Can America ‘Afford’ Another Recession?

It’s now history: the federal deficit for fiscal 2019 was -$984 billion. That’s an increase from the previous year of $205B, or 26 percent. And this increase in the deficit happened, mind you, despite an increase in revenue of 4 percent.

Here’s more history: On the last day of the last economic expansion (Nov. 30, 2007), the Debt Held by the Public was $5.146T, and twelve years later the Debt Held by the Public was $17.105T. That’s 3.32 times higher, kids.

So, twelve years, twelve trillion dollars of additional debt. What Americans need to keep in mind is that deficits are a function of both revenue and spending. Although revenue went up by 4 percent in 2019, spending went up by 8 percent; hence the deficit. Many Americans seem to not know that federal spending is controlled by Congress. Budgets, appropriations, continuing resolutions, omnibus bills, and supplementals are legislation, the province of Congress. Therefore, if one worries about debt, one should look to Congress for relief, especially the House of Representatives, the chamber where spending bills originate.

Here’s a little context: the $3.46T in total federal revenue in 2019 would have been more than enough to fund the entire federal government for as recently as 2013, when total outlays were $3.45T (see Table 1.1 of the historical tables to verify). If we had had 2019’s revenue in 2013, we’d even have had a little change left over to pay down the federal debt a smidgeon.

Our twelve-year window extends from the first day of the Great Recession to about one month ago. Since the finale of the Great Recession (June 2009), the economy has been expanding. But where would the economy have been if Congress hadn’t spent that $12T of borrowed “stimulus”?

Economic expansions have always ended, and sometimes with a resounding thud. However, when the last expansion ended, the deficit had been getting better. In fact, for the fiscal year that had ended two months before the Great Recession began, the total deficit was down $252B from the (then) record high set in 2004. So, the last deficit before the Great Recession hit was -$160B.

The feds project that the deficit will be more than a trillion dollars in 2020 and in each year of the next decade. So if a recession were to hit now, Congress would be in a worsening fiscal situation rather than the improving situation back in December 2007 when the Great Recession hit. Rather than a -$160B deficit, Congress would be running more than a trillion-dollar deficit.

The Great Recession was the worst downturn since the Great Depression, it’s been said. But with the accumulation of so much debt since the last expansion ended, and with out-of-control spending and deficit, one wonders how Congress will grapple with the next recession.

One of the ways that Congress copes with recessions is -- deficit spending itself. It’s called “priming the pump,” i.e. stimulus. But for more than twelve years, through both recession and recovery, Congress has been priming the pump. It started in February 2008 with the Economic Stimulus Act of 2008. One of the main features of the Act was one-time rebate checks (i.e. stimulus) for income tax filers. The projected cost of the package was $168B, no doubt one of the reasons that the deficit for 2008 set the then all-time record of -$458B.

It should be noted here that at the time, the first weeks of 2008, Congress did not yet know that we were already in recession. That would not be determined until December, when the Business Cycle Dating Committee of the NBER would agree on the start of what is now called “the Great Recession.”

What Congress hasn’t done since 2009 when the Recession ended is trim its sails and cut spending, (as their hero Keynes would advise). Instead, Congress has used recessionary tactics and tools to prop up the economy even when not in recession. Congress hasn’t gotten close to getting the deficit back to the pre-recession level in FY 2007. The stimulus of yet more stimulus (deficit spending) might not be very stimulating when you’re already running a trillion-dollar deficit. The danger is that Congress will run out of anti-recession ammo.

The common factor in the history here is Nancy Pelosi. She was the Speaker of the House when we slid into recession in December of 2007, she was Speaker when the financial crisis hit in 2008, she was Speaker when the deficit first breached the trillion-dollar mark in 2009, and she is Speaker now, as we plow through the trillion-dollar mark yet again. Nancy Pelosi is a “high maintenance” old gal; she’s damnably expensive. Your grandchildren will pay for her fiscal recklessness.

America needs a new speaker and a new House of Representatives. We can no longer afford the Democrats. The most important votes Americans will make in November 2020 are the votes they cast for Congress. We need conservative congressional candidates who vow to cut spending, but in ways that don’t stall the expansion. What we need is another Newt Gingrich, the Speaker who ushered in the balanced budgets and surpluses of 1998-2001.

Every candidate for the U.S. House should be asked what they’re going to do about the deficit and spending. If they say they’re going to raise taxes on corporations and the “evil” One Percenters because they can’t make do on revenue of $3.46T, then they’re unfit to “control the purse strings.” You might even tell them that.

The easiest way to fund the government is by selling debt, (assuming the feds will always be able to find buyers for U.S. bonds, notes, bills, etc.). It’s also fairly easy to “print” new money. What’s hard is raising taxes. But what’s especially hard is cutting spending. No one wants their government benefits cut, no government employee wants their salary cut or job eliminated; no one wants their “ox gored.” Cutting government spending is politically dangerous.

It’s simple, we can borrow more, we can crank up the printing presses and create new money, we can hike taxes (but only on a tiny group at the top), or we can at long last start cutting spending. With Madame Pelosi at the helm, one supposes that we’ll do all of it -- except for the part about cutting spending.

Can we “afford” another recession? If we cannot afford another recession because the usual remedies will be less effective given our trillion-dollar deficit, then we need to keep the current economic expansion going. But how do we keep humming an already very mature expansion, the longest expansion in postwar history? The best hope we have of keeping the economy expanding is by re-electing President Trump, and by giving him a conservative House of Representatives he can work with. Vote Republican, Americans.

Jon N. Hall of ULTRACON OPINION is a programmer from Kansas City.

It’s now history: the federal deficit for fiscal 2019 was -$984 billion. That’s an increase from the previous year of $205B, or 26 percent. And this increase in the deficit happened, mind you, despite an increase in revenue of 4 percent.

Here’s more history: On the last day of the last economic expansion (Nov. 30, 2007), the Debt Held by the Public was $5.146T, and twelve years later the Debt Held by the Public was $17.105T. That’s 3.32 times higher, kids.

So, twelve years, twelve trillion dollars of additional debt. What Americans need to keep in mind is that deficits are a function of both revenue and spending. Although revenue went up by 4 percent in 2019, spending went up by 8 percent; hence the deficit. Many Americans seem to not know that federal spending is controlled by Congress. Budgets, appropriations, continuing resolutions, omnibus bills, and supplementals are legislation, the province of Congress. Therefore, if one worries about debt, one should look to Congress for relief, especially the House of Representatives, the chamber where spending bills originate.

Here’s a little context: the $3.46T in total federal revenue in 2019 would have been more than enough to fund the entire federal government for as recently as 2013, when total outlays were $3.45T (see Table 1.1 of the historical tables to verify). If we had had 2019’s revenue in 2013, we’d even have had a little change left over to pay down the federal debt a smidgeon.

Our twelve-year window extends from the first day of the Great Recession to about one month ago. Since the finale of the Great Recession (June 2009), the economy has been expanding. But where would the economy have been if Congress hadn’t spent that $12T of borrowed “stimulus”?

Economic expansions have always ended, and sometimes with a resounding thud. However, when the last expansion ended, the deficit had been getting better. In fact, for the fiscal year that had ended two months before the Great Recession began, the total deficit was down $252B from the (then) record high set in 2004. So, the last deficit before the Great Recession hit was -$160B.

The feds project that the deficit will be more than a trillion dollars in 2020 and in each year of the next decade. So if a recession were to hit now, Congress would be in a worsening fiscal situation rather than the improving situation back in December 2007 when the Great Recession hit. Rather than a -$160B deficit, Congress would be running more than a trillion-dollar deficit.

The Great Recession was the worst downturn since the Great Depression, it’s been said. But with the accumulation of so much debt since the last expansion ended, and with out-of-control spending and deficit, one wonders how Congress will grapple with the next recession.

One of the ways that Congress copes with recessions is -- deficit spending itself. It’s called “priming the pump,” i.e. stimulus. But for more than twelve years, through both recession and recovery, Congress has been priming the pump. It started in February 2008 with the Economic Stimulus Act of 2008. One of the main features of the Act was one-time rebate checks (i.e. stimulus) for income tax filers. The projected cost of the package was $168B, no doubt one of the reasons that the deficit for 2008 set the then all-time record of -$458B.

It should be noted here that at the time, the first weeks of 2008, Congress did not yet know that we were already in recession. That would not be determined until December, when the Business Cycle Dating Committee of the NBER would agree on the start of what is now called “the Great Recession.”

What Congress hasn’t done since 2009 when the Recession ended is trim its sails and cut spending, (as their hero Keynes would advise). Instead, Congress has used recessionary tactics and tools to prop up the economy even when not in recession. Congress hasn’t gotten close to getting the deficit back to the pre-recession level in FY 2007. The stimulus of yet more stimulus (deficit spending) might not be very stimulating when you’re already running a trillion-dollar deficit. The danger is that Congress will run out of anti-recession ammo.

The common factor in the history here is Nancy Pelosi. She was the Speaker of the House when we slid into recession in December of 2007, she was Speaker when the financial crisis hit in 2008, she was Speaker when the deficit first breached the trillion-dollar mark in 2009, and she is Speaker now, as we plow through the trillion-dollar mark yet again. Nancy Pelosi is a “high maintenance” old gal; she’s damnably expensive. Your grandchildren will pay for her fiscal recklessness.

America needs a new speaker and a new House of Representatives. We can no longer afford the Democrats. The most important votes Americans will make in November 2020 are the votes they cast for Congress. We need conservative congressional candidates who vow to cut spending, but in ways that don’t stall the expansion. What we need is another Newt Gingrich, the Speaker who ushered in the balanced budgets and surpluses of 1998-2001.

Every candidate for the U.S. House should be asked what they’re going to do about the deficit and spending. If they say they’re going to raise taxes on corporations and the “evil” One Percenters because they can’t make do on revenue of $3.46T, then they’re unfit to “control the purse strings.” You might even tell them that.

The easiest way to fund the government is by selling debt, (assuming the feds will always be able to find buyers for U.S. bonds, notes, bills, etc.). It’s also fairly easy to “print” new money. What’s hard is raising taxes. But what’s especially hard is cutting spending. No one wants their government benefits cut, no government employee wants their salary cut or job eliminated; no one wants their “ox gored.” Cutting government spending is politically dangerous.

It’s simple, we can borrow more, we can crank up the printing presses and create new money, we can hike taxes (but only on a tiny group at the top), or we can at long last start cutting spending. With Madame Pelosi at the helm, one supposes that we’ll do all of it -- except for the part about cutting spending.

Can we “afford” another recession? If we cannot afford another recession because the usual remedies will be less effective given our trillion-dollar deficit, then we need to keep the current economic expansion going. But how do we keep humming an already very mature expansion, the longest expansion in postwar history? The best hope we have of keeping the economy expanding is by re-electing President Trump, and by giving him a conservative House of Representatives he can work with. Vote Republican, Americans.

Jon N. Hall of ULTRACON OPINION is a programmer from Kansas City.