Desperate for anything resembling a win, the Trump Administration along with Congressional Republicans, finally passed major legislation in late December in the form of supposed income tax overhaul. Except it’s not much in the way of overhaul. Basically it gives certain components of American society “free money” in the form of income tax reductions. Well, you might say, who could be against receiving free money. Except the government is handing out funds it doesn’t possess. It would be one thing if we were running a budgetary surplus every year and rebating that surplus back to the people. But just the opposite is true. The government is accumulating about half a trillion dollars in new debt every fiscal year. The current total debt is over $21 trillion and growing each month. Funny how so-called conservatives never made a big deal when the deficit went over the $20 trillion mark after Trump became president. I guess it was only earth-shaking when Obama was running up huge deficits.
In any event, this new legislation gives rather huge tax reductions to corporations, and significant tax cuts to the top one percent and the rest of the uber wealthy. The middle and lower classes, of course, get only a few crumbs of tax relief. A typical Republican game plan of trickle-down economics. Give generous tax deductions to the rich and they’ll reward the party with generous donations during election campaigns that allow more Republicans to be elected to office. Except as I’ve said, anything that significantly increases the public deficit is totally unaffordable as far as the best interests of the people are concerned. I realize that virtually no one lies awake at night worrying about the size of the public debt. But it’s a ticking time bomb that can bring Depression-era financial ruin to large segments of the population if not brought under control.
First, one must realize that the public deficit will never be paid off. It’s far too gigantic for that. The best that we can hope to manage is to pay off bonds and notes that are coming due by issuing new debt and praying it will sell on the world’s financial markets. So far it has, since the U.S. continues to make good on interest payments and bond principals as they mature. One thing that has worked in our favor regarding those payments is the fact that interest rates on world financial markets have remained extraordinarily low for many years. But as economies around the world continue to recover from the great recession that began in 2008, interest rates are slowly starting to climb. Low inflation has been a boon to the U.S. economy, especially in servicing its public debt. But once inflation begins to creep up, as it is current showing signs of doing, servicing the public deficit will become far more costly. How will we pay for these increased costs, especially with less tax revenue coming into the government coffers. It might give future potential bond holders pause for thought.
The U.S. budget has now climbed to about $4 trillion annually. The accumulated deficit, as I’ve stated, is over $21 trillion. Mind-boggling numbers to be sure. Almost too other-worldly to get one’s head around. To put it in perspective, when Ronald Reagan entered the White House in January 1981, the accumulated deficit stood at just under $1 trillion. It had taken over 200 years between the presidencies of George Washington thru to Jimmy Carter to reach that figure. In the 37 years, however, from Reagan thru to the first year of Trump, we’ve calmly, with hardly any notice, added another $20 plus trillion to that figure. But the general public attitude has been to just party on. Lets keep spending money we don’t have. What great fun. And now, more free money to the people in the form of an unaffordable tax cut.
Five items comprise over 80% of our annual spending. They are Defense, which includes the military, weapons, intelligence, nuclear missiles, etc. and which is now gobbling up close to a trillion dollars in annual spending. And whose budget most people, especially conservatives, want to see increased rather than reduced. Then there’s interest on the debt which, as I’ve stated, must paid if we want the world to keep buy our bonds. Next come social security and medicare, which seniors especially, threaten open revolt should any mention of reduction be made. Last is Medicaid, which might be trimmed slightly, but not enough to make any real difference. The remaining whole rest of the government is funded with less than 20% of available revenue. Not a lot of places to try saving some money. Might as well just keep partying on.
In pre-television days of the 1930s and 1940s, there was a show on the radio called Duffy’s Tavern, with the by-line of-“where the elite meet to eat.” Of course, it was anything but elite. More like a hole-in-the-wall bar. In any event when the rare customer did enter the tavern, and was willing to plunk down a nickel or dime for a beer, proprietor Duffy would tell the customer that this entitled him to go over and partake of the “free lunch counter.” In actuality, many bars actually did have a free lunch counter during the Depression era, available for the price of a beer. But one could only imagine the quality of food available at this counter. Probably more like ptomaine heaven. In any event the acceptance by the U.S. public of this latest tax cut which further imperils our financial future, makes it look like we’re still willing to chow down at the free lunch counter. What a rosy picture concerning one’s health.