Inaccurately Describing the Awfulness of the Trump Budget Bill Worsens Debt Panic, Hurting Everyone
To be clear, the bill that congressional Republicans dutifully passed and that Donald Trump signed on the country's nominal birthday last Friday was bad. Very bad. It seems safe to say that dooming tens of millions of people to needlessly early and painful deaths is bad. In fact, I would venture to say that it is not good, because it is a massive upward redistribution of wealth, with health care and food assistance being taken away from the non-rich in order to partially fund a massive tax cut for the richest Americans and large corporations. Yes, it is literally taking medicine away from sick people and food away from babies to make billionaires richer. (And I do mean literally, not in the silly "my head literally exploded" non-sense but in the "this is in fact what will happen" sense.)
So again: both bad and not good. The problem is that there is a sloppy and misleading way to describe what is bad about that bill, and unsurprisingly, it involves focusing on how the new law will affect federal borrowing. Deficits! Debt!! We're all doomed!!!! Such bills always show up with financial estimates attached, and it then becomes all too easy for people to refer mindlessly to a bill by its supposed cost. In this case, there has been much discussion of how the horrible bill will increase the debt over the 10-year budgeting window by $3.3 trillion, leading to endless repetition of that particular number. "The bill has 3.3 trillion dollars in deficits; can you believe it?!" (Note that we are long past the point where I expect anyone to be careful about using the words debt and deficit as if they are not synonyms.)
As an aside, I should note that Republicans also decided to dumb down the discussion even more by adopting a budgetary method that is jaw-droppingly dishonest -- even by the diminished standards of US political discourse, which is saying quite a lot. By using their new accounting lie, the Republicans claimed that they have enacted a bill with a $6 trillion surplus rather than one that will force debt to go up by $3.3 trillion. A frequent reader of Dorf on Law asked me in an email to comment on that baseline-redrawing exercise, and I responded as follows:
My first thought re the accounting gimmick was something like this: “Yeah, but this is so stupid that it wouldn’t even fill a single DoL column.” But then I remembered that I had that precise reaction in late 2010 when you told me that your conservative friends were getting worked up about this obscure thing called the debt ceiling!So assuming that by 2040 it’s still legal to write critical commentary, an octogenarian in Dublin will be gratefully but angrily acknowledging your role in turning me into the world’s top expert on budgetary baselines. Curses upon you.
That might yet happen, but I am currently choosing to resist. Rather than criticizing that aspect of the Republicans' dishonesty, I will instead focus today's column on the damage that non-Republicans cause by screaming about borrowing. A bill that is terrible in so many ways will, it turns out, increase annual deficits and thus result in the accumulation of more national debt in a decade than would otherwise have been needed. Making that the moral of the story will, however, ultimately hurt the people we are trying to help. The harms from this new law are only incidentally about borrowing. The important story is Republicans' continued inhumanity toward the people who simply do not matter to them.
Earlier this week, I attended a tax policy conference at the University of Cambridge, where even the more liberal-leaning professors in attendance were having a grand time criticizing American conservatives for being budget-busters. This opportunity arises relatively frequently, and both Professor Dorf and I have taken multiple at-bats over the decades trying to convince people not to feed the anti-government beast by saying, "See, Republicans are the real debt fiends!" At one of the sessions in Cambridge, I tried to make that point by saying something like this (as I remember it, which means that if I am not remembering accurately, I am merely misquoting myself):
Think about it this way. Suppose that rather than taking away health care from an estimated 13 million people, Republicans had figured out a way to take it away from, say, 50 million people, as a result of which the bill would not result in borrowing an additional $3.3 trillion over ten years. Is that good?
Or what if Musk had in fact been able to cut the $2 trillion in government spending that he promised he could save every year. Even though his failure proved that there was no "waste, fraud, and abuse" beyond rounding error, Republicans could have laid off even more federal workers and cut off even more benefits to retirees and others. Is that good?
I had already taken too much time in the Q&A, so I stopped there. Had there been more time, I would have added that the possibility of this latest "budget-busting" bill leading to a full-on debt crisis for the US (and therefore the world) can only materialize if there is a tipping point for federal debt as a percentage of GDP beyond which all hell breaks loose. It truly is all about the debt-to-GDP ratio. The problem is that the alternative versions (noted above) of doing the terrible things that Republicans want to do would not involve increasing the numerator (debt) but would involve shrinking the denominator (GDP) -- that is, massive fiscal austerity would cause a massive contraction of the economy. Even doing the supposedly responsible thing can, therefore, result in a massive increase in the debt-to-GDP ratio.When people talk about a debt crisis, they're saying that people will be hurt because the economy will be tanking. But you can hurt people without creating a debt crisis, so we should focus on the harm to non-rich people from this new law, not the increase in borrowing.
How massive? In a column earlier this year, I used conservative estimates that suggested that GDP could shrink by about $4 trillion (more than 13 percent of current GDP, that is, Great Depression-level outcomes), and that was only looking at the simple mechanics of how government spending feeds through to GDP. Adding in the economic impact of millions of sicker (and often deader) workers would increase the economic losses enormously -- which, again, is definitely not the most important harm on which we should be focusing our attention right now.
So all of this is just lovely. Great. Fantastic. Super-cool. Or, as they sometimes say in Ireland: "Happy days."
Speaking of Musk, even though he will never be able to create a viable conservative alt-party to challenge Trump's Republicans, that he is even talking about breaking with his party as a reaction to the budget bill is telling. Like the supposedly principled holdouts among the hard-line Republican fiscal hawks (almost all of whom fell in line for Trump, which we knew all along would happen), his complaint is that the bill did not cut government spending by enough. And it is not as if the Republican majorities in both houses of Congress will not have many more opportunities to cut more programs and cause more pain.
What will the non-conservatives who are currently echoing the debt panic industrial complex's talking points say at that point? "Yes, I said that adding $3.3 trillion to the debt was a bad idea, and you're now talking about cutting spending in a way that is supposed to reduce future debt, but I'm against that because ... er ... because ... oof ... what is it? Oh, because what matters is what's being cut!!" Exactly. But that is true now, just as it will be true then. The people who are focusing on the borrowing numbers today are reinforcing the narrative that it is all about panicking people with scary debt numbers, not about the real-world impact on human beings.
To be clear, even the large-sounding numbers that are being tossed around in the US's debased conversation are not necessarily large enough to create the much-touted debt crisis that Republicans have long predicted when a Democrat is in the White House and that non-Republicans are now predicting with similarly uninformed certitude.
As I wrote in a Dorf on Law column last month, no one -- certainly not the biggest deficit scolds -- has any idea of how much is too much, but they never tire of saying that we are just about to reach the tipping point. Why? Their answer, in essence, is: "Because we haven't hit it yet, and I know it's out there, so I'm going to tell everyone that we're only inches away from falling into the abyss."
Tomorrow, I will continue my critique of this cottage industry of prognosticators, some of whom claim to have "rules" that will tell us when the end is nigh. (Again, it is always well nigh, by their telling.) In a world where the leading superpower is busily building concentration camps, this is clearly not the most shocking news to discuss, but destroying the economy would be bad for everyone. It is surely worth taking another look at the charlatans and cranks who pretend to know when and why we are all doomed.
- Neil H. Buchanan