When I was growing up, if someone was missing, you might see their picture on the back of a carton of milk. Well, perhaps I need to visit my local dairy farm because I am desperately searching for someone very important: a fiscal conservative.
Recently, the U.S. Treasury announced that the federal budget deficit for fiscal year 2019 was just shy of $1 trillion. Despite a booming economy and just more than 4 percent growth in “revenue” (i.e., taxes collected), continued increases in government spending, including on interest, put our budget gap back into a territory not seen since earlier this decade.
This is not projected to change any time soon, as the deficit for the first two months of fiscal year 2020, which started on Oct. 1, 2019, ran at $343 billion and the recently signed federal spending bills are showing no sign of fiscal restraint.
While the population of the U.S. has grown around 15 percent since 2001, government spending has increased a whopping 137 percent. And with more than $23 trillion already accumulated in national debt, every dollar of the deficit adds to our total debt outstanding (as debt financing is pretty much the only tool we use to finance that overspending).
So, where are the fiscal conservatives, who criticized previous administrations for their reckless spending and vowed to help get the swamp drained? More importantly, what are they doing to help tackle this mess?
The time to cut spending is exactly when the economy is robust -- like it is now. In good financial times, the economy has enough slack to be able to absorb government spending cuts. During recessions, austerity is much more difficult, in terms of both outcomes and political approval. And, while interest rates are low, we could be using those favorable financial terms to refinance older, more expensive debt instead.
The time to cut spending is exactly when the economy is robust -- like it is now. In good financial times, the economy has enough slack to be able to absorb government spending cuts.
As anyone with their own debt knows, interest expense alone creates a financial situation that isn’t healthy. Every dollar we pay in interest makes the real cost of previous expenditures higher, while taking dollars away from future investments. It’s a fiscal trap—one that I wouldn’t recommend for any individual and one that I certainly don’t expect us to be living under at this level as a nation.
In fact, we are on a trajectory to have the amount of money we spend paying for past purchases exceed the amount we are spending on our national defense within a few years.
It used to be that some conservatives and centrists would at least feign concern at the state of our finances. You’d at least have a theatrical fight over why it was damaging to raise the debt ceiling. Now, it seems like the platform of fiscal responsibility has been long forgotten and too many of the fiscal conservative voices have gone silent or missing.
While the White House has had some good policies that have directly and indirectly influenced the strength in the economy, when it comes to spending, it is time to say, “enough!”
If President Trump, the GOP or anyone in or near Washington, D.C., wants to make a mark and leave a legacy, seriously and legitimately addressing overspending is the way to do it.
We are at a tipping point where our debt is going to become out of control and once it does, we will all suffer the consequences.
Carol Roth is the creator of the Future File legacy planning system, a “recovering” investment banker, host of "The Roth Effect" podcast and the New York Times bestselling author of "The Entrepreneur Equation." Click to read more.