It’s worrisome enough that President Trump has allowed deficits to creep back up to $1 trillion in 2019, according to the White House’s own estimates. But what’s remarkable is that they’ve gotten so high during a booming economy, when deficits typically narrow. Despite this fact, both parties are as far as ever from caring about the mounting federal debt.
Throughout its history, the United States has had periods of extraordinarily high deficits during wars or economic downturns. When the economy is doing poorly, “automatic stabilizers” kick in and spending goes up for safety net programs such as unemployment insurance and food stamps. Lawmakers tend to act to stimulate the economy through tax cuts and/or more spending. Meanwhile, tax revenue tends to fall because fewer people are working and incomes are growing more slowly for those who still have jobs.
This is what happened the last time deficits breached $1 trillion from 2009 to 2012, during Barack Obama’s first term in office. What Obama did was to pump up spending at a time when the economy was in deep recession and revenues were low. The economic downturn also coincided with the first wave of baby boomer retirements, and Obama refused to do anything serious to confront this long-term problem.
So, what’s unique about the current period in U.S. history is that we’ve gotten past the economic downturn and now have a strong economy, and yet we’re still adding to the federal debt. In 2007, the year before the financial meltdown, public debt was 35.2% of gross domestic product. By the end of Obama’s first term, in 2012, it had doubled to 70.3%. In 2018, it was 77.8%. Absent action, according to Congressional Budget Office projections, the debt will blow past the World War II peak in the coming decades, and double again, reaching 144% by 2049.
As a private citizen, Trump mocked Obama for doubling the debt. As a candidate, Trump vowed to eliminate the debt within eight years. As a president, Trump has allowed deficits to balloon and Republicans don’t care.
Trump has pursued the policy of increasing military spending and cutting taxes, while refusing to do anything to address the nation’s exploding entitlements of Social Security and Medicare. The man who supposedly tells it like it is, is afraid to upset older voters who make up a key part of his constituency.
Republicans spoke in stark terms about the looming debt crisis when Obama was in power. Yet the second Trump was inaugurated, they suddenly decided it was nothing to worry about.
Democrats, meanwhile, have decided that they are not going to let the federal debt stand in the way of proposing extravagant new policies — free healthcare, free college, free child care, student loan cancellation, guaranteed jobs, universal income — which would add tens of trillions in new spending to the already unsustainable burden.
If we’re staring at $1 trillion deficits with unemployment at 3.7% and interest rates still at historically low levels, saddle up. Because as the economy inevitably falters and rates interest payments inevitably increase, the future is going to get much worse.
