$1.9 Trillion in Spending, $11 Trillion in One-Term Deficits

Passage of the $1.9 trillion spending bill has Democrats giddy.  President Biden termed it “historic.” Senator Schumer calls it “a great day for this country.”  Not to be outdone, Senator Debbie Stabenow gushed, “People on the floor, in our caucus, it was almost like tears in their eye.  I mean, I felt it.”

Here is what actually historic.  According to the Congressional Budget Office, the Biden one-term deficit will total a forecasted $8 trillion, including the $1.9 trillion, spiraling to $11 trillion if Democrats follow through on next month’s planned $3 trillion bill for “infrastructure.”

Republicans have widely noted the huge waste in the spending bill.  Of $1.9 trillion, only $465 billion is due to the $1,400 check, putting the bill’s pork and payoffs at $1.4 trillion. Economists have identified the enormity of planned spending, and its recklessness. Even stalwart Democrat supporters recognize the Biden administration utter disregard of fiscal responsibility.

But that is not the full measure of the worst. Driving the country exponentially into ever greater indebtedness fairly and objectively marks the end of the American dream.                                                                                                                                                                                                                                                              

U.S. History and Public Debt

For two hundred years, after every great national crisis, the succeeding generations made sure to put the country back on sound financial footing.  Call it our blessed second greatest generation, the stalwarts who ensured national crisis did not eat up the chance for their children and grandchildren to prosper.

It is all here, in this one graph, the story of a nation caring for whom comes next. 

https://www.pgpf.org/sites/default/files/2020-fiscal-challenge-page-chart-1.jpg

Three times this nation has been tested to the utmost. 

  • The Revolutionary War, a young nation at risk, through the War of 1812 -- our finances restored by the 1830s. 
  • The grievous devastation of the Civil War -- our finances restored by the 1890s. 
  • The worst consecutive toll on the U.S. and the world -- World War I, the Great Depression, World War II -- compressed into thirty horrific years, yet all of it fiscally restored within a generation.

But now, notwithstanding more than 200 years of fiscal responsibility, resolutely pursued by both parties in the aftermath of crisis, the Democrats use Covid, and the barest contrivance of a majority, to drive this country irretrievably off the cliff.

And for what?  $3.5 trillion in past Covid spending, a proven vaccine in hand, herd immunity around the corner, economists calling for up to a 10% increase in GDP, with savings at record highs, unemployment already at 6% and true growth in GDP, from pre-Covid levels, realizable by the third quarter of this year, or sooner.

The late Senator Moynihan spoke of defining deviancy downward.  If Covid is a present crisis of comparable dimension, crisis has been defined downward to insensibility.

The scope and depth of the appalling damage being done to this nation cannot properly be understood without slowing the story down.  We must collectively feel the grit and determination that hitherto has saved us all.

The Nation’s Founding and Young Years

The nation’s first and everlasting financial hero is undoubtedly Alexander Hamilton.  In September 1789, Washington gave Hamilton 110 days to keep the U.S. afloat.  Exiting the war, the U.S. owed $80 million set against federal income from tariffs and excise taxes of $4.4 million.

Hamilton’s response was in three parts.  First, he insisted that all debts be repaid in full, including assumption of state debts, even if meant rewarding speculators. Second, he created a national bank, over the heated object of Thomas Jefferson and many Southerners. Finally, he insisted on a specific plan to repay the debt, including western land sales and a new, highly unpopular liquor tax.

Hamilton set the country’s DNA. Spend only as much as raised, and once the crisis is surmounted, force the resolve and resources to repay borrowed money in the next generation.  Absent Hamilton’s fortitude, the U.S. would have lacked the creditworthiness to borrow loans in Europe to pay for the Louisiana Purchase, without which the U.S. would never have become the nation we know today.  Even more impressively, from 1789 to 1860, the U.S. built out a continent, fought two major wars and created the infrastructure for the nation’s growth, all the while without incurring a single dollar of incremental public debt.

The Civil War

The greatest test relative to the country’s resources was undoubtedly the Civil War.  Federal spending to fund the war jumped five-fold, resulting in a national debt in 1865 of $2.7 billion from a mere $65 million in 1860.

The national response was bipartisan and uninterrupted.  For 30 years, expenses were held below revenue, even with the generational burden of pension obligations to Civil War veterans and rebuilding a devastated nation.  The result was continuous surpluses that went directly to debt repayment.

By 1893, the national debt was under $1 billion, on far higher GDP, in the process dropping annual interest cost to $23 million from an unaffordable $146 million (versus $270 million in then total spending).  It is worth noting that President Grant accomplished this work by abolishing income and estate taxes.  Americans paid for the Civil War largely based on alcohol and tobacco taxes, working hand in hand with continuous, bipartisan restraint in spending by the federal government.

World War I, The Depression, and World War II

In the thirty-year dire hardship path from World War I to victory in World War II, the U.S. debt reached $242 billion, or approximately $2.9 trillion in current dollars, peaking at 110% of GDP.  Returning GIs, an ascendent U.S. without economic rival, the baby boom and re-conversion of a wartime economy produced steady growth in the 1950s.  Spending on the Korean War aside, it took President Kennedy’s justly praised tax cuts -- a 30% cut in personal tax rate and a drop in corporate rates -- to rev the U.S. economy into sustained growth in excess of 3% annually.

His words are worth hearing anew, when they truly represented the boldness of the Democratic party:

“The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed under our present tax system…In short, to increase demand and lift the economy, the federal government’s most useful role is not rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures.” [emphasis added]

Here then was the program that reduced the national debt below 50% in the 1950s and ultimately to 25% of GDP by 1970.  Restrain spending, all the while focusing the government on its proper role of lifting the economy through incentives and opportunities for private enterprise.  What a vision, a bipartisan, sound vision.

It is also the proper measure of how mightily the Democrat party has fallen in its present insane, insatiable, unfunded and unending program to increase spending.  To which they add regulatory burden, ruinous renewable energy mandates, “equity,” open borders, sky high income taxes, wealth taxes, and authoritarian controls.  All this, with risible self-congratulations, just as we should be entering a generational commitment to turn down the debt levels in relation to GDP, a debt that is far greater when including unfunded obligations for Social Security, Medicare and Medicaid.

The measure of the hypocrisy can be seen in the one Democrat who by instinct and life experience is closest to President Kennedy’s vision for America.  Born in the small mining town of Farmington, West Virginia, Senator Joe Manchin watched his grandfather and father make a living in dry goods, but found his path instead in politics, winning state office at 35, ascending to the Governor’s office for two highly popular terms, and then to the U.S. Senate.

Here is his heartfelt inaugural address as Governor. “I have hope for a West Virginia that is fiscally responsible and never forgets that taxpayer money doesn’t grow on trees.”  On this point he is adamant and specific, “I will personally take responsibility for developing a plan to pay off, once and for all, the long-term debts that we owe.”  “We cannot afford to wait even one more minute.”

“We must be successful and make no mistake, we will be successful and then our children and grandchildren will be proud to follow in our footsteps in building a better West Virginia.”

What was true for West Virginia then is true for the United States now.

The Democrats’ spending program is a grievous assault on this nation’s future, more serious and ultimately more dangerous than any crisis we have faced in the past.  Wars can be won.  Unfunded spending on this scale is surrender.

It must be stopped.