Deficits and debt: who's in charge here?

Reader feedback at end

Two SAFE representatives recently met with Sen. Tom Carper to discuss our mutual interest in getting the government’s fiscal affairs in order. This was a third meeting with Delaware’s senior senator, and we were seeking his input on SAFE’s suggestion that the top issue of the upcoming 2020 presidential campaign – not impeachment, healthcare, global warming or whatever - should be the candidates’ respective plans for balancing the budget by 2025 (i.e., within the term for which they are seeking office). Top 2020 issue should be national debt, News Journal, 5/28/19.

Sen. Carper shares our concerns about the gravity of the fiscal problem and expressed appreciation for SAFE’s efforts. He envisions a “balanced” solution, however, and would favor a fiscal commission to negotiate an omnibus package of spending cuts and tax increases. A conversation about the fiscal problem,
10/28/19.

Let’s suppose, said Carper, that we could have another Fiscal Commission like the Bowles-Simpson commission that nearly succeeded in brokering a “grand bargain” on fiscal issues in 2010, which would be ready to start work after the president was inaugurated in 2021. Wouldn’t that be a nice idea?

Either President Trump or a Democratic contender will be inaugurated in 2021, and we didn’t ask what outcome Senator Carper was envisioning. The idea of a fiscal commission has some appeal, however, and it will be interesting to see if anything comes of it.


In addition to meeting with Sen. Carper, SAFE has offered its top issue of the 2020 election suggestion to President Trump and other political leaders. See, e.g., our second round (8/24/19) of correspondence to the president, the top leaders of Congress, and several others. Combatting the addiction to deficits and debt,
8/26/19.

•Congressional leadership (identical letters in substance, individually addressed to Rep.
Nancy Pelosi & Kevin McCarthy; Sens. Mitch McConnell & Chuck Schumer)

Sen. Chris Coons (sent electronically)

Chris Wallace of Fox News

Acting OMB Director Russell Vought

President Donald Trump (see 10/15/19 response, posted at end)

At a SAFE board meeting last month, it was decided to also reach out to a noted fiscal conservative. Seeking the best path forward, item 3,
11/11/19. Your faithful scribe followed up with a 12/16/19 letter to Sen. Rand Paul (R-KY); an expanded discussion follows.

I. Background – Secure America’s Future Economy (SAFE) is an independent, all-volunteer organization, which has been advocating smaller, more focused, less costly government since 1996. Our top issue is fiscal responsibility, to be demonstrated by paying off the national debt (or at least balancing the budget so the debt will gradually decline as a % of Gross Domestic Product).

Our views on this issue have been periodically communicated to government leaders, the media, etc. Thus, we faxed individually addressed letters to all members of Congress in
June 2013 urging that the government balance its budget and keep it that way.

SAFE has proposed an 8-step strategy to address the fiscal problem. Blog page of our website, 5/6/13 entry. What we would stress in this letter, however, is not the points in our plan as such but rather the goal the plan is aimed at – balancing the budget within say three years and keeping it that way.

Some may advocate reducing the deficit to a “sustainable” 3% of Gross Domestic Product, but a balanced budget policy would offer three advantages: (1) Reserve government borrowing capacity for true emergencies, e.g., a major war. (2) Control borrowing costs, which over time threaten to crowd out desired programs. Net interest expense, is currently running over $200 billion per year; it is projected to more than triple over the next 10 years. (3) Minimize the temptation for government leaders to make spending commitments now that will not be affordable later.

Sen. Paul was the only one of the 535 members of Congress who acknowledged our letter, let alone endorsing it. June 2013 letter (scroll down).

It appears that several of your suggestions are in line with my [own budget] proposal, and I will consider your ideas further as I introduce further legislation. Again, thank you for taking the time to share your suggestions in this matter. Please do not hesitate to contact my office regarding future federal matters.

Both SAFE and Sen. Paul have continued to advocate fiscal responsibility, but so far to no avail. The gross federal debt was $16.7 trillion on 9/30/13; it now exceeds $23 trillion and is projected to continue growing faster than the US economy for years to come.

Responsible observers agree that this situation is alarming. Sen. Mike Enzi: America’s fiscal path is unsustainable, youtube.com, video (3:58),
9/24/19. There seems to be no consensus as to what exactly should be done, however, nor the collective will to get the ball rolling.

In 2018, a joint select committee (16 members of the House and Senate) spent considerable time reviewing the budget and appropriations process. The public sessions and testimony were informative, but in the end the JSC failed to agree on any actionable recommendations. The basic problem, in our view, was a focus on congressional prerogatives and procedural rules versus budget results. JSC proposals for budget reform,
11/26/18.

Far from acknowledging that the Budget Control Act of 1974 may have been a big mistake, the JSC report seems to double down on it. Never mind that the fiscal problem is metastasizing, Congress wants to demonstrate its “ownership” of the budget process while treating the president’s “policy proposals” as basically irrelevant. It’s unclear whether anyone in DC will step up to the fiscal problem, but this surely won’t happen without presidential leadership because a 535-member board of directors housed in two independent legislative bodies isn’t up to the task.

We also followed some informal discussions of budget procedures in the Senate this year, and again were disappointed by the results. Participants agreed that the budget system isn’t working satisfactorily and is headed for a crash. Over 2/3 of government outlays, e.g., entitlement programs and interest expense, are viewed as “mandatory” and therefore not subject to annual budgeting. Expenditures for “discretionary” programs are based on budget baselines (statistical projections of previous expenditures) vs. anticipated revenues. There seems to be no recognition of the need for presidential leadership, such as would suggest the desirability of constructively engaging with the president’s budget staff versus viewing the OMB as a nuisance. And it seems to be assumed that answers will be found about ten years hence versus in the here and now. Continuing efforts to improve the budget process,
8/5/19.

This brings us to SAFE’s suggestion that 2020 presidential candidates should be challenged to offer concrete plans for balancing the budget by 2025. It’s not clear what their plans would look like, but such a thrust might make for a more productive discussion than has been seen on the campaign trail and in the Democratic primary debates thus far.

II. Current status – The 4th Democratic primaries debate provided a useful sampling of questions that have been addressed by Democratic candidates on the debate stage. Negative statements about the current president abounded, and also promises to institute new spending programs. Discussion of how to balance the budget, let alone pay down the national debt, was virtually non-existent. Political theater may be entertaining, but it's not very enlightening, 10/21/19.

Once again, as in debates 1-3, very little was said about the policy issue that SAFE would like to see at the top of the list for the 2020 elections. Indeed, the moderators didn’t ask a single question about the fiscal problem, and none of the candidates brought the subject up. Can it be that these talented and hopefully well-informed candidates are oblivious to the inevitable consequences of habitual deficit spending and spiraling debt?

The limited discussion of fiscal issues has been focused on proposals to pay for new spending proposals versus ideas for balancing the overall budget. The standard answer is tax increases, which according to most of the candidates would only impact the affluent and big corporations. Such representations are misleading, if not deliberately deceptive. Time to get smarter about taxes,
12/9/19.

•If tax increases are seen as essential (at least politically, if not economically) to balance the budget, the proceeds should at least be earmarked for deficit reduction versus new spending.

•A large part of corporate tax payments is passed on to consumers versus borne by investors.

•Individual tax increases would fall on the middle class as well as the wealthy because “that’s where the money is.”


Intertwined with the pitch for higher taxes is the theme that the Republican tax cuts at the end of 2017 should never have been enacted and should therefore be substantially reversed. These tax cuts were enacted in an effort to reboot the US economy, however, and they should be given time to work. Also, revenue increases could better be achieved by ending special tax preferences than by hiking tax rates.
Ibid, section 3.

Why all the stress on eliminating tax preferences while keeping tax rates low, thereby minimizing tax complexity? Reduce tax preparation effort for taxpayers and enforcement effort for the IRS – encourage voluntary compliance and reduce fraud – avoid distortion of economic decision-making that should be left to the private sector.

As an example of problems with the current [overly complex] tax system, consider the estimated amount [$500 billion per year] of federal taxes (income, payroll and excise) that are legally owed but aren’t being collected.


Ironically, the members of Congress don’t seem to appreciate the need for tax simplification and some of them (on both sides of the aisle) have been working overtime to save or revive a host of expiring tax preferences. Return of the tax games, Wall Street Journal,
12/10/19.

The lengthy and expensive list of demands includes making the $2,000 child tax credit fully refundable (so it can be claimed by parents who don’t pay taxes) – extending the earned income tax credit to childless adults – reviving a $1-a-gallon tax credit for blenders of biodiesel – tax credits for renewable electric power and energy-efficient homes – wind production tax credit – electric vehicle tax credit (raise number of vehicles limit) – handouts for solar power, microturbines, hydrogen fuel cells, carbon capture technology, waste-recovery projects, and “so much more.”

If the Democratic candidates don’t seem to be offering solutions for the fiscal problem, what about the president? Our sense is that he and his budget staff have done a fairly good job of pointing out opportunities for budget cuts, but to date have not come out strongly in favor of overall budget discipline. Projecting budget balance more than 10 years in the future, as was done in the president’s FY 2020 budget proposal, is tantamount to saying budget deficits will continue indefinitely. Whither BP-2020,
3/25/19.

III. Path forward - USA Today recently asked some questions about the national debt in an interview with the current Democratic frontrunner in the presidential race. That’s a start, but Joe Biden’s answers amounted to a pledge to reverse much of the GOP tax cuts. Nothing was said about the possibility of curbing the growth in overall government spending or committing to a specific fiscal goal, e.g., balancing the budget. Biden shares views on national issues, News Journal, 12/14/19.

Unless and until someone brings the fiscal problem to the fore, as 3rd party candidate Ross Perot did in the 1992 presidential race, this kind of “I’d keep a vigilant eye on it” message is probably about the best that can be hoped for. And if anyone is going to cut through the blather, we think it would most logically be the president.

SAFE’s letters have made the case for the president to say the budget must be balanced and here’s how he would propose to get there. At the risk of seeming presumptuous, we envision that his plan might be along the following lines:

•Bin all of those special interest tax breaks that are being stealthily supported on Capitol Hill, they are an irresponsible drain on tax revenue;

•Remind the American public of spending cuts that have previously been recommended by the administration (and ignored by the members of Congress);

•Serve notice of the president’s intention to insist that proposed spending cuts in the FY 2021 budget proposal (due in February) be taken seriously;

•Support legislation providing that presidential budget proposals will become binding within 60 days of submission unless Congress agrees on its own budget resolution before then.

•Direct the Treasury Department to take advantage of currently low interest rates to move the federal debt into longer maturities, thereby minimizing exposure to soaring interest expense if interest rates go up.

•Establish bipartisan commissions charged with respectively reviewing the structure and finances of (1) Social Security, (2) Medicare, and (3) Medicaid, and give each of them a deadline to report back with their recommendations within 15 months of formation.

Realistically, a little group like SAFE doesn’t have much clout in the White House. Talk about “the mouse that roared!” But we’re hopeful that Sen. Paul might be able to engage the president and his advisers on this issue with a better chance of success.

Nothing ventured, nothing gained. Let’s roll!

**********FEEDBACK**********

# Re draft budget balancing plan that is outlined for President Trump (see above), I can’t imagine Democrats agreeing to any cuts in discretionary spending other than for defense. Therefore, these ideas are a nonstarter unless the GOP wins back the House as well as holding the Senate and the White House in 2020. The only hope would be to reduce entitlement programs, but neither party has any appetite for that. – SAFE director

Nobody said balancing the budget would be easy, nor that success could be assured. But if leaders lay out disturbing facts and call for decisive action, surprising things can be accomplished. Consider (a) Paul Volcker’s role in combatting inflation by hiking interest rates to record levels during the Reagan administration, as will be discussed in the 12/23/19 blog entry, (b) the success Ross Perot enjoyed in making deficits and debt a campaign issue in the 1992 presidential race, and (c) Boris Johnson’s successful doubling down on Brexit in the recent UK elections. We should hash this subject out at the next SAFE board meeting.

#Numbers count, and maybe it would help if we got SAFE members and supporters involved in calling the White House comment line and offering the suggestion for making balancing the budget the top 2020 issue. One of the numbers is (202) 456-1111, and I’ve called them before on various issues. – SAFE director

Great idea, will ask for this support in the upcoming issue of the SAFE newsletter!

# Very well said. I wonder if you could send an email/letter to whoever is hosting the next debate and request they pose your question re the deficit. Perhaps show as background what has happened in the last 3 years and other periods. Who was the last president to balance the budget. And what could happen if the current situation continues. – Retired financial manager

Thanks for the suggestion, will consider it for one or more of the upcoming debates:

Jan. 14, 2020 - CNN/Des Moines Register Democratic Debate (7th Debate)
Feb. 7, 2020 - ABC/WMUR Democratic Debate (8th Debate)
Feb. 19, 2020 - MSNBC/NBC News Democratic Debate (9th Debate)







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