The U.S. has a massive budget and eye-popping debt precisely because Congress annually fleeces the rich. To believe otherwise is to believe in Santa Claus, ferociously dumb markets, or both.
What’s disappointing is that Washington Post columnist Catherine Rampell plainly believes in neither, but let’s her often reasonable disdain for the GOP and its rhetoric get in the way of reasonable commentary. Take her latest column for the Post. It’s about the Republican Party’s efforts to extend President Trump’s 2017 tax cuts.
Rampell somewhat predictably titled her piece “Tax cuts for the rich, austerity for the poor.” In it, she wrote:
“Republican lawmakers seem inclined to give him most of what he wants. So how do they plan to fill their gaping budget hole? They claim they’ll do it through a combination of fake math, nonbinding promises and shanking the poor.” There’s much that’s incorrect about what Rampell wrote, and the mostly market-reverent Rampell could likely be persuaded to agree.
Let’s start with “fake math.” The GOP couldn’t engage in fake math even if it wanted to. Evidence supporting the previous claim can be found in the $36 trillion worth of federal debt that Congress has already run up over the decades.
It’s a reminder that Treasuries are the most owned and most analyzed income streams in the world. See $36 trillion once again if you’re confused. Rampell is not confused, at which point she must know that whatever Republicans and Democrats do when controlling the purse, no one is fooled.
In other words, reality intrudes on U.S. budgeting at all times. That’s because markets are relentlessly pricing the value of Treasury’s debt payments every minute of every day.
All of which answers very clearly how Republicans now, and Democrats in the future, will fill gaping budget holes now and in the future. And it won’t be by “shanking the poor” as Rampell suggests. More realistically, and logically, Republicans and Democrats will fill gaping budget holes by borrowing at some of the lowest interest rates in the world.
Why is it that they can borrow at the lowest interest rates in the world? They can for two reasons: the budgetary math isn’t remotely fake, and it’s not fake because the rich whom Rampell imagines are undertaxed are in fact wildly overtaxed now, and will continue to be wildly overtaxed well into the future. How else would Rampell explain nominally staggering amounts of U.S. debt at such low interest rates?
Self-proclaimed deficit hawks on the right and left love to scare their middle and upper middle class readers with promises that eventually the IRS will come to them to pay off all the debt, but the latter is just a signal that confusion about debt and deficits is bipartisan in nature. Do the “hawks” seriously believe the U.S. could continue to run up so much debt if it were at all presumed that the middle would ever be asked to foot the bill for all of Congress’s waste?
If the question confuses anyone, they need only look outside government debt and see which private individuals and businesses are allowed to borrow in size. After which, governments can only borrow insofar as they have taxable access to the private production of their citizenry. Get it?
Which of course answers Rampell’s lament ably. Republicans now, and Democrats in the future, will be able to spend and borrow ridiculously not because they’re occasionally pursuing “tax cuts for the rich” as Rampell contends, but precisely because there’s no fake math, but lots of fake rhetoric about tax cuts for the rich that actually reduce their taxes.
