Rising Debt against the Children 

OCTOBER 6, 2021 11:36AM

Rising Debt against the Children


Federal government debt is rising as politicians increase spending faster than tax revenues are coming in the door. With the economy growing, the government should be paying down debt, rather than increasing it at a rapid clip. Even without the infrastructure and entitlement bills currently being debated, the government will spend $3 trillion more this year than it will take in. House Speaker Nancy Pelosi says the new spending is “for the children,” but added debt will work against the children and drag down their standard of living.

Federal politicians have become increasingly irresponsible. They have not balanced the budget since 2001, and they have only balanced the budget 13 percent of the years since 1930. By contrast, politicians balanced the federal budget 68 percent of the years between 1791 and 1929. There was no legal requirement for them to do so, rather they did it because they correctly believed that limiting spending to revenues was the prudent and ethical way to budget.

Democrats and Republicans are currently battling over who will get blamed for raising the government’s statutory debt limit above $28 trillion. But both parties are to blame for the mountain of accumulated federal debt, which is roughly eight times larger than total state and local government debt of $3.2 trillion.

Since 2001, federal debt has risen 495 percent compared to just a 148 percent increase for state and local debt (page 7). Apparently, voters are sending politicians to Washington who are more irresponsible than the ones they send to state capitals. Or maybe there is something in the water in D.C. As governor of West Virginia, Joe Manchin received an “A” grade for sound fiscal management, but now in D.C. he is considering voting for a $1 trillion infrastructure bill and a $1.5 trillion entitlement bill, on top of trillions in other new spending passed since early 2020.

American politicians are more debt‐​addicted than politicians in most other high‐​income countries. Figure 1 shows the OECD estimate for combined federal, state, and local government gross debt in 2021. U.S debt at 141 percent of GDP is higher than the OECD average of 100 percent, and the 9th highest of 32 countries. Rather than squabbling over our useless statutory debt limit, our politicians should be implementing the apparently superior budgeting practices of countries such as Estonia, Luxembourg, Switzerland, Korea, and New Zealand.

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U.S. debt has risen partly because of recessions and other crises in recent years, but other countries have also faced shocks. Figure 2 shows that debt has risen faster in the United States than in most OECD countries since before the Great Recession in 2007. U.S. debt has risen 76 percentage points of GDP since 2007 compared to the average OECD increase of 47 percentage points (U.S. debt rose from 64 to 141 percent, while average OECD debt rose from 53 to 100 percent).

Senator Manchin has “repeatedly raised the deficit as one of his major concerns,” and he says he’s “never been a liberal in any way, shape or form.” Just about every Republican would make the same claims. But somehow federal government debt has jumped $6 trillion over the past two years and keeps on rising.

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More on government debt here, here, and here. The failures of federal spending are examined here, here, and here.

Data Notes. The OECD data from Table 36 is general government gross financial liabilities. OECD publishes the weighted average, but I calculated the simple average across countries.

January 26, 2021 10:36AM

Government Spending Could Top $9 Trillion

President Biden’s push to spend another $1.9 trillion on economic relief is surreal given that government budgets are vastly ballooned already. Total federal, state, and local government spending soared from $6.8 trillion in 2019 to $8.8 trillion in 2020. That is $68,000 in government spending for every household in the nation.

We have already imposed $6 trillion in new debt on future taxpayers in just two years. More spending would be reckless and extremely unfair as young people will have their own costs and crises to deal with down the road. Vaccinate people, repeal shutdown mandates, and the economy will recover by itself. That’s what market economies do. The government has already spent far too much.

The chart shows federal, state, and local government spending, with estimates for 2020 and 2021. It includes the almost $900 billion in relief spending passed in December, but does not include Biden’s proposed $1.9 trillion in new aid. If Biden’s plan passes, spending will easily top $9 trillion in 2021. Data are for federal fiscal years.

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The patterns of spending and revenues in the current downturn differ from the Great Recession a decade ago. Back then, state‐​local government revenues dipped and federal revenues plunged. In the current downturn, overall government revenues are fairly stable.

During the Great Recession, total government spending rose about $1 trillion, and then flatlined for a few years before rising again. This time, spending jumped about $2 trillion.

Even without a Biden stimulus bill, spending will be about $8.2 trillion in 2021, up $1.4 trillion from 2019. Even if one believes that deficit spending helps the economy, there will already be about $2.6 trillion of it in 2021 without a Biden bill.

Data Notes

The data for 2005 to 2019 are from Table 14.1 and 14.2 here. Federal spending and revenues for 2020 are here. For 2021 federal spending, I assumed CBO’s baseline plus $875 billion from the December aid bill. For federal revenues, I assumed 2021 will be the same as 2020. State and local spending and revenues for 2020 are calculated from BEA quarterly data in Table 3.3 here, and 2021 is assumed to be the same.

Barack Obama new book "A Promised Land"

Republican presidents besides Reagan have done a bad job of slowing the growth of spending.

President Obama wrote in his autobiography on page 415 in A PROMISED LAND:

There was a reason I told Valerie, why Republicans tended to do the opposite—why Ronald Reagan could preside over huge increases in the federal budget, and federal workforce and still be lionized by the GOP faithful as the guy who successfully shrank the federal government.

Take a look at Daniel Mitchell analysis of Presidents’ spending restraints!!!


Spending Restraint, Part I: Lessons from Ronald Reagan and Bill Clinton

Uploaded by on Feb 14, 2011

Ronald Reagan and Bill Clinton both reduced the relative burden of government, largely because they were able to restrain the growth of domestic spending. The mini-documentary from the Center for Freedom and Prosperity uses data from the Historical Tables of the Budget to show how Reagan and Clinton succeeded and compares their record to the fiscal profligacy of the Bush-Obama years.

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Ronald Reagan was my hero and he did slow the growth of federal spending. In this post I did want to admit that Republicans have spent way too much in the past too, but we do have some spending cut heroes too. I have a lot of respect for Tea Party heroes like Tim Huelskamp and Justin Amash who are willing to propose deep spending cuts so we can eventually balance our budget.

Look at how things have been going the last four years and no matter how anyone tries to spin it, we are going down the financial drain fast. We got to balance the budget as soon as possible. Dan Mitchell of the Cato Institute showed in an article that I posted earlier about how much spending has exploded the last four years.

John Brummett wrote in the online addition of the Arkansas Democrat-Gazette on May 30, 2012:

Obama did indeed run up the deficit with a stimulus measure to keep the economy from collapsing as he entered office…But in regard to budgets that he actually has proposed as president, beginning with the one for the fiscal year starting nearly a year after his election, Obama has raised spending at a slower rate than Clinton…

Republicans simply are more effective than Democrats at declaring a simple untruth loudly and repetitively through a pliable and powerful echo chamber of talk radio and cable news, thus embedding that untruth beneath the superficial consciousness of people otherwise disengaged.

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Now the truth of the matter is that Obama has spent around 25% of GDP when Clinton and most of the other presidents spent 20% or less. This fact allow disproves Brummett’s assertions listed above, but I will admit the Republicans have been guilty of spending too much also.

Dan Mitchell of the Cato Institute sets the record straight concerning the Republican’s spending which has been excessive too at times:

In a post last week, I explained that Obama has been a big spender, but noted his profligacy is disguised because TARP outlays caused a spike in spending during Bush’s last fiscal year (FY2009, which began October 1, 2008). Meanwhile, repayments from banks in subsequent years count as “negative spending,” further hiding the underlying trend in outlays.

When you strip away those one-time factors, it turns out that Obama has allowed domestic spending to increase at the fastest rate since Richard Nixon.

I then did another post yesterday, where I looked at total spending (other than interest payments and bailout costs) and showed that Obama has presided over the biggest spending increases since Lyndon Johnson.

Looking at the charts, it’s also rather obvious that party labels don’t mean much. Bill Clinton presided during a period of spending restraint, while every Republican other than Reagan has a dismal track record.

President George W. Bush, for instance, scores below both Clinton and Jimmy Carter, regardless of whether defense outlays are included in the calculations. That’s not a fiscally conservative record, even if you’re grading on a generous curve.

This leads Jonah Goldberg to offer some sage advice to the GOP.

Here’s a simple suggestion for Mitt Romney: Admit that the Democrats have a point. Right before the Memorial Day weekend, Washington was consumed by a debate over how much Barack Obama has spent as president, and it looks like it’s picking up again. …all of these numbers are a sideshow: Republicans in Washington helped create the problem, and Romney should concede the point. Focused on fighting a war, Bush — never a tightwad to begin with — handed the keys to the Treasury to Tom DeLay and Denny Hastert, and they spent enough money to burn a wet mule. On Bush’s watch, education spending more than doubled, the government enacted the biggest expansion in entitlements since the Great Society (Medicare Part D), and we created a vast new government agency (the Department of Homeland Security). …Nearly every problem with spending and debt associated with the Bush years was made far worse under Obama. The man campaigned as an outsider who was going to change course before we went over a fiscal cliff. Instead, when he got behind the wheel, as it were, he hit the gas instead of the brakes — and yet has the temerity to claim that all of the forward momentum is Bush’s fault. …Romney is under no obligation to defend the Republican performance during the Bush years. Indeed, if he’s serious about fixing what’s wrong with Washington, he has an obligation not to defend it. This is an argument that the Tea Party — which famously dealt Obama’s party a shellacking in 2010 — and independents alike are entirely open to. Voters don’t want a president to rein in runaway Democratic spending; they want one to rein in runaway Washington spending.

Jonah’s point about “fixing what’s wrong with Washington” is not a throwaway line. Romney has pledged to voters that he won’t raise taxes. He also has promised to bring the burden of federal spending down to 20 percent of GDP by the end of a first term.

But even those modest commitments will be difficult to achieve if he isn’t willing to gain credibility with the American people by admitting that Republicans helped create the fiscal mess in Washington. Especially since today’s GOP leaders in the House and Senate were all in office last decade and voted for Bush’s wasteful spending.

It actually doesn’t even take much to move fiscal policy in the right direction. All that’s required is to restrain spending so that is grows more slowly than the private sector (with the kind of humility you only find in Washington, I call this “Mitchell’s Golden Rule“). The entitlement reforms in the Ryan budget would be a good start, along with some much-needed pruning of discretionary spending.

And if you address the underlying problem by limiting spending growth to about 2 percent annually, you can balance the budget in about 10 years. No need for higher taxes, notwithstanding the rhetoric of the fiscal frauds in Washington who salivate at the thought of another failed 1990s-style tax hike deal.

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