Out-of-control government spending is a dangerous problem that both political parties are failing to address. The United States’ national debt is $28 trillion and rising and the federal government continues to run massive deficits. The COVID-19 pandemic has only escalated government spending. The national debt represents a significant crisis for the nation. A recent review of the federal government’s finances by Truth in Accounting estimates that the national debt is $123.11 trillion when considering the unfunded liabilities of Social Security and Medicare. To pay off our massive debt, it would require each taxpayer to pay $796,000.
“How much debt is too much, and when does it begin to have corrosive economic consequences,” asked a recent editorial by The Wall Street Journal? “History shows that massive national debt is a major cause of decline, even extinction, of nations that refuse to live within their means,” wrote columnist Cal Thomas.
It is not only out-of-control spending that is driving the debt but also the unfunded liabilities of entitlement programs such as Social Security, Medicare, and Medicaid. Truth in Accounting estimates that the unfunded liabilities for Social Security and Medicaid alone are over $96 trillion.
It appears that federal spending will not slow down anytime soon. President Joe Biden and the Democrat Congress passed a $1.9 trillion stimulus, the American Rescue Plan, and are now trying to pass an additional $2 trillion “infrastructure” spending bill. President Biden and Democrats are also calling to increase the corporate tax from 21 percent to 28 percent. This, and other proposed tax increases, will punish taxpayers and be detrimental to the economy.
Economist Larry Kudlow has described President Biden’s economic plan as throwing a “wet blanket” on the economy. Further, Kudlow described the Biden administration’s spending as “beyond extravagant.” “That’s why it’s really a shame that the Biden administration wants to fiddle with free enterprise and come crashing down with huge tax hikes and regulatory red tape, all of which are major interventions,” stated Kudlow.
President Biden is hoping that his administration is more progressive than either President Franklin D. Roosevelt’s New Deal or President Lyndon B. Johnson’s Great Society. Just as with Presidents Roosevelt and Johnson, the Biden administration believes that the federal government is “primary driver of growth.”
President Biden’s “Build Back Better” plan is based on policies that expand the federal government’s size and scope and transform social welfare policy while escalating the national debt. Even before Congress passed the American Rescue Plan, many states were in recovery from the COVID-19 pandemic and did not need these stimulus dollars. Much of the $4 trillion in COVID-19 stimulus money passed by Congress was left unspent.
Many progressive and liberal policymakers argue that the federal government can continue to spend money without any consequences. This is the argument of the modern monetary theory.
The insanity of the modern monetary theory argues that debt does not matter, but the nation is entering into dangerous territory. How long can Uncle Sam avoid the consequences of the laws of economics? “Huge deficit spending may prompt a financial crisis, induce rising inflation and interest rates, and generate long-term economic harm,” stated Chris Edwards, Director of Tax Policy Studies at the CATO Institute.
“This gusher of spending is greatly damaging. This is not monopoly money, but rather it represents real resources that will be confiscated from people when the bills come due,” argues Edwards.
How can we address the massive national debt before it is too late? First, it will take a cultural change from the American people to revive the American founding principles, which created a Constitution based upon limited powers. Second, the Republican Party must make limited government a priority.
“Inside the Republican Party, once a church preaching small government and balanced budgets, the deficit hawks are going the way of the passenger pigeon — toward extinction,” wrote columnist Patrick J. Buchanan.
Republicans should look to President Calvin Coolidge as an example. President Coolidge was the ultimate “budget hawk.” A fundamental aspect of Calvin Coolidge’s philosophy was that he did not separate economics and morals. He saw them as the same. Coolidge regarded “a good budget as among the noblest monuments of virtue.”
Coolidge often argued for “economy in government,” which was tied to his devotion to the Constitution. For Coolidge, keeping a budget in balance with reasonable tax rates was not just sound economic policy but moral and constitutional. A federal government that was limited was the best economic policy for growth, and it was moral in the sense that it protected economic liberty and the Constitution.
President Coolidge, who assumed office after the death of President Warren G. Harding, continued Harding’s spending and tax reductions. Under President Calvin Coolidge, the federal budget fell from $3.1 billion in 1923 to $2.9 billion in 1928, with the low point being $2.8 billion in 1927.
Even in the aftermath of a severe national depression, the fiscal conservatism of both Harding and Coolidge resulted in a period of significant economic growth. “The Roaring Twenties were a time of unprecedented prosperity. GNP expanded year after year without inflation. Productivity improved, and real wages increased. The stock market tripled,” noted Jim Powell, a Senior Fellow at the Cato Institute.
“Unemployment, 12 percent when Harding took office, was three percent when Calvin Coolidge left. Manufacturing output rose 64 percent in the Roaring Twenties. Between 1923 and 1927, U.S. growth was seven percent a year. At decade’s end, America produced 42 percent of the world’s goods,” wrote Buchanan in reflecting on the economic record of Harding and Coolidge.
Americans must heed the lesson that government cannot drive economic growth. Roosevelt’s New Deal failed to solve the Great Depression, and Johnson’s Great Society’s “war on poverty” neglected to solve poverty. Both were only successful at expanding federal power. History demonstrates that reducing the size and scope of government is almost impossible.
“There appears to be no historical evidence that once a Western democracy expands central power and control of the nation’s resources that it ever willingly gives up those gains,” argued Buchanan. Whether the New Deal, Great Society, or even the COVID-19 pandemic, federal government power tends to ratchet up during times of national emergencies.
Coolidge’s fiscal conservatism serves as a reminder for the nation today that not only is limited government good for a strong national economy, but it also takes a moral commitment from both citizens and policymakers to uphold constitutional principles.