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OPED: What is U.S. getting for $1 trillion deficit?
According to the non-partisan Congressional Budget Office, taking into account the recent tax cuts and latest spending bill, the federal budget deficit will surpass $1 trillion by 2020, and the national debt will rise to a staggering $29 trillion by 2028.
One would think that such an enormous level of deficit spending would befit a nation with the world's best health care system — one that is available to everyone. It might be expected to foster a public school system that is second to none, with well-paid teachers helping to produce an informed and engaged citizenry and a workforce fully prepared for the 21st century economy. You may expect to find state of the art infrastructure, with efficient and well-maintained roads and public transit, and a high-speed rail system connecting all major cities. Such spending levels would also seem likely to result in services that would promote significant reductions in levels of poverty, addiction and violent crime. It might be used to energize an economy that takes full advantage of the investment and employment opportunities offered by continuing advances in technology and the use of clean energy and renewable sources.
Yet, despite our prolific spending, we fall far short of realizing the quality of life that our outlays suggest we should expect.
Our fiscal policies have brought considerable benefits to some, particularly those with the highest levels of wealth, but they have not advanced a broad vision of an expansive economy that lifts the general welfare. For example, rather than providing tax benefits where jobs are created, we implement non-targeted tax cuts in the mere hope that jobs will somehow magically follow. In the meantime, while some benefit handsomely from a lowered tax rate, we continue to accumulate massive debt by our insistence on reducing revenue without cuts in spending.
For nearly 40 years now, we have been hearing how tax cuts, which have consistently had the effect of providing the largest benefit to the highest income earners, will pay for themselves in the resulting robust economy — the so-called supply-side theory of economics. The problem is, it has never worked out that way.
When President Reagan took office in 1981, the highest individual tax rate was 70 percent, and the corporate tax rate stood at 46 percent. The top individual rate was then cut all the way down to 28 percent, and the corporate tax rate was reduced to 40 percent. While economists debate whether the subsequently improved economy was owing more to tax cuts or the reduction in interest rates — the rate the Federal Reserve charged to banks had reached a whopping 20 percent — the one thing that is clear from the Reagan tax cuts is that the lost revenue was not replaced.
In fact, those tax cuts helped lead to unprecedented increases in both the federal budget deficit and the national debt. While President Reagan did cut spending on domestic programs, he essentially wiped out that savings with increased defense spending. The failure to offset tax reductions with meaningful spending cuts, in the belief that those losses would be replaced by a booming economy, ballooned the budget deficit from $79 billion at the end of the Carter administration in to $153 billion at the end of Reagan's, and the national debt jumped from $998 billion to $2.8 trillion during the same time period.
When contemplating a budget deficit consistently exceeding $1 trillion, and a national debt approaching $30 trillion, given the many quality of life issues with which so many are confronted, one has to wonder just what we are getting for all of that money. And all signs suggest that we will have to continue to wonder.
— Raymond Daniel Burke, a Baltimore native, is a shareholder in a downtown law firm. He wrote this for the Baltimore Sun.