Coronavirus update on fiscal problem (President Trump)

Secure America’s Future Economy
Advocating smaller, more focused, less costly government since 1996.

Delaware
April 10, 2020

President Donald J. Trump
White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear President Trump:

SAFE’s members are zealous advocates of fiscal responsibility. We believe the government’s budget should be balanced every year, and that the way to bring this about is not to raise taxes – it is to cut wasteful government spending and minimize regulatory red tape.

Your administration has embraced many of these points, albeit not always carrying them far enough. Thus, as noted in your budget proposal for Fiscal Year 2021 (BP-2021), “this Administration’s Budgets have proposed more spending reductions than any other Administration in history.” Yet the OMB estimates it would take 15 years to achieve a balanced budget, which given how the budget game is played in DC amounts to saying this result will never be achieved.

Current practices must change to achieve better results, and in our judgment the 535 members of Congress aren’t likely to address the fiscal problem without strong presidential leadership. Accordingly, we have previously urged that the government’s fiscal woes be recognized as the top issue in the 2020 presidential campaign.

To get the ball rolling, you could outline a plan for balancing the budget by 2025, and challenge your presumptive opponent (former Vice President Joe Biden) to either agree or announce an alternative plan. Whoever won the election, the president inaugurated next January would be committed to get busy on the fiscal problem versus simply talking about it.

It may seem unrealistic to envision balancing the budget within a presidential term, but this feat was accomplished during the second term of President Bill Clinton. SAFE recently outlined a plan that might conceivably work (
12/16/19 blog entry). Here are the highlights (updated).

A. Don’t raise taxes per se, but repeal all those special interest tax breaks (aka “extenders”) that are being stealthily supported on Capitol Hill by both political parties. B. Press for implementation of the spending cuts proposed in BP-2021. C. Recognize presidential Budget Proposals as binding (rather than simply advisory) unless Congress agrees on its own budget resolution within 60 days after the BP is submitted. D. Take advantage of currently low interest rates to move federal debt into longer maturities (e.g., sell “war bonds.”) E. Establish bipartisan commissions charged with respectively reviewing the structure and finances of (1) Social Security, (2) Medicare, and (3) Medicaid, and give each commission a deadline to report back with their recommendations within 15 months after formation.

Neither side has said a word about balancing the budget, however, and meanwhile measures to combat the coronavirus pandemic have thrown the economy into a tailspin that portends huge increases in previously projected deficits and debt. The CARES Act (signed on 3/23/20) committed some $2.2 trillion in economic relief to address the situation, and leaders on both sides of the aisle are already gearing up to throw more money at the crisis. As you know, gross federal debt just went over $24 trillion, less than six months after passing $23 trillion.

Some economists say additional deficits and debt won’t matter if anticipated benefits from increased government outlays accelerate economic growth sufficiently. They tend to overlook the possibilities, however, that (1) government programs will displace private sector efforts that could deliver substantial benefits, and (2) elimination of wasteful government spending might be a better funding option than issuing more debt. This Modern Monetary Theory (MMT) is simply a variation of the Keynesian economic logic, which failed so miserably in the 1930s. Sounds like Magical Monetary Theory to us.

Ramping up government spending to fight the crisis should not be viewed as the prime option, in our view, but rather as a last resort. Accordingly, we would offer the following suggestions for any further economic relief legislation.

#PRUDENCE - Don’t aspire to “go big” and then brag about spending more money than any administration in history, focus on committing money responsibly. Having already pushed through cash grants for nearly all Americans ($1,200 for adults; $500 for dependent children), what conceivable reason could there be to layer on a temporary payroll tax cut?

#SPENDING OFFSETS - The Major Savings and Reform volume of BP-2021 could provide a useful menu for spending cuts to be considered. There has also been some fine work done by the Government Accountability Office, and by private think tanks like Heritage Foundation, National Taxpayers Union, and Citizens Against Government Waste.

#PORK – Keep the focus on rebooting the overall economy versus gratifying political factions or special economic interests. For example: (a) Renewable energy mandates & subsidies, bailouts for the ethanol program, etc. would weaken – not strengthen – the US economy; (b) Additional small business loans should be extended based on economic merit, not on a basis that prioritizes farmers, women, minorities and veteran-owned businesses.

#POLITICS – There is no valid reason to include changes to our voting laws in economic relief legislation, particularly when the proposed changes would enhance the already disturbing potential for voting fraud.

#FOCUS – This is not the time to push for “nice to have” programs like a $2 trillion infrastructure program, even though they might be justifiable under different circumstances.

This letter is being posted on SAFE’s website, and will also be sent to members of Congress and others with a potential interest in the matter. We hope that you will find our suggestions helpful. Please advise if you have questions or we can help further.

Sincerely,

William Whipple III, President
Secure America’s Future Economy


© 2020 Secure America’s Future Economy • All rights reserved • www.S-A-F-E.org