Trump's First Budget Proposal

In April 2016, then candidate Trump told the Washington Post that he would promise to completely eliminate the U.S.' national debt over 8 years. (This of course assumed his re-election to a 2nd term.) His first budget proposal includes a 9% boost in defense spending, and deep cuts elsewhere.

Trump is proposing a 31% cut to the Environmental Protection Agency, a 28% cut to the State Department, & deep cuts in foreign aid, medical & scientific research, as well as anti-poverty programs that do things like provide free meals to children and the elderly. Trump would entirely eliminate federal funding for National Public Radio (NPR), the Corporate for Public Broadcasting, and the National Endowment for the Arts.

Trump's philosophy seems to be to shift the funding of many social programs to the private sector - let the philanthropists pay for it. I'm actually okay with that because I see that our current national debt of over $19 trillion is equal to more than $166,000 for every man, woman and child in America.  And it is still growing.  We have to make deep, painful spending cuts somewhere. The problem is that that's not really what Trump is proposing.

Overall federal spending under Trump's proposed budget still comes in around $4 trillion - about the same as in President Obama's last budget plan.  Moreover, the deficit (the amount by which spending exceeds tax revenue) would be about $559 billion under Trump - nearly the same as it was under Obama.  And the Trump budget doesn't do anything to curb the growing spending - or raise revenue to pay for the growing spending for Medicare, Social Security, and other entitlement programs that so many Americans rely on.

Trump's April 2016 pledge doesn't seem to be reflected in his budget proposal.  Don't you think it should be?  

I realize that Trump is already in for a fight.  He believes we're not secure, and by making these deep cuts he's freeing up existing spending for things like the defense departments and construction of a border wall between us and Mexico.  Already the liberals are crying foul, and the lobbyists are preparing to launch their attacks to persuade Congress not to let Trump have his way.  Based on their past behavior, I have no confidence that our Congress has the courage to make deep spending cuts anywhere.  My guess is they will either not let Trump have his defense increases - or they will just borrow more money to pay for it. 

It's even more frightening to consider the prospects of our national debt, when the Republicans are promising tax cuts.  In the face of our national debt and deficit spending plans, they think American corporations and individuals should pay less taxes.  I know there is a much-beloved theory that if we make tax cuts they will stimulate the economy and more taxes will actually get paid.  I haven't actually seen that work.  Ever.  Not in my lifetime anyway. 

While I'm not an expert on world history, I am a student of it.  And so far I'm not aware of any country that has been able to make that work either.  In all the history of the world, it seems that governments must tax their people in order to pay for what they do.  No one has ever been able to cut those taxes and actually pay for government spending.  Not in the history of the world.  And many governments have actually collapsed under the weight of their own spending (and inability to raise the tax revenue.)

Its not inconceivable to me that the U.S.' national debt could top $40 trillion or more before Trump's maximum term of eight years in office.  I remember when Obama took office.  Our national debt was already in the stratosphere.  It was breathtaking.  I could not imagine how our country could go on borrowing.  I honestly feared our whole economy could collapse if the national debt got any worse.  But Obama, and our Congress, had a different vision.  We continued our wars, our liberal social programs, and even implemented a costly health care plan.  The government spending and borrowing continued unabated for eight more years - and the national debt more than doubled. 

Here's the thing I know.  It is expensive to be America.  We have made ourselves the world's police force - moving literally on every continent to fight for freedom and democracy.  We have made ourselves the world's benefactors - shipping humanitarian aid to every continent when there is need.  We have made ourselves the freedom fighters, propping up regimes that we view as righteous, providing foreign aid to the tune of billions to countries like Israel or Egypt.  And of course, we are not willing to say no to our own people.  So we allow the people to vote themselves all sorts of benefits - by sending representatives to Washington who will work to give them what they want.  (Politicians often point to their record of "winning" federal money & program support for their own geographic constituents.)  All of this is expensive. 

Like I said, it is expensive to be America.  And so I wonder how we can move forward if we don't both make deep spending cuts AND commitments to pay more taxes.  When will American individuals and corporations decide that it is worth it to pay our own way?  When will we be willing to make the hard financial choices in order to reverse this collision course with reality?

What are YOUR thoughts about this?

America the Expensive

There is an ugly truth here. It's a bit like the proverbial elephant in the room. That is to say it's there, it's true, everyone knows it (or should) --- but nobody is ready to talk about it. Are they afraid to talk about it? Or do they just not know how to talk about it?

New York Times' editorial writer Eduardo Porter recently published a book that he titled, "The Price of Everything: Solving the Mystery of Why We Pay What We Do." I haven't (yet) read the book. But when I first heard about it, I thought the title was very catchy. The Price of Everything. Isn't that just the question that needs to be answered?

I don't know why we pay what we do for different things. But I'm sure that Mr. Porter will be able to enlighten when I read his book. I'm just not sure that he's answering the most important question. I mean, is it more important that we know why the price of everything is ... or what the price of everything is?

As you and the rest of the world are painfully aware, the United States is struggling with federal budget deficits and a national debt that is staggering. A fascinating web site that I visit from time to time is http://www.usdebtclock.org/. It provides a running account of the debts and unfunded liabilities of the federal and state governments of the United States.

Our politicians are only just now starting to intensify the dialogue in Washington, DC about what to do. It remains to be seen whether they'll really get serious about increasing taxes, reducing spending and putting the U.S. federal government on firm financial footing again. At the state level, the various state governments are reacting in different ways. Some are slashing spending. Some are raising taxes. Most are - like the federal government - just wringing their hands without actually taking any tangible action to address the issue.

And exactly what is the issue? Quite simply it is that living in these United States is an expensive proposition. The freedoms that we celebrate? They're expensive. The security that we appreciate? It's expensive. The global leadership role? Expensive. Those civil rights? Expensive. That rich heritage? Expensive.

Do you see the correlation here? America might truly be the greatest country on earth. It may be the largest super power that the world has ever known. But it is also the most expensive country the world has ever known. Operating the U.S. government and the governments of the individual states is expensive. How expensive is it?

The math here isn't complex. We simply look at how much the government spends doing all of the things it does --- and that gives us the price of everything. In the current fiscal year, that will cost about $3.5 trillion dollars. However, the total revenue of the federal government (from taxes, fees, etc.) is only about $2.3 trillion dollars. This leaves us with a federal budget deficit of about $1.2 trillion dollars.

So think about it this way. America the beautiful is about $1.2 trillion more expensive than we thought it would be this year. So if our politicians threw away the tax code and just sent everyone a bill for their fair share of the cost to be America, each of us (every man, woman and child) would get an invoice for about $4,500 this year ... on top of the taxes that we have already paid! So nobody gets a tax refund. Everyone gets an additional tax bill of $4,500. And it's due immediately. This is how you should think about this.

The story is worse though. Because the government didn't do a "true up" and send us each an additional tax bill last year or the year before, or the year before and so on, the cumulative deficit (i.e., national debt) now adds up to more than $14.2 trillion dollars. So if our politicians threw away the tax doe and just sent everyone a bill for their fair share of the cost to be America, each of us (every man, woman and child) would get an invoice for about $47,300 this year ... on top of the taxes that we have already paid! So nobody gets a refund. Everyone gets an additional tax bill of $47,300. And it's due immediately. This is how you should think about this.

We've had presidents promise, "No new taxes!" And we've had politicians and so-called experts calling for spending reductions. But the oddest thing is that no one has just said, "Look America. Being America is an expensive proposition. What with aging baby boomers going onto Social Security, the war against terrorism, the wars in Iraq and Afghanistan, the aging infrastructure, the program commitments that we've made to everything from national parks to the arts to single mothers to the unemployed to airline security ... it's all gotten terribly expensive. None of us knew it would be this expensive to be America, the land of the free and the home of the brave. But it is. And we have got to all knuckle under and pay for it."

Why isn't anyone having this conversation? Isn't that what sane, rational people would do? I imagine if my wife kept spending and spending and I was borrowing to pay the bills and digging ever deeper into debt --- then we'd have that conversation. I'd say something like, "Look honey, as much as I love and admire you and all that you're doing, the truth is that we cannot afford to live like we do. We can't afford to be as generous as we are. So we have two options. And the good news is, we can do both of them. But we at least have to do one of them. First, we can make more money to fund this expensive lifestyle. Second, we can stop living such an expensive life. So what will it be?"

Let's face it, this is the conversation that Americans need to be having right now. And we need to have it with both our federal and state government leaders. The likely answer is that we need to increase taxes and reduce spending. But not doing either is not an option. We are on an unsustainable road here. It is the proverbial elephant in the room. Are you ready to talk about it?