“Those of us who call ourselves Republicans have a choice to make: We can choose to stand for our historic principles, or we can continue on the road to angry populism.” Those are the words of former U.S. Senator John Danforth (R-MO) and Rina Shah, respectively founder and senior adviser of Our Republican Legacy.
Danforth and Shah are trying to make the Republican Party normal again. They properly disdain the unrecognizable modern GOP of “high tariffs,” “ownership stakes in corporations,” along with directives on “what universities can teach, where law firms can practice, or whom comedians can mock.” Amen to all that.
Where there’s disagreement is with their focus on “persistent federal deficits.” About the disagreement, it has nothing to do with support for federal spending. To be clear, government spending is the worst tax on freedom and prosperity of all, whereby Congress extracts precious money from the private sector that it doesn’t stare lovingly at, but instead allocates in economy-sapping, politicized fashion. Thought of in terms of the trillions worth of government spending over the decades, it’s depressing to contemplate the transformative businesses that never formed, the medical advances never arrived at, and the transportation leaps never achieved.
Which is why the focus on deficits and debt is such a dangerous distraction. Danforth and Shah contend that our “current fiscal trajectory” signals “weakness,” but they could probably be persuaded that $37 trillion worth of debt signals the exact opposite. Money is ruthless, and if Treasury can run up $37 trillion in debt, that’s the surest sign from the deepest markets in the world about the most owned income streams in the world (U.S. Treasuries) that federal tax revenue collections in the present are a very pale imitation of what they’ll be in the future.
While government borrowing in no way boosts economic growth (quite the opposite), Treasury’s ability to borrow so much signals that the U.S.’s best days are far from behind it. Which is a loud market signal that as opposed to U.S. deficits and debt signaling too little government revenue, too much spending, weakness, or all three, the unsung signal as described at greater length in The Deficit Delusion is that Treasury has a revenue problem: too much now, and quite a bit more in the future. The deficits and debt are a signal of this too-long-ignored truth.
Which is why Danforth and Shah can hopefully be persuaded to rethink their stance on deficits and debt. Implied there is that if the federal government simply achieves budgetary balance, that all will be well. Surely not, and certainly not in a way that will lead to the limited government desires of Our Republican Legacy. Evidence supporting the previous claim can be found in the $37 trillion (and counting) in federal debt.
The debt is once again a market signal that federal revenues are nowhere near what they’ll eventually be, which means budgetary balance in future decades will be had in concert with a federal government consuming quite a bit more than it does at present. It’s a long way of saying that fiscal responsibility will not be found in reducing “persistent federal deficits,” but in drastically reducing the tax revenues flowing to Treasury that paradoxically enable the deficits.
We have a too much revenue problem now, and as the national debt once again tells us, we’ll have a much bigger problem of too much revenue in the future. Until this is recognized, and dealt with, expanding government alongside soaring debt will be the present and future norm.
