Fixing Deficits With Better Priorities

by Phil Anderson

“Politics: A strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage.” Ambrose Bierce

Conservatives supposedly are for fiscal responsibility. We should live within our means. The government should not, according to them, spend more than it takes in taxes. As a corollary,   taxes hurt the economy and must always be cut. These pious platitudes superficially sound good but are misleading and destructive in many ways.  

Actions speak louder than words. The historical record shows that since 1980 federal deficits and increases in the national debt occurred most often under Republican leadership. Now deficits are exploding under the current administration. The increase to the deficit will be $5.088 trillion, or a 30 percent increase, from fiscal year (FY) 2017 ((including the FY 2020 proposed budget).** President Trump, as all candidates do, ran on the promise to eliminate the debt. How do you know a politician is lying? Their lips are moving.  

Conservatives are not actually against government spending. They are just against spending that helps people. Spending that puts money in their pocket is just fine. So huge increases in Pentagon spending, corporate subsidies, tax breaks, and tax cuts that overwhelming benefit the wealthy are fine. Spending on healthcare, housing, and education are not. As Ambrose Bierce wrote over 100 years ago, the conservative masquerade is not about principles, is it about public money promoting private advantage.   People need to be informed and not deceived by the political posturing. The misleading, self-serving arguments are repeated every budget cycle. So I am repeating what I have written in the past about the real causes of deficits and the national debt.  

Government, like individuals, borrows money and has debt. Debt can be a problem if you have too much and can't make the payments. It can be a problem if you are using debt for the wrong reasons. Partying on the credit card is not good. Using debt to invest in your future (buying a house, starting a business, going to college) can be a wise choice. Unfortunately much of our federal spending is not spent wisely to build the public good or invest in our people's future.  

There are three major causes of federal debt: excessive military spending, excessive health care costs, and tax breaks.  

Historically the Pentagon has consumed about half the discretionary budget. This only includes the Department of Defense, nuclear weapons costs, and the Overseas Contingency Fund (wars in Iraq and Afghanistan). It does not include ALL the “national security” related spending. For example, the Veterans Administration, which is directly related to the consequences of war, is not included. When the Department of Homeland Security, Department of State, the FBI, Veterans Administration and defense related interest on the debt are included the total national security spending is 85% of the discretionary budget! This is before the recent increases in defense spending.  

No other nation spends anywhere near this amount on defense. There are many ways to reduce spending and achieve better financial controls without hurting security. But neither political party has had the political will to take on the vested interests that profit from our national security paranoia.  

Another driver of national debt is healthcare costs. We have the most expensive healthcare in the world. The federal government is a major buyer of healthcare services. Health care is the fastest-growing category of federal spending and in 2015 totaled $1.1 trillion. This is almost as much as the total discretionary budget. The Defense Department spends 10% of its budget on healthcare so fixing this problem would also reduce military spending!  

Most of this spending goes to private, for-profit healthcare providers, insurance and drug companies. The “healthcare industrial complex” costs, like military costs, are out of control. The excessive cost of healthcare impacts individuals, businesses and government at all levels. A rational, comprehensive, universal national healthcare system is needed to control costs.    

The third major cause of deficits and national debt is tax breaks. Tax breaks have a cost just like spending (economists call them “tax expenditures”). The cost of various tax breaks adds up to more than the entire federal discretionary budget. Even though almost everyone qualifies for some tax break, most of the benefits go to higher income folks. Most of the value goes to the upper 20% of income earners. Many tax breaks benefit large businesses.  

Tax breaks have long standing bi-partisan support. No one is going to mess with the home mortgage deduction, for example, even though it costs $70 billion a year and does little to actually promote home ownership. The biggest tax expenditure is the tax deduction businesses can take for employee health insurance ($236 billion in 2018). Again, a single national healthcare program that covered everyone would make this unnecessary. A comprehensive national health care system would be far cheaper (and better for most people) than the current fragmented maze of public, private, and non-existent insurance.  

Government is an essential part of our economy and society. It is the necessary rule maker and referee. It is a major consumer, employer, and provider of services. The public infrastructure provided by all levels of government is the foundation of our economy. These essential functions are needed continuously, not just when times are good and tax revenues are up. The conservative agenda simply does not make sense or serve us well.      

Budgets are about choices. Congress could choose to spend our national resources more wisely. We could have national health program that covered everyone and controlled costs. We could invest in debt free college and job training for everyone. We could have a world class public transportation system. We could lead the world in environmental protection and green energy. We could create prosperous, clean, safe, sustainable local communities. We don't lack the money. We lack the wisdom and political will to make it happen.      

** Source: The Balance www.thebalance.com/us-debt-by-president-by-dollar-and-percent-3306296