Some time ago, a dear friend of the conservative persuasion e-mailed me a meme stating that the "deficit" would reach $20 trillion sometime this year. As I had just seen that the national budget for this next fiscal year is around $3.8 trillion, I found that odd. I then realized that, as many do, my friend had confused the debt with the deficit. As an adjunct to this, of course, in my friend's circle of politics all these things were directly attributable to the 2008-2016 occupant of the White House. Soooo......I decided reality therapy was in order. It's odd that the same persons refuse to hold the 2019 occupant of the same residence accountable for anything bad.
The national debt has been a controversial factor in American political life since Alexander Hamilton became George Washington's Treasury Secretary in 1789. He was almost assuredly the second most influential Federal Government figure for the next 5 years. His Report on the Public Credit called for the creation of a permanent national debt for a number of reasons. For a thorough examination of the rationale behind this, read Ron Chernow's excellent Hamilton biography. It isn't really covered all that much by Lin Manuel Miranda in "Hamilton."
The "national debt" is defined as all federal government financial obligations to the public. Currently it, not the "deficit," is close to $22 trillion. The deficit, on the other hand, is, in essence, the yearly simple subtraction of Government expenditures from Government revenues. When this is a negative number, as it has been since 1941 (and many years prior) the national debt increases. The only recent approach to a deficit free budget was in the last of the Clinton years when there was actually a projected budget surplus. This, unfortunately, was promptly devoured by the legislative and military policies of the Bush administration. Contrary to recent conservative dogma, Obama administration policies actually contributed relatively little to the deficit. The graph below is illustrative of this fact:
Without the housing market bubble bursting and the war in Iraq, the definitely non-partisan CBO projection from 2001 to 2011 was for a $5.9 trillion surplus, compared to a $3.4 trillion public deficit at the end of 2000. There can be little doubt that the housing bubble collapse was not really Bush's fault as he was patently incapable of understanding what was happening. On the other hand, cutting taxes and going to war in Iraq (and we're still seeing daily how well that turned out)) are both directly attributable to the Bush administration and unquestionably Bush's responsibility as, according to Bob Woodward's authorized book, tax cuts for the wealthy and justifying invading Iraq were objectives from inauguration day!
As the graph makes clear, the Obama administration's policies, per se, impacted the deficit to a rather small degree, but most were aimed at the huge unemployment and poverty increase which followed the housing market collapse and what has been styled as "The Great Recession" by economists and social scientists.
So, let's leave the "responsibility shaming" behind (for now), since it is fairly obvious why the deficits got bigger and the debt, of course, followed. Let's focus instead on the Federal Budget and the seemingly constant bitch slapping in Congress, each side blaming the other for the deficit. It really comes down to understanding what the components of the budget really are and how they got that way. In the interest of transparency, I will try to insure that where my personal opinion is injected, it will be obvious and denoted.
While there is a lot of flak and controversy in some quarters regarding the defense spending portion of the budget, the issue is not nearly as clear as some would make it. Surprisingly (or perhaps not) Congresspersons are lobbied intensively by the defense industry, and results are sometimes indicative of their success. These range from equipment which is obsolete by delivery to materiel which the Force doesn't want, but a contractor's insistence that it was "good for jobs" has prevailed: The below snippet from 2015 is instructive:
"We are still having to procure systems we don't need," (Army Chief of Staff) Odierno said, adding that the Army spends "hundreds of millions of dollars on tanks that we simply don't have the structure for anymore." For three years, the Army in numerous Congressional hearings had pushed a plan that essentially would have suspended tank building and upgrades in the U.S. for the first time since World War II. The Army suggested that production lines could be kept open through foreign sales. Each time, Congress has pushed back !(the italics are mine).
In December, 2015, Congress won again in the National Defense Authorization Act for Fiscal Year 2015 that funded $120 million for Abrams tank upgrades. The Army and the Marine Corps currently have about 9,000 Abrams tanks in their inventories. The tank debate between the Army and Congress goes back to 2012 when Army Chief of Staff General Odierno (who would know) testified that the Army doesn't need more tanks. This, of course fairly recent history, but it is representative of what happens when Congressmen ditch common sense for jobs in their districts, necessary or not.
As a matter of proportion, however, and considering its importance, Defense spending is a relatively small portion of the entire budget pie, seen below in pie chart form:
I know, So where am I going with this? Well, it happens that the deficit (the amount we spend over and above what we take in) is real debt we owe various entities, who purchase T bills and other government financial instruments. Increasing the debt (by increasing the deficit) also increases the interest the government has to pay out of the Federal budget. Unsurprisingly, this ain't discretionary, since foreign bond holders (Japan $1.22 trillion, China $1.11 trillion, for example) want their interest on time. So too, do the Mutual funds and public retirement plans which buy T-bills. This year, non-discretionary interest payments alone (11.7% of the 2019 budget) comprise just slightly less than that of discretionary defense spending (12.4% for 2019.)
This is the 2018 budget, but note that the debt interest portion is about 3% lower than 2019-20 projections. And this, children, is why the deficit, which drives the debt, is important. And now to the OP-ed portion.
In 2016, Donald Trump ran in 2016, as a "deficit/debt hawk." In fact, he promised at various times to eliminate the deficit (or the debt, he doesn't really differentiate to his base, most of whom don't understand anyway) in 8 years but has, in just four years, increased the annual budget deficit by 68%. Trump inherited (an Obama budget) deficit of $585 billion when he took office in January 2017. That was 58 percent lower than the $1.4 trillion former President Barack Obama inherited in 2009 following the financial crisis, a number his administration slashed over two terms.
During the same campaign, Trump said he could clear America's $19 trillion of gross federal debt within eight years. To do that would mean eliminating the federal deficit, the negative difference between income and expenditure which keeps adding to the debt pile. Instead, on his watch, it ( the national debt) is now $22 trillion. Regarding the national debt, Trump told The Washington Post in April 2016, several months before the election: "I think I could do it fairly quickly...I would say over a period of eight years." Trump then suggested he would do so by renegotiating trade deals and creating trade surpluses. Of course he has a very, very good brain and knows more about finance than anyone.
His abominable record would suggest otherwise. His response when questioned on the rising deficit and its possible implications is revelatory about the man. In early 2017 senior officials actually showed Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the national debt in the not-too-distant future. In response, Trump noted that the data suggested the debt would reach a critical mass only after his possible second term in office. “Yeah, but I won’t be here,” the president bluntly said, according to a source who was in the room when Trump made this comment during discussions on the debt. Now, don't you feel better?
In truth, reducing the debt by 50% would free up about $110 billion annually, which would do a lot for those in need without even touching defense spending.
While there may be differences of opinion re: proportionality, there should be little question that national defense should be a relatively high budget priority. And so, we come to the real reason I decided to undertake this rather long essay:
Looking at the chart above (total budget) makes it obvious that a 60% share of the budget goes to Social Security/Unemployment and Healthcare programs. I point this out because a disturbing number of far rightists would have us believe that what is driving the large federal deficits of Obama years was the president "giving away stuff" to poor people. This of course immediately peels back their almost non-existent veneer of humanity and reveals the racism and extremely un-Christian (yeah, I said it - try and refute it) bias in many of these persons.
By the way, it's also blatantly untrue. One quick example - the "Obama phone" was actually provided under a Bush administration law and Obama neither pushed for or signed anything related to these phones. In like manner, we hear food stamps (acronym SNAP) and "welfare" (common program acronym) Temporary Assistance for Needy Families (TANF) cited as if they were illegal, immoral, fattening, and an egregious drain on the budget. Get a conservative angry about the debt and these will, in 90% of cases, be the first target of (self)-righteous indignation.
Feeding Americans with food stamps at highest estimates constitutes just about 1% of the $3.9 Trillion budget. All federal food programs, even school lunch programs, are covered under Agriculture's 4% slice of the pie. In fact, well over 50% of SNAP recipients work full time, so perhaps a better question might be to ask why persons who work full time still fall below the eligibility threshold for Food Stamps. The other story, which conservatives seldom even mention out loud is that the U.S. Department of Agriculture also distributes between $20 billion and $30 billion in cash subsidies to farmers and owners of farmland each year, and that number has skyrocketed due to Trump agricultural tariffs! The actual amount depends on market prices for crops, the level of disaster payments, and other factors. More than 90 percent of agriculture subsidies go to farmers of five crops—wheat, corn, soybeans, rice, and cotton.
More than 800,000 farmers and landowners receive subsidies, but the payments are heavily tilted toward the largest producers. Where's the outrage over these payments to agribusiness? Let me restate this as a comparison: The federal government spends 75% as much giving money to wealthy agribusiness as it does to feed poor working families whose income qualifies for food stamps.
There are, in total, 83 federal programs which could be lumped under the umbrella of "welfare." The largest single common component of these is health care related programs. Another factor is that there are federal programs which can only be described as corporate welfare. The following is relevant:
$59 billion, or 3% of the total federal budget, is spent for regular welfare (including housing, food, rent subsidies, etc and everything) while $92 billion, 5% of the total federal budget, is spent for what amounts to welfare for corporations. So, the government spends roughly 45% more on corporate welfare than it does on these particular public assistance programs. Again, where's the outrage?
Finally, for today, at least, let's look at the two huge chunks of the budget. They have little to do with welfare or charity. The first is lumped together as Social Security (SS), Unemployment and "labor?" Mention changing (SS) in any meaningful manner and those who reflexively support Conservatives go nuts, even though the staunch defenders of SS have been Democrats! It is yet another instance of Far Rightists voting against their own best interests. I see it every day in my retirement community, "End food stamps and welfare, but don't touch my SS!" All this, of course, even though as originally incepted in 1936, 65 was an age many would never reach.
Meanwhile the average lifespan (and to a degree, meaningful work life span) have increased markedly. In 1935, average life span all races, both sexes, was 61.7 years of age. In 2010, that figure was 78.7, seventeen years more! Yet SS eligibility age has increased only 2 years for full benefits, and remains at 62 for early benefits. In like fashion, Medicare eligibility remains at 65.
If Congress (or anyone else, for that matter) had the guts in the 1950s, this was foreseeable and preventable. Simply raising early (partial) benefits age to 65 would have been a great start, and moving full benefits age up one year in each decade from 1950 to 1980 would have fixed the problem. Now that would be a serious savings in SS benefits and would have an effect in a spending category which has real impact. Of course the real issue is that baby boomers, representing a huge "demographic bubble" of people are entering SS eligibility, while their children and grandchildren, who had smaller families are a smaller work force percentage. In plain speak, fewer workers are paying in while more retirees are drawing SS. Left alone this would demographically "re-even out" in the 2030-35 time frame. Predictions of doom and gloom re: Social Security (usually used by persons like Paul Ryan to "justify" cuts) are based on flawed statistics, that is, the assumption that input will continue at current levels (which is close) but that benefits costs will also stay the same (which they won't as the "boomer" lump moves through the system and on to the great golf course in the sky. At some point, as the birthrate has remained relatively stable since 1970, when there were 3.7 workers for every SS recipient. In 2010, that had slipped to 2.9 workers per recipient. Left alone, as the "boomer bulge" abates, these figures will readjust.
Likewise, the second category and most easily "fixable" One is Medicare/Medicaid. I've lumped them together for several reasons although they are not technically the same. Both suffer from the same root cause expense wise, and that is the sad fact that, due to governmental gifts to the Drug and Health Care industries , we in the US pay about twice as much per-capita as a percentage of GDP than most developed nations in the world.
Even in Switzerland which mandates privately purchased health care insurance for all citizens (you know, exactly like the Affordable Care Act has done?), health care cost per-capita is less than 65% that of the US. Of course when anyone running for office even hints at national health care, as several are doing now, the far rightists unsheathe the dreaded "S" word. So I would guess that in truly Socialist Sweden and Finland health care is a debacle, right? Actually, Sweden and Finland pay less than 40% per-capita for health care than we in the US do! I know, I know, "But Mike, we all know socialized medicine is bad!" Yeah, except when it isn't, which is more often than not. Of course the "inconvenient truth is that Medicare IS Socialized medicine!
What's the difference? well, for one, drug companies don't have free rein to charge ridiculously inflated prices, as they do in the US. In the highest earning industry in the private sector, major big pharma companies earn between 350% to 500% more profit than most other sectors. This isn't used for research and development as they want you to believe; it is spent on the two holy grails of the industry - lobbying and advertising. This is why routine medications like Nexium cost ten times as much in the US as in the Netherlands - same drug, same package, ten times the cost!
Two Bush era laws guarantee profits for these fat cats. The first mandates that Medicare/Medicaid won't ever "bargain" drug prices. The second guaranteed that all drugs, regardless of price, will be covered under Medicare - at "retail" prices. Medicare is by far the largest US payer for prescription drugs. They are charged whatever the drug company says they sell it to doctors for, Then add 6% and reimburse the vendor! Currently, US prescription drug costs run about $257 billion annually, with government share being about (conservatively) $90 billion of that. A quick recap for perspective's sake: With the drug costs we pay in America, just the government's cost share of prescription drugs is 1.5 times the entire annual budget share for "welfare!"!!! Negotiating drug costs as most nations do could reduce overall government drug costs by (again conservatively), 45%! This would almost equal the entire cost to the Fed of welfare programs.
As for Medicaid, although it was intended to keep poor Americans from dying, it has become much more than that, fueled ironically, by the same outrageous costs as Medicare. Medicaid is, increasingly becoming the last source of funding for long term care for seniors who thought they had provided for themselves, only to be impoverished by through the roof healthcare and/or memory care costs. As a personal example, my mother, who lived to be 97, burned through Dad's retirement, social security and about $600,000 in other assets in her last years. This resulted in the now all too familiar "impoverish grandma" scenario with which more and more Americans are becoming familiar. This meant making her a pauper, so Medicaid would cover her bills, which it did. At about $9,000 monthly, it doesn't take long.
So, get angry about "waste fraud and abuse" but also get a sense of perspective about what we value and what we ought to value. At the end of "The Big Short," Steve Carell's character is shown sitting dejected because, although he was correct in his predictions about the housing market collapse, he realized it was essentially the product of unregulated greed by the rich who were trying, as always, to become richer. When he is asked about what will happen, and whether those who should go to jail will actually do so, he says (paraphrasing here) "No, no one will go to jail and in a couple of years they'll blame all this on the poor and immigrants." Now reflect on all the recent Republican "debates/shouting matches."
We hear a lot about the poor, minorities and immigrants, usually demonizing them, but listen closely for any concern about the financial criminals who caused the Great Recession of 2008. Look at the Republican House and Senate's continuing weakening of Dodd-Frank and other consumer protection market regulation and then tell me Carell was wrong. I didn't think so. Donald Trump simply serves as the terminally stupid and complicit catalyst.
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