Decision just another short-term patch
Gordon L. Weil
In the middle of the night recently, while crises whirled
around the world, the U.S. made a major policy move.
Not about Ukraine. Not
about immigration. The Senate simply
adopted a new temporary budget bill to keep the federal government running for six
more months, setting up a crisis for just before the election.
During the 1992 presidential election, a Clinton strategist emphasized
the campaign’s focus: “It’s the economy, stupid.” The government impacts the economy even more
now through taxes and spending. The
budget matters.
It can’t seem to get the balance between them right, making borrowing
money a major business of government. The
problem is that Congress and the American people like spending and hate taxes. When it comes to Congress, that includes both
Democrats and Republicans.
When the Democrats propose increased spending, they promise
to pay for it by increasing taxes on the wealthy and big corporations. When the Republicans propose cutting taxes for
the same entities, they would slash non-military spending and boost
borrowing. When the two sides meet, they
deadlock and must temporarily patch over their differences with more debt.
National spending falls into four major categories: Social
Security, Medicare and similar programs, military, non-military and debt
payments.
Making payments on the federal debt should be beyond debate.
The government has made commitments to lenders both in the U.S. and
abroad. They buy U.S. bonds, because the
country always pays its debts. That has led to the American dollar serving as the
world’s prime currency, contributing to the country’s role as a superpower.
Threats to America’s credit are caused by battles over the
debt ceiling, but the dollar’s world role is also affected by the budget games.
They raise concerns about the reliability of the U.S.
Social Security and Medicare are the so-called “third rail”
of American politics. Because these
programs are so vital to so many, neither party wants to risk touching them. They are financed by employer-employee contributions,
but are nearing the point where those funds won’t cover the cost.
That leaves unpopular choices. Raise payroll taxes or cut benefits or do
both. The conversation about what to do is picking up speed as the shortfall
gets closer.
Some Republicans, though not Donald Trump, want to increase
the eligibility age for receiving Social Security, which would amount to a
benefit cut. A few Republicans even see
these programs as “socialism” and would slash them.
Democrats would raise payroll taxes on higher income
people. That would not be enough, so
they are driven toward using income taxes revenues. If there were more workers, who would contribute
to payroll taxes, it’s less likely these general funds would be needed. That may explain why some Democrats support
immigration.
There is another reason why immigration could have a positive,
economic effect. China and Japan, with little immigration, are shrinking in
population, and their economies suffer. More people bring an expanded labor force and
boost consumer spending. The U.S.
population will shrink without immigration, which could bring economic decline.
Social Security now provides more than half of the retirement
income for more than half of its recipients.
The program may have become part
of a national pension policy, not the short-term income supplement it once was.
Plus, people are living longer so more
funds are needed, while there are fewer workers contributing.
House Republicans are right about the need for separate spending
bills so each area of government activity gets needed attention. But when they refuse to compromise, they
leave Congress with a last-minute desperation bill. Meanwhile, the Senate budget builders came up
with separate bills, thanks partly to Sen. Susan Collins, a key Republican player
on spending.
Both parties need to get more serious about dealing with the
federal budget, both spending and taxes.
President Biden says he wants to raise taxes on the wealthy and has had
some success, but a recent report shows he has actually cut taxes. The GOP says it dislikes deficits, but beats
the Democrats in creating them. Trump
was a top-flight debt producer.
No president in decades has submitted a serious and disciplined
budget. Budgets are usually political documents
with no real future. Many depend on impossible
revenues, including Biden’s this year, undoubtedly leading to more debt. Budgets also almost never review the ongoing
need for past spending decisions, partly because cutting them may cost jobs.
The media is no help, having created a permanent political campaign. With an eye on their reelection, politicians
follow the almost daily polls that supposedly transmit the popular will. The
trouble is that the polls focus on the short-term.
In the current budget system nothing changes, and last-minute
patches are applied to keep the government in operation. Without improved leadership
looking beyond the next election, the prospect is for another midnight budget
fiasco.