Democratic U.S. Sen. Joe Manchin of West Virginia may have understated the case when he rightly described a pending $3.5 trillion spending bill as “fiscal insanity.” Worse than insanity, it’s a fiscal obscenity.
Sometimes numbers get so big that most people see a big blur and lose any real sense of what they mean. And no, this isn’t just one of those explanations that if a dollar were a mile, it would take more than 14 million trips around the Earth’s equator to reach 3.5 trillion (although that is true). Instead, this is a simple lesson of comparative history and budgetary reality.
First, let’s understand that even the 10-year, $3.5 trillion price tag (for what I’ll henceforth call the “Big Bill” to distinguish it from other legislation) comes from all sorts of highly dishonest budgetary gimmicks that hide the bill’s true cost of nearly $5.5 trillion. Yet for the sake of argument, let’s accept the official number at face value.
This is new spending, over and above the existing federal budget, which even before the coronavirus had risen by astronomical amounts — more than twice the rate of inflation for two solid decades — under presidents Bush, Obama, and Trump. On top of that outrageous government largesse, Congress in just 14 months approved $5.7 trillion, more than the entire annual, pre-COVID federal budget, for an orgy of everything it could possibly pretend was for “COVID relief.” Then there is the pending $1 trillion “infrastructure” package, of which some $550 billion is new spending and which itself uses more gimmicks to hide even higher costs.
Even at the dishonestly low official numbers, the infrastructure package and the Big Bill together would add more than $450 billion per year to the existing bloat-atop-bloat described above. That $450 billion would have covered all federal domestic discretionary spending (not counting “international affairs”) in 2008, former President George W. Bush’s final year in office. But again, this is new money — on top of that Bush baseline, on top of the huge increases since Bush, and on top of the COVID relief.
If your mind isn’t getting dizzy yet, you’re a mathematical genius.
Still, it gets worse. Even without these two new massive spendathons, total federal debt (including intragovernmental debt) already stands 25% above the size of the annual economy. This is the worst debt-to-GDP ratio in U.S. history, even larger than the temporary spike caused by World War II. It comes not when the United States is experiencing a depression that might slow tax receipts while increasing federal aid to people out of work but instead with unemployment at levels below the U.S. norm and tax receipts at historic highs.
In other words, there isn’t much room left for the U.S. economy to “grow” its way out of current debt. Adding $3.5 trillion of spending and $1 trillion for infrastructure while slowing the economy with trillions of dollars of new taxes invites disaster.
Consider that Greece fell into a horrific financial crisis in 2009, when its debt hit 115% of its annual economy — less than the 125% the U.S. faces now. In 2010, Portugal experienced a similar upheaval when it barely exceeded 100% of GDP.
The dollar remains the world’s “reserve currency,” so the U.S. is afforded more leeway. Still, a nasty tipping point looms. If a single creditor holding just, say, 3% of our debt, such as China, starts demanding rapid repayment, a major panic could ensue. Remember that the U.S. financial “crisis” of 2008-2009 began with the collapse of investment firm Bear Stearns, which held only $18 billion in total capital compared to China’s full $1 trillion of U.S. government debt.
We’re playing with fire — not just in the familiar sense of saddling our children with unsustainable debt but by risking an imminent panic leading not just to financial crisis, but full collapse.
And these are just the awful numbers. The policy choices in the Big Bill are even worse, but that’s for another day.
Insanity cannot help itself. To deal in obscenity, though, is a deliberate act. If Congress passes the Big Bill, it will have committed, by far, U.S. history’s grossest fiscal obscenity.
