A pandemic accompanied by a looming recession does not make for a fun time to talk about fiscal prudence. But it’s the right time.
When we emerge from the current crisis, our economy will be in a shambles and our national debt will have exploded. We went into this pandemic with an annual budget deficit of $1.1 trillion, and that was with a growing economy and a roaring stock market. With the economy now sure to go into recession, that deficit will grow even more just as a simple matter of declining revenue.
Congress will now add $2 trillion in deficit spending in its relief package negotiated in the Senate, and that is on top of $140 billion added just days before in the relief bill initiated in the House. The first legislative attempt to help now looks more like a mere rounding error of just over a paltry $8 billion. In a week, in other words, our deficit spending for the year nearly tripled. Our national debt, already topping $23 trillion and scheduled to rise to $28 trillion by 2025, will now be more like $30 trillion by then.
And, leaders in Congress have said that there will be more spending to come before the COVID-19 pandemic is over.
But, it’s even worse than that. Those numbers don’t include the unfunded liability in the Social Security and Medicaid programs. Taking those into account means adding tens of trillions of dollars more to our national liabilities.
These numbers are staggering by any possible measure. Now consider that we had a small budget surplus just 20 years ago. What happened? Prolonged wars, profligate spending, unpaid for tax cuts, and an unpredicted recession all conspired to break our bank. And now a pandemic that is threatening tens of thousands of lives and millions of livelihoods is quickly working its way around the United States.
Imagine where we would be today if, in 2000, when we had a growing economy and a budget surplus, we had made different decisions.
If we had made our fiscal health our top priority. If we had looked to the long-term health of the nation rather than short-term political and economic stimulus efforts. If we had not taken on two foreign wars and attempted to rebuild several foreign nations with trillions of dollars from our treasury.
If we had acted differently, imagine what we could do today to keep our economy afloat, to buy supplies for our hospitals, to invest against the next pandemic.
Democracies are notoriously bad about planning for the long term. The public has short memories, our press is in a constant churn of changing lead stories and priorities, and our political leaders have short-term interests in re-election and the success of their party even when they are not personally on the ballot.
Prudence, perhaps the most important political virtue, demands far-sightedness and a dedication to the health of the future, even when that means pain in the present.
Until deficit spending was invented and embraced by our political class, there was always an anchor weighing down our temporary desires. Now the political class of any given time can borrow from unseen future generations to pay for their desires or the challenges of their own age. Our desires, being unshackled and our political class lacking prudence, we are now under mountains of debt.
If our nation were a household borrowing against the wages of our children and grandchildren to pay for our flat screen TVs, new cars, and vacations, we would rightly be denounced and considered undisciplined, uncaring, imprudent. We would be filing for bankruptcy.
We can’t just add national debt forever. Someday the chips will be called in and we will have to pay the price. Will we be ready for that day? Will the United States have to default on its debts? Will taxes become crippling and confiscatory? Will our populace be left unprotected from economic downturns because we have no fiscal reserves to call upon? Will a pandemic sweep through our nation again without us being able to provide for the health care resources needed to save lives and restart the country?
History will not end. There will be other crises. Will we be ready?
We will have enemies that arise and wars that need to be fought. We will have the need to buy and store strategic supplies. We will have an attack on our Internet and all our vital resources that are controlled through the Web. We will have economic downturns and the challenges of a changing climate. These are all predictable as, despite some of our wishful thinking, history does not end.
How strong the United States will be and how ready to rise to the challenges ahead will be determined by our preparation during times when things are going well.
A big part of those preparations must be getting our fiscal house in order. We must ween ourselves off deficit spending. We must prioritize our own country and the needs of our own future generations. Like adults, we must make difficult differentiations between needs and wants. Democrats must stop wanting to fund every nice idea they see, and Republicans must stop worshiping at the idols of tax cuts and magic growth estimates.
The fiscal days ahead will be difficult, if we are adults and step up to prudently plan for the future. But we should not shrink at difficult choices. We should be prudent, we should plan, we should put our household in order. Doing so will ensure we are ready for the challenges to come.
Gary L. Gregg is Director of the McConnell Center at the University of Louisville and host of the podcast Vital Remnants.
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Author: Gary L. Gregg