit. He really doesn’t seem to be in control of anything.

  3. March 21, 2017 at 14:18

    Whatever are you talking about, sir? You should clarify to which comment you are objecting. Surely you know that money as a medium and means of exchange is very manipulated? Money is supposed to represent resources but that has gotten farther and farther from the actual earth’s resources as we’ve abstracted the concept, and at some point, we humans are going to hit the limits of our earth, it can’t go on forever. We can’t eat computers, not can we regenerate the ocean once we’ve filled it with poison. No economics theorist will solve that dilemma!

    • Seer
      March 23, 2017 at 01:20

      Exactly!

      THE issue is that our economic systems (and thus our very existence) is tied to the utterly impossible premise of perpetual growth (on a finite planet). Growth will ALWAYS collapse.

      As Dr. Albert Bartlett so clearly noted, the greatest failing of humans is their inability to understand the exponential function.

      William Stanley Jevons’ writing in The Coal Question brought us “Jevons Paradox.” Anyone not knowing what this is ought to research.

      Sir John Glubb wrote The Survival of Civilization in which he documents the collapse of many empires. The pattern of collapse is clear, and no ideology or leadership, no matter how “intelligent” or how ridiculous, was able to overcome collapse. Glubb wasn’t able to see that the failings could ALL be credited to the failure to continue on the path of perpetual growth.

      Pensions and existing collectives cannot tolerate, mathematically, contraction. All are predicated on growth. Ultimately REAL growth fails, and with that failure goes everything (just as with all past civilizations’ collapses). Humans will summons up their greatest asset -hubris- to deny their failure- blame the other political party, blame policies, blame those “others.” War will be the only accepted outcome. THAT is why the 10% increase in an already absurd military budget. As Dick Cheney also said, “The American way of life is not negotiable.” Eventual self-destruction lies ahead….

      [Regarding why no mention of Democrats and their influences on deficits is that they don’t, as a collective, tout smaller government or a reduction in deficits. The Republicans are masters of hypocrisy- liars’ liars The Democrats are just a bag of shit.]

  4. Bonald
    March 21, 2017 at 13:56

    Sad to read such an economically totally uninformed comment on this otherwise excellent page of critcal opinions!

    (All those worrying about state debts, seem astonishingly unconcerned about any learning about the functions of debt, government spending and money in our economic system.)

  5. Bill Bodden
    March 21, 2017 at 13:25

    If, as Trump alleges, the most capable military in human history is “depleted,” which is seriously doubtful, it is because of long, costly, and futile wars in the greater Middle East…

    Perhaps, our military is in a similar condition as the military was when George Marshall took over as chief of staff. In his first year in that role he got rid of something like 30 generals he deemed incompetent. In Vietnam our generals lost to the North Vietnamese whose budget was just a fraction of that of Westmoreland and company. Iraq? The Petraeus surge was a loser, after which the militias and other local resistance encouraged Dubya to get the hell out of Baghdad. Afghanistan: The Taliban and other local resistance have the U.S. and NATO stuck in a 15-year and counting quagmire.

  6. WG
    March 21, 2017 at 12:51

    Good thing Obama didn’t massively increase the debt, its only the republicans that do that…

  7. March 21, 2017 at 11:43

    The plutocrats always get fed, the people get starved. That way the stock market looks better so we can talk about this wealthiest nation in the world! And Chris Hedges titled one of his books, “War Is a Force That Gives Us Meaning”, sarcastically, of course. No, does not matter what party, they’re “two wings of the same bird of prey”, not sure to whom that’s attributed but quite apt.

    Interesting, RT stated today Russia will pay off its debts assumed from the USSR this month when it pays Bosnia-Herzogovina, and Russia is also writing off Cuba’s and African nations’ debts to the old Soviet Union as well. Can you imagine the USA doing that?

    • Bill Bodden
      March 21, 2017 at 13:14

      … they’re “two wings of the same bird of prey”, not sure to whom that’s attributed but quite apt.

      One of my heroes, Walter Karp, wrote those words around the time of Ronald Reagan, but I believe someone else was the originator. Regardless of who wrote those words, we would all do well to keep them in mind.

  8. Zachary Smith
    March 21, 2017 at 10:51

    I’m a “deficit hawk” myself, so I understand Mr. Eland’s concerns. But what I do not understand is the omission of a non-GOP president from the essay.

    Barack Hussein Obama’s deficits – depending on who you ask – were anywhere from a match to more than double those of George “texas torturer” Bush.

    • Joe Tedesky
      March 21, 2017 at 11:13

      I guess I should give some slack to Ivan Eland that he focused down hard on Trump, but yes I agree the Democrate’s are not any better. Maybe Mr Eland could write a part 2 where he explains what is going on with the other Wall St. party. The problem lies in the fact that these politicians need to ballon the deficit in order to reward their awaiting donor class who funded them into office. Everybody wants a big piece of the pie, and it’s a politicians duty to feed them as much as they can.

    • Bart in Virginia
      March 21, 2017 at 13:55

      Remember that Obama inherited the Great Recession and had to spend in order to provide (crappy) jobs and increase demand. Part of his deficits were automatic increases of programs like food stamps and others.

      He weakly tried to pass a larger stimulus but several weak-kneed Dem Senators (remember Holy Joe and Ben Nelson?) and the triad of Larry, Timmy and Hank prevented it. That larger stimulus would have necessarily increased the deficit further but would have helped employment figures.

    • Joe Tedesky
      March 21, 2017 at 16:10

      Bart I’m one of those who believe the stimulus would have been better spent on the people. Big bonuses, stock buy backs, and recapitalizing doesn’t lift the economy. Even now if the stock market does good that doesn’t necessarily mean the average Josephine is feeling the growth. I’m also one who wants manufacturing to come back, and I don’t buy into all this automation will prevent growth. Countries need to have goods and food staples to sell. Good economies can’t be just measured by the stock market. In fact this situation needs to be reversed where if the productivity of the employed does well, then that would indicate that these companies who employ these workers are doing good, and likewise it would be a barometer for the investor to know where to invest their money. Instead our system is building castles in the sky by printing a lot of fiat currency, and denying there is inflation….it’s the bubble, and we all know that when you over inflate the ballon the bubble will burst. Stay as much as possible out of debt.

    • Peter Loeb
      March 22, 2017 at 07:22

      DEMOCRATIC BLINDSPOTS

      Democrats (including self-proclaimed “liberals-progressives”)
      never ever see any analysis which includes any actions
      whatsoever by Democratic Administrations.

      In his work, Dr. Jack Rasmus sees both theory and history.
      I recommend his 2010 book:

      “EPIC RECESSION: PRELUDE TO DEPRESSION”.

      Rasmus has updated his earlier works with an
      excellent article which Zachary Smith, Joe Tedesky
      should read with care”

      http://www.counterpunch.org/2017/03/02/trump-in-historical-perspective-from-nixon-to-breitbart/

      —Peter Loeb, Boston, MA, USA

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