The 2018 Spending Bill is Irresponsible and Not Fiscally Conservative

Senator Rand Paul’s principled stand against the “hypocrites” who voted for the 2018 spending bill was right and reflects the will of the GOP members.  Fiscal conservatives should take note.

 

The will of the GOP members as approved by GOP delegates to the 2016 RNC Convention is thus:

“The Republican path to fiscal sanity and economic expansion begins with a constitutional requirement for a federal balanced budget. We will fight for Congress to adopt, and for the states to ratify, a Balanced Budget Amendment which imposes a cap limiting spending to the appropriate historical average percentage of our nation’s gross domestic product while requiring a super-majority for any tax increase, with exceptions only for war or legitimate emergencies. Only a constitutional safeguard such as this can prevent deficits from mounting to government default.”

-2016 GOP Platform

Yet, in 2018, the republican-controlled congress voted for a spending bill that fails to live up to even a shadow of the GOP platform.  That the 2018 spending bill will fail to balance the budget, increase caps on spending, cause more budget deficits and debt should be the cause of great concern for fiscal conservatives who have traditionally found a home in the GOP.

Don’t be fooled by the “dynamic analysis” argument put forth to defend the 2018 tax and spending bills.  Administrations under Reagan, Bush, and even Kennedy all cut taxes without spending cuts.  Each resulted in higher budget deficits and debt. There is no historical evidence that tax cuts without spending cuts reduce budget deficits and debt.  Not one tattered scrap of evidence.  None.

In fact, the objective, non-partisan Committee for a Responsible Federal Budget found the following:

”If temporary provisions in the bill were made permanent, the ultimate cost could increase to $1.7 trillion, or $2.1 trillion including interest, and increase debt to 105 percent of Gross Domestic Product (GDP) by 2027. Coming on the heels of the $1.5 trillion tax cut in December, this deal would be another huge blow to fiscal responsibility.”

This debt must be paid by future tax payers like our children and grandchildren.

There are those who claim the Federal Reserve can retire debt simply by printing more money as treasury notes mature. Such an approach has severe implications on the financial security of the middle class.  It devalues the US dollar, decreases the purchasing power of savers, increases dependency on federal entitlements, and imposes a hidden tax on individuals and families who were fiscally responsible.

Some may claim the solution is to reform the tax code.  Significant change anytime soon to the tax code is unlikely given the historic 2018 tax overhaul.  But, this misses the point.  The cause of deficits and debt is not the tax plan.  The cause of deficits and debt is too much spending as a percentage of Gross Domestic Product (GDP).

Hauser’s Law offers valuable insight.  Hauser’s Law is the empirical observation that tax revenue as a percent of GDP has remained constant (around 19.5%) since WWII, regardless of any significant changes to the tax code or party in power.  Would it not be prudent to peg spending to a percent of GDP so that it tracks with tax revenue? Even the proponents of “dynamic analysis” should agree.

Debt Deniers

There are those who deny the risks of federal debt.  They claim there is no risk as long as the debt is backed by the full faith and credit of the federal government.

To these debt deniers, I offer the following challenge.  Name one nation at any time throughout history which survived long-term debt.  I have yet to receive a satisfactory reply.  Though the corollary challenge is much easier.  Name one nation that faced financial and social ruin due to long-term debt.  In the past century alone, several come to mind such as Greece, Brazil, and many others.  Chief among these is the collapsed state of the Weimar Republic which led to the rise of Nazi Germany and WWII.

I concede there is one historical example of a nation that survived long-term debt, though, it proves my central point.  King Philip of France retired his nation’s burgeoning war debt in 1307 by killing off the Templar Knights and confiscating their property.  This after inflicting similar treatment on his own subjects – Jew and Catholic alike.  King Philip’s atrocity against the Templars reverberates in modern times by the superstition associated with Friday, the 13th, the day the Templars were murdered to retire France’s debt.

In every case, long-term debt ultimately leads to poverty, disease, death, destruction, and war.  As for “faith and credit” of the federal government, just remember that is soft language which describes the power to forcibly confiscate property from citizens.

I stand with Rand.

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