AUSTERITY CAUSED BY TAX CUTS

Why all these proposed Republican spending cuts barely make a dent in the national debt

David Lightman
Mon, October 9, 2023 

Robert Mittendorf/The Bellingham Herald


The relentless conservative drive to dramatically cut federal spending — a campaign that nearly caused a government shutdown and helped topple House Speaker Kevin McCarthy — wouldn’t do much to significantly reduce the national debt anytime soon.

The push for drastic reductions in federal spending is expected to come up again once House Republicans pick a new speaker. They plan to start considering their choice this week, with no firm timetable for a final decision..

Whoever takes the gavel is expected to keep pushing for deep cuts. The Democratic-run Senate is unlikely to go along but the GOP effort matters as a message to constituents about what Republicans are seeking. That becomes particularly important if the party wins the presidency, retains a House majority and captures control of the Senate next year.

The GOP initiative is also a reminder of why Congress is so stuck on adopting a budget. When McCarthy, R-Bakersfield, agreed last month to a bipartisan plan to continue current spending for 45 days, angry conservatives plotted his successful removal.

The GOP budget plans range from sweeping to symbolic. For instance, aid that 702,000 Californians receive to buy healthy produce (through the Women’s, Infant and Children’s program WIC) would be dramatically cut. So would the federal tax credit for electric vehicle charge equipment.

On the more performative side, Republicans want to chop Defense Secretary Lloyd Austin’s $221,000 annual salary to $1.

While such reductions collectively would save billions, nonpartisan budget analysts maintain that the cuts barely address the broader question of how to significantly reduce the nation’s $33 trillion debt.

“They’re playing in much too small a sandbox’’ said former Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat known for working with Republicans on fiscal matters.

The domestic spending cuts, he said, “aren’t where the problem is.”

Republican budget-cutters counter that their changes are a vital first step toward making the federal government more efficient and starting on a useful path to reducing the debt.

“Stop bleeding money, stop racking up debt, defend the United States, stop social engineering, and just do your damn job as Congress. I think that ought to be a pretty simple goal and a bipartisan goal,” said Rep. Chip Roy, R-Texas.
Struggling with debt

The federal budget had annual surpluses from fiscal 1998 to 2001, as a booming economy, a 1995 budget deal and a 1993 tax increase helped revenue pour into the Treasury. .

Since then, there have been nothing but annual deficits—$1.35 trillion in fiscal 2022—and the national debt has grown to $33 trillion. The deficit began climbing as Washington responded to the Sept. 11, 2001 terrorist attacks, pumping an estimated $2 trillion into wars in Iraq and Afghanistan. It spent to combat the Great Recession in 2009, delivered big tax cuts in 2017 and passed huge COVID aid packages in 2020 to 2022.

In fiscal 2022, the 12-month period that ended last September, the federal government spent $6.2 trillion. About two-thirds is called “mandatory spending,” meaning Congress does not have to vote on it. This includes Social Security benefits and Medicare payments.

That leaves only about one-third that Congress can really control annually. Roughly half is defense and the other half is domestic programs like education, transportation, energy and others

Most independent budget analysts agree that meaningful debt reduction has to involve costly entitlement spending. Social Security is estimated to be 11 years from insolvency. Medicare also faces financial problems in a few years.

Those programs’ benefits are automatically funded and adjusted annually for inflation. Social Security benefits this year are up 8.7%, and next year are expected to climb about 3%.

The House’s GOP-run budget committee released a budget blueprint this summer that, while it proposes deep spending cuts, would not change Social Security. It does propose billions in Medicare savings through reforms.

“Our budget protects and strengthens Medicare through policies that drive down out-of-pocket costs for seniors, stop overpayments, and enhance our health care workforce,” the budget says.

It also urges the creation of a bipartisan commission to tackle the programs’ future. The commission would devise ways to get the programs on a sustainable financial path and help modernize the systems.

This sort of commission was arguably successful in the 1980s, when Social Security faced financial uncertainty. It proposed what at the time were politically shaky reforms, including tax increases to fund the program and an increase in the age of eligibility.

Cuts and more cuts

At the moment, the political focus is on spending cuts and taking incremental steps that are unlikely to get final approval. Once the House gets down to business again, those cuts will be the main topic of debate for some time.

The House Budget Committee said in its blueprint that its plan can deliver a surplus by fiscal 2033. In addition to cuts, it assumes 3% economic growth per year, above what the nonpartisan Congressional Budget Office forecasts. More growth usually means more revenue and less spending.

The budget also reverses some of the plans Democrats recently approved. Outlays for green energy and technology “should have been targeted towards traditional roads and bridges, not wasteful initiatives,” the committee said, listing several programs it found excessive.

Among them: $7.5 billion for electric vehicle charging stations, $5 billion for electric and low emissions buses and ferries and $10 million for career skills training to install energy efficient building technologies.

When the budget has come up on the House floor, Republicans were eager to offer a wide range of cuts.

Rep. Marjorie Taylor Greene, R-Georgia, proposed the reduction in Pentagon Secretary Austin’s salary, arguing “he is destroying our military.” She cited the chaotic American withdrawal from Afghanistan, saying Austin “failed America.”

Rep. Betty McCollum, D-Minnesota, lauded Austin for his long military career. But the $1 plan passed by a voice vote.

The spending cut spree continued for days as the Sept. 30 shutdown deadline neared.

“To get the (Defense) department focused on its warfighting mission and away from culture wars, the bill includes a number of new general provisions to send a clear message to the department,” said Rep. Ken Calvert, R-Corona, chairman of the Senate defense appropriations subcommittee.

Some analysts warn that such cuts have the potential to harm the people who need help the most. Cutting Women, Infants and Children program funds to buy healthy produce would leave recipients with roughly $11 to $15 monthly to spend, the left-learning Center on Budget and Policy Priorities estimates.

It said the cuts would affect an estimated 702,000 toddlers, preschoolers and pregnant, postpartum, and breastfeeding California participants in the program.

Republicans have argued that strengthening work requirements in assistance programs will help motivate people to work, reducing the programs’ cost and helping the economy as people pay more taxes and increase their spending.

But it wouldn’t do much to get the country on a smooth, sustainable path to a balanced budget, Democrats countered. And such proposals are likely doomed in the Senate.

“Why are we going through this exercise again when we know it is going to end the same way?” asked House Democratic Leader Hakeem Jeffries of New York.

McCarthy backed continuing current spending levels for 45 days. With Democratic help, it passed, and four days later conservative Republicans led his ouster as speaker.

Legislation with all the cuts is likely to be back in the House soon.