Welcome to the woeful world of free-lunch economics

Welcome to the woeful world of free-lunch economics
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Congress and the president have been on quite the borrowing binge over the past few months — from multiple rounds of tax cuts to smashing through the budget caps. Meanwhile, talk of paying for these budget-busting policies has just about disappeared.

Instead of the sensible conversation that starts with: "If something is worth doing it is worth paying for,” we have been hearing from our leaders: “Don’t worry, this will pay for itself,” and, “This is too important to have to pay for."

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Welcome to the world of free-lunch economics. 

 

Just this week, we learned that budget deficits are now projected to be $12.4 trillion over the next 10 years — an increase of $2.3 trillion since 10 months ago. 

The milestones of trillion-dollar deficits about to return and become permanent, the debt reaching the size of the economy in just over a decade, and annual interest payments increasing by $600 billion over the decade are signs this new school of economics is not putting us on a smart path.

In just a little over a decade, our debt could be the highest it has even been compared to the overall economy. The current record was set just after World War II. The difference here, though is there is no world war. No recession. No depression. Unemployment is low. Growth is strong.

There is no need for stimulus and no rationale to rack up such a huge tab during stable times and already historic levels of debt. 

Instead, at this point in the business cycle, we should be running surpluses (remember that quaint concept?) to be prepared for the next emergency. But there is zero talk of changing course. 

Sure, there is the empty idea of voting on a balanced budget amendment. If people were serious, this would be a reasonable idea for discussion. Many details would need to be worked out, like escape hatches for recessions and emergencies, and balancing restraints on spending and revenue.

Our fiscal hole is now so large that balance is a long, long way off, and it is better to focus on more credible goals. But come on, in this context, the balanced budget amendment is a total joke.

And no one should get away with supporting the balanced budget amendment idea without also putting out their actual plan that would balance the budget. Process can help, but this all comes down to actual policy choices.

Voting to require balancing the budget without putting out a budget that does indeed balance is still looking for that free lunch.

Next week is the deadline for Congress to have completed its budget, and one hasn’t even been proposed. Given the terrible numbers, it should include reconciliation plans to generate significant savings (as opposed to last year’s budget, which made the deficit much worse). 

Our debt is projected to increase by almost 20 percentage points over the next 10 years. Spending on health, retirement and interest alone will double in dollars, and entitlement reform is long overdue.

During the next 13 years, our nation’s major trust funds for highways, Medicare hospital insurance and Social Security will run out of full funding. If Congress had addressed this problem 10 years ago, revenue and benefit changes would have been much smaller. 

Even today, changes can be phased in. But if we wait a few more years, the choices are much more difficult. Instead, this fiscal situation has been made dramatically worse by the large, irresponsible, unpaid-for tax cuts.

Now it appears that instead of passing a budget to fix this mess, Congress may well not pass a budget at all. Turns out, looking for a free lunch tends to go hand-in-hand with abdicating responsibility. 

Frankly, Congress should not even be allowed to turn to other business until that most basic task of passing the budget is met.

Free-lunch economics appears poised to do major damage to our economy, slowing growth, increasing the chances of some type of crisis and starving the nation of the resources and flexibility to meet new challenges — from the threat of recession to grappling with artificial intelligence and the future of work.

Our short-sighted, politically-motivated approach will harm our kids and weaken our country.

Policymakers have dug themselves into quite the hole. Our historic and unsustainable debt cannot be fixed with more tweaks and gimmicks.

It will take a big deal including new discretionary spending caps, a real plan to fix our entitlement programs and changes to bring in more revenues. Fairy dust, wishful thinking and free-lunch economics won’t get us there.

Maya MacGuineas is the president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt.