We are doomed

Harold Black, PhDBlog

The President has just released his Fiscal Year 2021 budget proposal. Since every budget proposal from every president is usually proclaimed “dead on arrival” by the opposition party, the question is “why?” and he answer is “because he has to.” The president is mandated by law to produce a budget annually but there is no law mandating that congress must pass one. In fact, it is increasingly rare that a budget is ever passed. Rather hundreds of employees at the Office of Management and Budget must waste their time preparing the president’s proposal. Then, my former colleagues at the Congressional Budget Office waste their time analyzing the impact of the proposal on budgetary baselines. Both the House and the Senate waste more hours preparing their own budget proposals. If by chance one house passes a budget, then the other house is sure to reject it. Even if both houses and the president are in the same party, it is rare for a budget to pass, particularly if that party does not have 60 senators to block filibusters in the senate.

Nevertheless, the president will go through the motions and produce a budget proposal. The other party and the press will moan and groan about the budget being heartless: taking food from the poor, taking medicines from the aged, poisoning the environment and reiterating that in no instance will a single penny be cut from any program. The country is then forcibly financed by one continuing resolution after another. The result is a path that is not sustainable because the congress has taken the gutless action of automatically funding social security, Medicare and Medicaid. These constitute the nondiscretionary part of the budget and are on automatic pilot with automatic annual escalators. The discretionary part is everything else.

Since the nondiscretionary part is sacrosanct, all cuts must come from the discretionary part. Lots of luck. The Trump budget proposes cuts in some areas and growth in others within the nondiscretionary portion. The overall effect is more spending than the previous budget. In fact, all three of the president’s proposed budgets call for more spending than the Obama budgets and trillion-dollar deficits. We are doomed.

The Congressional Budget Office estimates that if we continue on this path unchecked, the mandatory parts of the budget will consume more and more of the total budget. So by 2050, mandatory spending will equal Federal tax revenues with nothing left for anything else. Of course, before that time, something will have to be done – the most likely “something” being an increase in taxes. However, an increase of the magnitude required will not be tolerated by the populace and if enacted will cause a severe recession resulting in less taxes being collected.

Now since in 2050 I will be 104, I guess I should not worry. However, since my mother will soon be 102, then maybe I should make a few modest proposals to address the coming crisis. Regardless of how the politicians manipulate taxes, revenue stays remarkably around 18 percent of GDP. Nondiscretionary increases gobble a growing percent of GDP simply because the escalators increase faster than the growth in GDP.

The solution is to cap the percentage of GDP allocated to nondiscretionary spending eliminating the automatic escalators. Next, gradually raise the full benefit age for Social Security to 70. Remove the limits on annual contributions to 401(k)s. Limit the federal budget to no more than 18 percent of the previous year’s GDP. The president’s budget would then be an exercise in allocating funds only to the discretionary parts without an overall increase in spending. Lastly, codify these suggestions into law with the provision that only if the president declares a national emergency and both houses of congress agree with a two thirds majority will these limits change.

A simple solution with virtually no chance of passage. Did I mention that our national politicians are gutless?

Dr. Harold Black is professor emeritus at the University of Tennessee, Knoxville. This piece appeared in the USA TODAY NETWORK – TENNESSEE. Dr. Black can be reached hblack@utk.edu.