$6,551,872,000,000 . . . And Growing

We have been following the spending spree on Capitol Hill for years. Even before the pandemic, both the Trump Administration and Congress seemed to dispense with any notion of restraint on spending. The result is a towering debt that now exceeds our gross domestic product. The situation is worsening by the day as both the White House and the Congress seek massive new spending. The federal government spent a record $6,551,872,000,000 in fiscal 2020. That is a 45.4% increase from 2019 — an addition of $2,044,283,520,000 above the previous record of $4,507,588,480,000. The budget deficit has now tripled. Yet, there is no indication that the spending spree will end. Trillions of additional spending have been pledged by Democrats for programs ranging from free college to new environmental programs to bail outs for cities. The Trump Administration has pledged even greater tax cuts as the country struggles with a debt load that could be a burden for generations.

I have long admitted to being socially liberal and fiscally conservative. However, at some point, a modicum of rationality will have to take hold of our economic policies. The U.S. budget deficit tripled to a record $3.1 trillion in the fiscal year that ended Sept. 30. There is no question that we have to add debt to deal with our citizens struggling in this pandemic.  While we would have been in a better position if the White House and Congress had not spent wildly before the pandemic, we have to address the ongoing crisis for our population. Yet, trillions for new programs are being pledged for 2021 and the rising debt is being largely dismissed.

When measured against economic output, the budget gap in fiscal year 2020 is now 16.1% and  the most conservative estimate puts the federal debt at 102% of gross domestic product.

In the meantime, the White House is demanding another $1.88 trillion and House Democrats are demanding another $2.2 trillion bill. The Treasury selling new securities in utter abandon, pushing total government debt held by the public to reportedly $21 trillion. That is a 25% increase from the beginning of the fiscal year. (Note some put the debt higher than $21 trillion).

This will not end well.

22 thoughts on “$6,551,872,000,000 . . . And Growing”

  1. Deming, the American statistician whose advice was rejected by U.S. automakers, is best known for teaching companies like Toyota, Honda and others to produce quality products following World War II. What many people don’t know is Deming, a statistician formerly working in a federal agency, also had a detailed plan for fixing broken government bureaucracies outlined in the book “Deming At Work”. Good read for this topic.

  2. Too bad, Jonathan Turley, that you fail to understand the economics of governments.

    The economists aren’t worried.

    1. There are about 40,000 working economists in this country. How many of them are talking to you?

  3. biden’s platform and economic plan will further weaken the Republic and will increase the odds of even greater polarization and unrest.
    How can the taxpayer funded 47 year politician who help create many of today’s economic, racial-social and public school educational ILLs ; and now he’s going to fix these problems, cognitively impaired ??
    He could not effectively and morally keep his son hunter clean, ethical, and out of harm’s way and he wants to lead the country ?

  4. That China deliberately released a virus from its redundantly secured, fail-safe Wuhan Institute of Virology to suppress domestic protests, the global economy and support for President Trump in an election year is beyond any shadow of doubt and irrefutable.

    China must be sued for $25 trillion (to be increased) for global damages.

    $25 trillion in awards must be obtained from direct payments, tariffs, asset freezing and canceling of debt to China.

    1. Funfact: Congress has the power to tax only for “…general Welfare…” not individual welfare, specific welfare, charity or redistribution of wealth. “From each according to his ability, to each according to his need” is a principle of the Communist Manifesto not the U.S. Constitution. The entire American welfare state is unconstitutional and must be fully abrogated. Also, Congress cannot regulate anything other than money, commerce and land and naval Forces. Congress cannot interfere with the possession or disposition of private property.

      90 % of what Congress wastes in taxpayer funds on is not in the Constitution.

  5. is that including future t and did you subtract the obama debt? If it’s exact then it means we’re keeping up with Pelosi debt and all we have to do is get enoughnon rinos drive out the socialiasts and repeal all of Pelosi and Schumers crap bills then easily deal with the loss of the legitimate economic income suffered due to the pandemic AND use the honest formula of GDP minus COP and COG equals NDP In future if can’t get past GDP then don’t bother it isn’t useful wtihout the whole formula. If it goes the other way and you are retired move south of the border where it’s safer AND the COL is 40% the cost of suffering under the socialist fascists.

  6. is that including future t and did you subtract the obama debt? If it’s exact then it means we’re keeping up with Pelosi debt and all we have to do is get enoughnon rinos drive out the socialiasts and repeal all of Pelosi and Schumers crap bills then easily deal with the loss of the legitimate economic income suffered due to the pandemic AND use the honest formula of GDP minus COP and COG equals NDP In future if can’t get past GDP then don’t bother it isn’t useful wtihout the whole formula

  7. There was a very good solution back during the Obama administration. He appointed a commission to provide a bi-partisan solution and Simpson-Bowles came back with $2 of spending cuts to $1 of tax revenue increases. Obama shelved it (spending cuts) and GOP attacked it (tax increases)

    So who really cares? Washington only governs by crisis, nothing more. When our debt brings a financial crisis, then voters will be personally impacted and will demand action. Problem with that is the cure then could be as bad as the crisis.

  8. Wiseoldlawyer:

    Of course you are correct, but one obvious answer is to close 600+ military installations, end efforts to overthrow governments in order to install dictators friendly to the fossil fuel industry, enact a wealth tax, and close tax loopholes that allow obscenely wealthy people to evade taxes.
    Republicans only propose cutting programs that benefit the public.
    President Johnson (LBJ) said the biggest problem in government is waste. That would obviously include spending billions every day on programs that are a huge drain on
    the economy and mainly benefit rich people ,large banks and corporations.
    Break up monopolies (e.g. Amazon), and give more support to American-based businesses. Provide Medicare for all and let those who would prefer going out of the country for their healthcare needs – to do so. STOP funding the research for new Rx unless the Rx company also makes a generic version available.

    The above is probably how Trump intends to make amends for the mess made by Democrats during the past four years.

    1. The ratio of military expenditure to domestic product is the lowest it has been since 1939. That’s not the source of our problem you ignoramus.

        1. You’re usually pushing some fantasy with great and undeserved self-assurance. You shouldn’t be surprised when people spit at you.

          There’s a partial solution to the acute problem (drunken sailor goodies distribution) and that’s to quit doing it and try to shift to targeted lockdowns. Good luck getting the teachers’ unions and the ghastly Gov. Whitmer to co-operate with that.

          The solution to the chronic problem is to balance expenditures with revenues and to balance each budget over the course of the business cycle (which means running small surpluses two years out of three). Which means expenditure cuts and tax increases. The balance between the two depends on your priorities which depends in turn on a set of understandings both practical and normative. There are granular problems with how the military operates, but you haven’t a clue what they are. The military is an inherently public function and inherently a function of the central government. The federal government in its military program is not invading realms properly left to provincial and local government nor is it invading realms best left to the private sector. Since less in the way of available factors of production is being devoted to the military than has been the case in nearly 80 years, complaints about the military are gratuitous.

          Some obvious measures:

          1. The federal grants mill. The recipients are crony philanthropies, higher education, and state and local government. Phase out everything going to private parties and to incorporated affiliates of state and local government (like state universities). Also, phase out transfers to local governments bar the following residue: spot rental and service contracts, payments in lieu of property taxes on federally owned real estate, adjudicated indemnities for unintentional torts derived from federal regulations, disaster relief, and grants to Indian reservations. Phase out transfers to state governments except for (1) Medicaid; (2) unemployment compensation; (3) Interstate highway maintenance; and (4) general revenue sharing distributed according to formulae – formulae which would provide a riser for the more impecunious states and territories to stand but provide little or nothing for affluent states. The sum of distributions to state and territorial government are properly limited to 4% of gross domestic product.

          2. Replace subsidies to people’s mundane expenditures with a modification of the Earned Income Tax Credit. SNAP and other nutrition programs, Section 8 and other housing subsidies, subsidies to utility bills – gone.

          3. Limit voucher distribution, insurance, and cash allowances to the following: disaster relief, veterans’ benefits, Social Security (old age, disability, survivors), Medicare, Medicaid, SSI, and odd legacy programs like Railroad Retirement. Everything else (especially TANF) is replaced with a modification of the Earned Income Tax Credit.

          4. Establish a schedule of counter-valing tariffs to protect American agriculture from subsidies abroad and then end production controls and deficiency payments administered by USDA. The Farm Service Agency and the rural development apparat in that department get shut down.

          5. Limit federal financing of higher education to: training expenses for federal employees and prospective federal employees; veterans’ benefits; and a benefit program for those who are not incorporated into state polities (military families, people in itinerant civilian occupations, reservation Indians, residents of the smaller insular dependencies, and a selection of American citizens living abroad). The current mess of grants and loans would be phased out. Student loans extended by private parties would have only so much creditor protection as would allow a market to emerge at non-usurious rates; also, the menu of circumstances in which extant loans could be discharged in bankruptcy would be extended – gingerly. While we’re at it, end federal job training programs not offered under the rubric of the Job Corps.

          6. Revise substantive eligibility standards, application procedures, and post-award review procedures for the grant of Social Security Disability benefits and SSI benefits. Attempt to reverse mission creep in these programs.

          7. Institute a set of cohort-specific retirement ages (adjusted every few years) for Social Security old age benefits. The ratio of beneficiaries to the working population should over time fluctuate around a set point.

          8. Finance Medicare out of payroll taxes, ending the fees currently charged. However, maintain Medicare spending at a consistent share of total personal income by instituting deductibles which are adjusted annually. Add deductibles to Medicaid as well (applicable to medical care, not long-term care).

          9. Amend modes of federal employee compensation. Limit the accumulation of early-retirement credits to uniformed protective-service personnel and to hands-on construction workers. Have every federal employee receive a ‘stated compensation’ which would consist of a notional credit calculated according to months worked (for salaried employees), hours worked (for wage employees), and days worked (for per diem employees) to which a credit for employee perquisites would be added – each agency would have a perquisites budget which would on pay stubs be partitioned equally among FTE employees. From this notional compensation would be deducted charges: for the perquisites; for FICA (calculated as a % of notional compensation); for a medical insurance plan; for a l/t care plan; for a retirement account; and for state and federal tax withholding. The retirement account would be a defined contribution program; for ordinary federal employees, a minimum of 15% of notional compensation would be sent to this account; for employees earning early retirement credits, a minimum of 30% of same would be sent; employees would have an option to add more. In order to finance medical and long term care insurance, a premium in the form of a % assessment on notional compensation would be imposed. Federal employees (and their dependents) would be sorted into cohorts and insurance companies each year would submit sealed bids to insure each cohort. The contract be that the insurer fulfills a contract (with substantive and procedural provisions) in return for the premiums assessed on the workers in the cohort over and above a certain deductible. The deductible would be x for a plan covering a single worker, 2x for a plan covering a worker and spouse or a worker and child or a worker and adult ward; and 3x for a marred worker with children or a single worker with multiple children or multiple wards. The bid would be the value of ‘x’, with the contract going to the low bidder. In this way, federal employee compensation would be transparent, and labor costs derived from the price dynamic in the market for medical and long-term care services would be borne by the employee’s household.

          10. Amend payroll taxes and other charges. Social Security and Medicare would be financed by a % assessment on an employee’s total compensation, topping out at a dollar value adjusted each year according to changes in nominal employee compensation per worker. Unemployment compensation would be partially financed out of that and partially financed out of an employer’s total revenue. Workman’s compensation would be financed entirely out of risk-rated premiums imposed on employers.

          11. Institute in stages a value-added tax applicable to any sort of sales transaction but the following: transactions subject to the capital gains tax, real estate rents; and sales of salvaged, discarded, and donated property. Have an absolutely uniform rate and minimal discrimination between economic sectors. A rate of somewhat north of 20% ought to do the trick.

          12. Define ‘taxable income’ as follows: start with the Bureau of Economic Analysis definition of income; exclude what you’ve received in Social Security, Medicare, Medicaid, and unemployment compensation; exclude vouchers, insurance, allowances, and in-kind merchandise received from the VA or from the disaster relief apparat; exlcude vouchers, insurance, allowances, and in-kind merchandise received from state programs for the elderly and the disabled; and deflate your nominal interest yield by the GDP deflator so you report your real interest income. Calculate personal income tax liability as follows: [0.4 x (Taxable Income)] – (Your payroll tax payments) – ($c x m), where ‘m’ is the number of members in your household and ‘c’ is a dollar value adjusted each year according to changes in nominal per capital personal income. If the result of this equation is a + integer, that’s your tax liability. If it’s negative, you’re due a rebate. That might be the value of the rebate, but you have to compare it to the cap applicable to your household; if it’s over the cap, your rebate will be truncated. If everyone who signs the return qualifies as elderly or disabled, the cap is calculated according to personal income per capita in your region; if no one is, the cap is calculated with reference to your earned income; if one person is elderly or disabled and one is not, a compromise value is calculated. The tax rebates provide an income floor for the elderly and disabled and some ‘matching funds’ for the earned income of impecunious people. The rebates would be distributed in installments throughout the year.

          13. Make use of the personal income tax to finance Medicaid, SSI; cash, insurance, and allowances distributed by the VA; cash, vouchers, and in-kind distributions by the disaster relief apparat here and abroad; and some deficiency payments to federal pensioners. Make use of payroll taxes to finance Social Security, Medicare, and unemployment compensation. Make use of the value-added tax and miscellaneous small taxes to finance the rest. (Make use of tolls, fares, and service charges to finance incorporated affliates of the government like the postal service and the federal hydroelectric authorities, as well as funds to finance Interstate Highway maintenance). The main purpose of the personal income tax should be to redistribute income and everyone faces the same marginal rate, albeit varying average rates.

          14. Reduce outstanding debt stocks through asset sales. On the block: nearly the entire portfolio of federal grazing lands (in re a portion of the proceeds can be used to indemnify current holders of grazing permits), all Forest Service lands bar the old growth (which would repair to the National Park Service or the Fish and Wildlife Service); and the Postal Service.

      1. Congress has the power tax to provided for the common Defence and general Welfare; not individual welfare, specific welfare, charity or redistribution of wealth.

        The U.S. military may be funded through taxation as legislated by Congress.

        The U.S. welfare state may NOT be funded through taxation.

        The entire American welfare state is unconstitutional.

        All forms of redistribution of wealth and social engineering are unconstitutional.

        Article 1, Section 8

        The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States;

      2. Except that your comparison is misleading or worse because it does not include debt as a ratio of GDP (over 100% now). And even more critical, it ignores the fact that US military expenditures equal the next five nations combined, and it appears that the more we spend on military the closer the world gets to nuclear winter. Rising expenditures make us less safe.

        The US is a NATO member, as is Turkey and other European nations. Turkey threatens war with multiple NATO countries. If Turkey wars against another NATO member, by law/treaty the US is legally obligated to defend both nations against each other. If that sounds insane it’s because it is. US soldiers would be legally obligated to kill each other. We’d have to bomb ourselves into oblivion.

        The Constitution states clearly that only Congress can declare war and this power can not be delegated, including to a NATO contract. Further, POTUS military excursions are illegal. A primary goal of the framers was no Monarch who declares war on any whim. That power is invested only in Congress members directly elected by the people and answerable to them only.

  9. Reviewing the Japanese experience after 1989 should disabuse one of the notion that fiscal stimulus is all that effective. Here’s a hypothesis: we needed to enact a special benefit to people idled by the pandemic – namely people over 60 and people over 50 with weight problems who could not work from home; we also needed an indemnity program for retail tradesmen compelled to restrict their custom due to social distancing rules. I think that would have addressed social distress at a much cheaper price. (Also, after the first few weeks, the lockdowns needed to be targeted. As disagreeable as this ailment is to people, it’s only lethal to the old and to late-middle-aged people with weight problems). Three-quarters of the population is not at risk from this ailment and should have been living normal lives since about April.

  10. After 47 years in government Biden has a plan for our economy and buying our debt, China will help us.

    1. CraNic-Excellent post. It kills me when lifetime politicians brag about how long they’ve been in Washington. I want to yell out “yes and look where you’ve put us now”!

  11. Not trying to be nasty here Professor, but pundits who identify a big problem and yet have zero to say about solving or mitigating it deserve little respect.

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