Adam SmithDavid (Adam) Adam SmithJudd Gregg: The big, big and bigger problem ‘Marketplace of ideas’ turns 100 — it’s not what it used to be Overnight Defense: Pentagon says Syrian oil revenue going to Kurdish forces | GOP chair accuses Dems of using Space Force as leverage in wall fight | Dems drop plans to seek Bolton testimony MORE — the fountainhead of the ideas that defined a market economy and one of the intellectual inspirations for our Founding Fathers — said of governments:
“Great nations are never impoverished by private, though they sometimes are by public, prodigality and misconduct.”
Prodigality is an old Scottish term for excessive or wasteful spending.
In other words, Adam Smith observed back in the 1700s that it was not the citizens who bankrupt countries but rather those who govern.
Milton Friedman, the most influential western economist in the period after the Second World War, put it another way:
“If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”
The federal government in this last fiscal year, 2019, ran up almost a trillion-dollar deficit.
This is the fourth year in a row that the federal deficit has increased.
During the last three years, a time of considerable economic growth and low unemployment, the deficit has risen 64 percent.
Initially, some of this growth in the deficit could be tied to a reduction in corporate revenues as a result of the tax cut of 2017. But corporate tax revenues have now returned to their historic levels of income for the federal government.
Deficits for the coming decade are projected by the Congressional Budget Office to be as follows:
2020: $1.008 trillion
2021: $1.034 trillion
2022: $1.159 trillion
2023: $1.181 trillion
2024: $1.151 trillion
2025: $1.284 trillion
2026: $1.274 trillion
2027: $1.260 trillion
2028: $1.479 trillion
The federal debt recently exceeded $23 trillion, up from $8 trillion in 2008. It now represents more than 100 percent of the Gross Domestic Product (GDP), up from about 70 percent in 2008.
In 2019, the deficit equaled approximately 4.6 percent of our economy. This was during a time when the economy was growing at a rate of about 2 percent.
These numbers are numbing.
They should scare anyone who is interested in having America remain a solvent nation.
But they do not.
President TrumpDonald John TrumpThis week: House kicks off public phase of impeachment inquiry Impeachment week: Trump probe hits crucial point Judd Gregg: The big, big and bigger problem MORE has no interest in the deficit or fixing those elements that are driving it.
He is in denial, surrounded by advisers and TV counselors who wish to ignore the topic and its causes.
The Democratic candidates for president are layering more and more programs that require major spending onto their agendas as they seek the votes of constituencies that they believe will benefit from such largesse.
“Prodigality” is an understatement.
What is occurring is something that borders on a criminal act of malfeasance by those who are leading, or wish to lead, this nation.
This is not fake news.
These are real numbers, predicting with a great deal of certainty — and probably understating — deficits exceeding $1 trillion a year for as long as can be honestly projected.
The drivers of this fiscal chaos are simple. They are clear. They would be manageable if the political will was there.
Our entitlement society simply is not structured to handle the massive increase that is occurring in the number of retired Americans as the baby boom generation ages.
We have gone from approximately 33 million to 43 million Social Security beneficiaries in the last ten years.
Social Security and Medicare, which are central to why the federal burden is exploding, are not structured to have so many retirees in comparison to the number of people working.
In 1950, there were about sixteen people paying into Social Security for every one person taking out. Today, there are about two people paying in for every one person on Social Security. The numbers simply do not work.
Addressing, improving and making either the Social Security system or the Medicare system better is not countenanced by those seeking election.
The programs are locked down in their structure and patterns of expenditures because those in power and those who seek power are unwilling to address the fiscal morass into which these critical programs have drawn the nation.
The politics of both Social Security and Medicare are not to make them better or to even work efficiently for those who benefit from them, but rather to use them as political battering rams in order to win votes.
The axiom is simple: “When a democratic, entitlement society meets a massive demographic shift you get unsustainable deficits and debt.”
But at some point there will be an awful price to pay for these failures in governance.
It will probably come in the form of an economic downturn driven in large part by the loss of confidence in the value of the dollar, as those who lend to the United States realize that they will be repaid in dollars worth less then those they lent.
This will lead to a significant drop in the standard of living of all Americans. The next generation will be stuck with the bill this president and this Congress and their immediate successors seem intent on running up.
All this is unnecessary. This is correctable.
The first and most important step would be to have those who allege they lead us pay attention to the deficits and debt and make slowing their growth a priority.
Of course, this is not going to happen under the present leadership of either party.
But it is possible that at some point, hopefully soon, the issue of this debilitating deficit and debt will become a real concern of our politicians. We are a nation of problem solvers and this problem is becoming bigger and bigger.
The guess is, looking at the above projections of the CBO, that around the year 2023 or 2024, the deficit and debt will become so acute that even those in Washington — possibly an entirely different cast of characters from today’s gaggle — will move this issue to the forefront.
The solutions are not that complex nor do they need to have a draconian or even significant impact on those who need the support of these two core entitlement programs.
All they require is a format built on bipartisanship and committed to the goal of solvency not only for Social Security and Medicare, but also for the federal government.
This can certainly be done. It has to be done.
It just is not going to be done with our present political leaders, nor those who are currently aspiring to replace them.
Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee, and as ranking member of the Senate Appropriations Foreign Operations subcommittee.