Debt Limit: When You Run Out of Other People’s Money, Keep Spending Anyway
Spending and deficit control are indispensable to a the long-term economic health and stability of a nation. But today, fiscal restraint is visible only in the rear-view mirror.
The fix requires putting spending control back front and center, of course. But also, as I’ve noted over at Forbes in a new column on “Regulatory Reform’s Role in Addressing the Debt Limit,” undertaking a sweeping purge of economic and social regulation in society. Here we take a look at both.
Back during the Trump administration, a handful of conservatives raised alarm over the surge in federal spending and a mounting national debt that was taking place. Indeed, the uniquely healthy economy early in the Trump tenure marked an opportune moment to stem federal disbursements. But that, of course, never happened.
And then—spending exploded with the governmental reaction to COVID.
Breakneck spending, and accompanying stratospheric deficits, have continued since. Biden has spearheaded a torrent of costly and suspect post-COVID legislation boasting of “rescue,” “investment,” “innovation” and inflation relief. The result of it all? The Congressional Budget Office has informed us that fiscal year 2023 ended with $6.3 trillion in outlays, bejeweled with a $1.4 trillion deficit.
Even with a national debt bursting through its legislated ceiling of $31.4 trillion, Biden’s budget proposes to retain deficits exceeding a trillion dollars annually for as far as the eye can see. The cherry on top is that the kind of spending he and progressives support is also highly interventionist and regulatory, even authoritarian.
Would-be fiscal conservatives that had lost the appetite for addressing spending under Trump have at last awakened, especially given Biden’s replacing private sector priorities with a rather astonishing series of “Whole-of-Government” machinations (these are detailed in the recent Ten Thousand Commandments).
Even before the rocketing spending generated by the Coronavirus outbreak, spending on debt service already threatened to rival the entire defense budget. Now that interest rates are rising, debt service becomes a more even more of an alarm.
But not to emboldened progressives, who advocate Medicare for All, a Green New Deal, a guaranteed minimum income and more. The pandemic escalated long-fashionable magical thinking that government outlays create wealth.
Biden’s budget remorselessly adopts that attitude. Margaret Thatcher was famous for observing that “The problem with socialism is that you eventually run out of other people’s money.”
Today’s progressives do not care. Their mantra is, “When you run out of other people’s money, keep spending anyway.”
National debt notwithstanding, the left has not renounced its theory of unlimited borrowing. Indeed, progressives are urging “Dark Brandon” to instruct the Treasury to mint that Trillion Dollar Coin.
Given all this, fiscal conservatives must press harder than they think on their slate of spending reforms. They’ve always been reluctant to talk military and entitlements, but will have to do that, too.
Also necessary, especially in the wake of Biden’s regulatory interventions that take the Obama “pen-and-phone” to a new level, is regulatory streamlining. Minimizing regulatory intervention (economic, “health and safety,” social) is every bit as important as spending control is.
The Republican Study Committee recently issued a Debt Limit Playbook that not only contained proposals for negotiating spending restraint with Biden, but noted several longstanding regulatory reform ideas. Many should have long since been enacted. In no particular order, these include:
- A regulatory budget to cap compliance costs, enhance accountability and foster economic growth;
- Offsetting new rules with the removal of old ones;
- A regulatory sunsetting commission;
- Requiring congressional approval of major agency rulemakings;
- Reducing court deference to agencies’ sometimes ambitions and self-serving interpretations of law in rulemaking (the legal doctrine called “Chevron Deference”);
- Revoking independent agencies’ exemptions from the Paperwork Reduction Act, the Unfunded Mandates Reform Act, and the Data Quality Act;
- Report Cards on proposed agency actions and other roundup statistics;
- A portal for federal agency sub-regulatory guidance documents, bulletins, notices, circulars, memoranda, manuals and other materials agencies issue.
- Inflation assessments of Biden executive actions;
- Strengthening unfunded mandates oversight with the new Unfunded Mandates Information and Transparency Act;
- Enhanced small business regulatory flexibility;
- Requiring that a Senate-confirmed appointee rather than a careerist sign off on final rules.
These moves can aid economic recovery and indirectly benefit the federal government’s fiscal picture.
There’s another option, also noted at Forbes, to directly address spending by resurrecting a bill called the “Reducing Excessive Government Act” (or REG Act), which had been introduced in the 115th Congress by Sen. Mike Lee (R-Utah) and former Sen. Cory Gardner (R-Colorado).
The REG Act proposal would make increases in the debt ceiling contingent upon proportional 15 percent cuts in regulatory agency spending.. For example, were the debt limit to be increased by $1 trillion, a reduction in regulatory costs of $150 billion over ten years would be required.
The “emergency measures” Treasury is undertaking now that the debt limit is reached with exhaust themselves soon. After wrestling things down this time, the GOP ought not forget the lesson of permanent spending (and regulatory) control as a priority if a Republican president happens to take office again.
We’re not saying enact a Balanced Budget Amendment, but give a few fiscal surpluses a go; and recognize that doing something about federal regulation can make everyone better off. Then we can start reducing debt ceilings, not raising them.