With an expected deficit of $1.2 trillion for 2018-2019, the
U.S. Government in December, 2017 enacted a tax cut with an expected revenue
loss of nearly $1 trillion over a decade (assuming some growth from the tax
stimulus) and, two months later, a budget deal passed adding $300 billion to federal
spending in the next fiscal year.[1]
All this was done with the U.S. debt at over $20 trillion—higher than the annual
GDP at the time. With the economy
humming along with a low unemployment rate, the prospect for any fiscal
discipline was bleak. Put another way, if budget surpluses could not come at
the boom end of an economic cycle, then deficits would be likely in good times
and bad. Behind the structural imbalance of contiguous deficits and an
ever-growing debt is the all-too-human preference for instant gratification
without a corresponding value being placed on self-discipline.
In a republic, the electorate elects representatives in part
because direct democracy has no constraint on the immediate passions of a
people. In the case of the U.S. Congress and White House, the representatives had not by 2018 at least
resisted the instinct for immediate benefit for the good of the American
republics and their peoples—which together constitute the United States. Thomas
Jefferson and John Adams agreed in retirement that an educated and virtuous
citizenry is vital to a viable republic. The $20 trillion federal debt reflects
back on Americans not in a good way in this respect.
For a republic—including one that is also a federation of
republics—to be viable over the long term, some allowance for the long term
must be made in the form of fiscal discipline. This is essentially
self-discipline on a societal level. In the case of the tax cut and additional
federal spending, Americans could “expect some of the strongest economic growth”
in years.[2]
This made the urge for instant gratification particularly alluring. In the
medium term, Americans would face “more risk of surging inflation and higher
interest rates—fears that were behind a steep stock market sell-off” in early
February, 2018.[3] Notice
that the negatives begin only in the
medium term; hence they do not detract from the instant gratification. In the
long term, the U.S. could have less flexibility fiscally in enacting a stimulus
to combat a recession or even a crisis like that which had hit Wall Street in
September, 2008. Additionally, “higher interest payments could prove a burden
on the federal Treasury and on economic growth.”[4]
The short term boost in an already booming economy could be expected at the time to hamper economic growth
perhaps at a time of recession! Yet the force of this anticipation had no power
in the enacting of the tax cut and additional spending. Knowledge, it appears,
requires virtue manifesting as self-discipline. That it was missing reflects especially
on the elected representatives of both parties, but also on the American
electorate that elects and re-elects those representatives with impunity.
[1]
Neil Irwin, “Austerity Era Comes to End,” The
New York Times, February 10, 2018.
[2]
Ibid.
[3]
Ibid.
[4]
Ibid.
