Monday, October 23, 2017

Sustaining The Unsustainable

       As if the disastrous shredding of the Republican promise to repeal and replace Obamacare weren't an embarrassing enough exposure of the GOP's inability to bring its rhetoric into line with reality, we now have the spectacle of a tax cut promised by President
Rounds And Thune
Not A Bit Worried About Federal Debt
Trump that is likely to jack up the very deficits that South Dakota's U.S. senators have been vowing to contain for years. 
  Our senior Senator John Thune preaches in his website that "for too long responsible budgeting has not been practiced in Washington" and that "our country is on an unsustainable fiscal path."  Not to be out-evangelized, junior Senator Mike Rounds said in his website last August that "with our debt spiraling out of control . . . it's clear that federal spending at current levels is unsustainable."

     So just how did Thune and Rounds mount their crusades against unsustainability?   They ignored them and voted last week to approve a budget of about $4.1 trillion in spending with revenues anticipated at $3.65 trillion, leaving a deficit of $440 billion through October, 2018.  What's more, in the byzantine process of Senate deliberations, this budget sets the stage for deficits totalling $1.5 trillion over the next 10 years.  So much for unsustainability.
     Naturally, there's a Republican explanation for this gush of red ink our Senators support.  According to the partisan line, this budget sustains the "unsustainable" in order to smooth the way for the tax reforms that President Trump has been pushing since inauguration day.  The GOP line is that Trump's tax cuts will not be budget busters at all.  Powerful economic growth will generate tax revenues that themselves are strong enough to cut into the federal debt and bring it more in line with historic levels. Based on the experiences of the last half-century, this is bunk.  I have yet to see any data that support that argument.  George W. Bush's tax cuts were followed by the 4th largest national debt increase incurred during a president's tenureReagan's often-ballyhooed tax cuts were followed by a tripling of the national debt during his years in office.    
      Bringing that theory down to a more relateable level, the recent Kansas tax-cutting experiment instigated by Governor Sam Brownback has been a disaster, leading to a $900 million deficit. The Washington Times last summer called Brownback's effort a "failed tax experiment" that should be heeded by Republicans at the national level.  We South Dakotans can take note of the fact that we don't even have an income tax, which according to Republican dogma should make our state a wonderland of investment and economic growth  As we've seen, of course, that's a pipe dream.  In the 5 year period that ended in 2016, South Dakota's per capita GDP growth was a fraction of 1%, compared to a national growth rate of more than 6%.  Last June the financial data service Wallethub ranked South Dakota's income taxless economy an underwhelming #32 in the country.  Much as tax relief would be nice for me and my peers in South Dakota's business community, on the basis of facts and history, I'd like to know how Senators Rounds and Thune can keep pushing the line that tax cuts will make up for the federal deficits they support    
     
    

3 comments:

  1. John, I wonder how many younger Americans realize that the national debt at the end of fiscal year 9/30/80, the last budget before Reagan's first term and the next to last budget before his tax cuts, was 907,701,000,000.00, in other words under a trillion dollars.

    All through the Viet Nam war years, it increased in the level of 10s of billions a year and then during the rapid inflation after that war ended, increased by hundreds of billions of dollars a year.

    I wrote to Representative Thune and Senators Daschle and Johnson prior to the 2001 tax cuts, realizing that going to war in Afghanistan was not the time to cut taxes and pointing out that it would only amount to ten dollars a week to me and those earning in the same amounts as I was earning. They all three voted for the tax cuts. Then by 2003, we were at war in Iraq as well, and the second round of Bush tax cuts was proposed, and I wrote again to Representative Janklow and Senators Daschle and Johnson begging them to vote against the tax cuts, but again to no avail.

    I am not an economist and certainly don't even understand economics, but as any fool can see, you can't keep cutting taxes and have a sustainable government. To me those who continually cut taxes are just as bad as communists, because they both seek the same end, the dissolution of government.

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    1. I have felt and feel the same way. If the deficit is a danger to American economics, I would like to participate in a World War Two style attempt to reduce it. I want a leader who would motivate the Country to "Buy Bonds". Someone who can spur Americans to action. Someone who would do more than talk about it but take action. I'm tired of hearing how bad it is and then nothing is done or in this case the opposite.

      I would follow that leader and agree to contribute more towards that goal. Sadly, there's no one in sight.

      I would like to comment on the "death tax". Senator Thune made his point of view clear but my question is who is going to pick up the lost government revenue? Where are his cuts or the replacement revenue? You don't have to look very hard to see the replacement moneys or cuts will be shouldered by Americans far down the financial food chain.

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    2. As I said in my first post, I don't really understand economics, so if I am wrong, I hope John will correct me. I don't think that buying bonds will get us out of this mess, as the government will still have to pay those bonds back.

      The only thing that is keeping us from being bankrupt, is that the I interest rate is being kept artificially low. If traditional rates were being applied to this debt, just the interest on the debt would increase the debt by 1 trillion dollars per year. That would say nothing about the deficit spending caused by the tax cuts and funding the government's responsibilities.

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