Aug. 13, 2019
Permission to republish original opeds and cartoons granted.
Deficit likely to come in just shy of $1 trillion in 2019, latest Treasury figures show
With just two
months remaining in fiscal year 2019, come Sept. 30, the U.S. budget deficit
appears likely to come in just shy of $1 trillion, the latest data from the
U.S. Treasury shows. Since 1980, the debt has grown on average 8.8 percent
every fiscal year, but during that same period, the U.S. economy has only
averaged 5.4 percent nominal growth economic nominally before adjusting for
inflation. As a result, the debt is now 105 percent of the economy. And if
those trends were to continue, the debt will top $100 trillion in 2037, and
exceed 193 percent debt to GDP. What does that look like? Just ask Japan, with
a 200 percent debt to GDP ratio, whose economy has barely grown nominally in 20
years amid a declining population.
Cartoon: Wrong Track
The Green New
Deal seems to be only headed in one direction.
Video: Trump tariffs take 10% out of trade deficit with China, now Fed must not let dollar get too strong
The U.S. trade
in goods deficit with China is down 10 percent in the first six months of 2019.
Overall imports from China for the year are already down $30 billion this year.
At the current pace, exports to the U.S. could drop by $66.5 billion, or 12
percent this year. That amounts to a half a percentage point of China’s $13.6
trillion Gross Domestic Product, but the feedback loops are likely being felt
on the production side of China’s economy as well as it grows at its slowest pace
in 30 years. Can the slowdown bring China to the table?
EPA right to grant waivers to refiners under Renewable Fuel Standard
Americans for
Limited Government President Rick Manning: “The Environmental Protection Agency
is right to grant waivers to a limited number of distressed small U.S. oil
refiners from the Renewable Fuel Standard (RFS.) The RFS requires all refiners to blend
biofuels like ethanol into gasoline or purchase credits from others that do in
order to remain in business. While these
waivers might disappoint the corn lobby which would rather bankrupt small
refiners through the cost of credits than give an inch in their demand for
fealty to ethanol, the EPA’s waiver decision balances the mistaken federal government
policy to promote burning corn in our automobile engines with the financial
needs of refiners who foot the cost of adding corn to superior performing oil
in making gasoline.”
Newt Gingrich: Trump is right about Baltimore – new solutions needed for old problems
“Faced with a
problem this large, I always turn to two great leaders and their advice on
solving really hard problems. President Dwight Eisenhower said: ‘Whenever I run
into a problem I can't solve, I always make it bigger’ Albert Einstein said: ‘We
cannot solve our problems with the same thinking we used when we created them.’
We should take the advice of Eisenhower and Einstein and make the problem of
Baltimore even bigger and then suggest a dramatically new and different plan
for getting to a prosperous, safe, educated, healthy, and honest Baltimore. We
owe it to the children whose futures are being crippled in bad schools, the
families whose incomes are being crippled in neighborhoods without jobs, and
those whose lives are being threatened by a totally unacceptable level of
violence to have the courage to follow Eisenhower and Einstein down a path of
new solutions and new courage.”
Deficit likely to come in just shy of $1 trillion in 2019, latest Treasury figures show
By Robert Romano
With just two months remaining in fiscal year 2019, come Sept. 30, the U.S. budget deficit appears likely to come in just shy of $1 trillion, the latest data from the U.S. Treasury shows.
From October through July, the deficit has already come in at $866.8 billion. The U.S. budget deficit has not topped $1 trillion since 2012.
To get to $1 trillion for the year, the government would need a net deficit of a little more than $133 billion, but it has averaged only $44.7 billion in the months of August and September the past three years. It could still happen, but usually the federal government runs a surplus in September as the government tends to receive substantial corporate and income tax payments that month.
Even then, a budget deficit of $900 billion or so is nothing to sneeze at.
In fact, the national debt, now more than $22.3 trillion (a quarter of that is held by government trust funds), grew by almost $1.5 trillion in 2018 as spending in Washington, D.C. continues to outpace the growth of the economy and revenues.
Since 1980, the debt has grown on average 8.8 percent every fiscal year, but during that same period, the U.S. economy has only averaged 5.4 percent nominal growth before adjusting for inflation.
As a result, the debt is now 105 percent of the economy. And if those trends were to continue, the debt will top $100 trillion in 2037, and exceed 193 percent debt to GDP.
Even if the debt only grew by 7 percent, as it did last year, that still would grow the debt to more than $78 trillion by 2037.
What does that look like? Just ask Japan, whose economy has barely grown nominally in 20 years amid a declining population. It has a $10.5 trillion debt and just a $5.2 trillion Gross Domestic Product, a more than 200 percent debt to GDP ratio.
These jaw-dropping numbers should be enough to give any member of Congress pause as they consider votes on this year’s appropriations bill. Even so, many will doubt that the numbers matters that much. So, who’s right?
The question is whether these debt loads are sustainable or not over the long term. Will the dollar still be the world’s reserve currency by then? Will the dollar remain strong relative to other currencies? Will there still be such demand for U.S. treasuries on global financial markets? Will we still be running $870 billion plus trade deficits annually? Will we experience another baby boom?
Perhaps the most critical factor to consider — since it captures the outcome of these other questions—is whether the economy will really grow at 5.4 percent nominally, a number which definitely relies on the booms of the 1980s and 1990s. Since 2000, nominally — that is, before adjusting for inflation — the economy has only averaged about 4 percent growth.
Meaning, there are scenarios where spending — much of which is baked into the cake of Social Security, Medicare, Medicaid, etc. — continues to increase substantially but the economy does not robustly grow at all, ala Japan. I certainly can foresee and worry about those scenarios.
On the other hand, there are other scenarios where one can forecast major economic growth, for example, if major production is restored to the U.S. from overseas, we do get a baby boom, trade deficits are reduced and more money is invested in building this country. In terms of bringing overseas production back to the U.S., that is certainly a major part of the economic vision President Donald Trump laid out for the American people in 2016.
With robust economic growth, then it’s a future where you also see substantial increases in revenue because you’re dealing with a larger pie, and so balancing the budget does not seem so insurmountable.
The bright side is nothing is set in
stone yet, but almost all of the solutions I can conceive of all involve restoring
strong growth to the U.S. economy. Revenues are rising compared to last year, $2.86 trillion from October to July, compared to $2.77 trillion at the same point last year. The trouble is spending is increasing much, much faster, with $3.73 trillion through the first 10 months of the fiscal year, compared with $3.45 trillion last year.
In terms of spending cuts, the sad truth is there is almost no will in Washington, D.C. to pare back the budget. The budget President Donald Trump and the Office of Management and Budget proposed would cut overall spending by $2.7 trillion over 10 years and bring the budget towards balance within 15 years. Unfortunately, Congress has not adopted many of the proposals in that budget.
When we did get budget sequestration in 2011 after the debt ceiling standoff between former President Barack Obama and Congressional Republicans, it essentially froze domestic, discretionary spending for a few years, and the deficit was reduced. So-called mandatory spending was never addressed because nobody wants to propose either cutting Social Security and Medicare benefits or raising payroll taxes. Even with sequestration, the lowest the deficit got was $441 billion in 2015. That’s still really, really large.
Here we are in 2019, at full employment, the economy’s doing okay, and all Congress had to do was take its foot slightly off the brakes and suddenly we’re nearly going to hit $1 trillion on the deficit. By the end of fiscal year 2020, we may very well cross that threshold again.
What do we suppose will happen the next time we have another recession? What if it’s a big recession like in 2008 and 2009? Then, deficits likely will become much, much greater as revenues take a hit.
Again, nothing is set in stone. I tend to think optimistically about the future because I do not think running perpetual trade deficits like we have was ever going to be sustainable. If the American people hadn’t voted for Donald Trump in 2016, they would have had to invent him. Eventually, policymakers were going to figure out that we could grow the economy here and we’d all be better off for it, revenues would grow and nobody would worry about the debt. It may be that Trump, whether he wins or loses his reelection bid in 2020, has already set us on that path. I certainly hope so.
Robert Romano is the Vice President of Public Policy at Americans for Limited Government.
Cartoon: Wrong Track
By A.F. Branco
Click here for a higher resolution version.
Video: Trump tariffs take 10% out of trade deficit with China, now Fed must not let dollar get too strong
To view online: https://www.youtube.com/watch?v=7yPVKAdJwz8
EPA right to grant waivers to refiners under Renewable Fuel Standard
Aug. 12, 2019, Fairfax, Va.—Americans for Limited Government President Rick Manning today issued the following statement praising the EPA for granting waivers to distressed oil refiners under the Renewable Fuel Standard:
“The Environmental Protection Agency is right to grant waivers to a limited number of distressed small U.S. oil refiners from the Renewable Fuel Standard (RFS.) The RFS requires all refiners to blend biofuels like ethanol into gasoline or purchase credits from others that do in order to remain in business. While these waivers might disappoint the corn lobby which would rather bankrupt small refiners through the cost of credits than give an inch in their demand for fealty to ethanol, the EPA’s waiver decision balances the mistaken federal government policy to promote burning corn in our automobile engines with the financial needs of refiners who foot the cost of adding corn to superior performing oil in making gasoline.”
To view online: https://getliberty.org/2019/08/epa-right-to-grant-waivers-to-refiners-under-renewable-fuel-standard/
ALG Editor’s Note: In the following featured column from Foxnews.com, Newt Gingrich makes the case for a new Baltimore that can overcome the major challenges and problems it faces:
Newt Gingrich: Trump is right about Baltimore – new solutions needed for old problems
By Newt Gingrich
When President Trump recently called attention to the problems of Baltimore – including the suffering of residents who live in substandard housing and must endure a high crime rate – he was criticized and called a racist by some.
But in fact, Baltimore faces many problems, and many Democratic officials and residents of the city have pointed these out for years.
The current Baltimore cannot be fixed. However, a new successful Baltimore might be invented.
Let’s start with two reminders of reality. The problems Baltimore faces are big. A lot of smart, decent, dedicated people who have invested their lives and money have still been defeated by the problems.
Drug addiction and fatalities have skyrocketed in the city. Baltimore has the highest opioid fatality rate in the country.
Baltimore also has the highest murder rate in the country per capita. It has an underfunded, inadequately sized police force that is deeply distrusted by the people who most need its help – thanks in part to a current corruption scandal.
There is no stability in the Baltimore police force. There have been five police commissioners in the four years since Freddie Gray died in police custody.
As the murder rate in Baltimore reached almost 14 times the per capita rate in New York City, former Maryland Gov. Martin O’Malley told The Economist that the number of police in Baltimore fell from a high of 3,278 in 2002 to 2,514 now. The unofficial motto of the city seems to be “crime up, cops down.”
Since 2007, there have been 3,359 people killed in Baltimore. If former New York City Mayor Rudy Giuliani’s policing reforms had been applied to Baltimore, 2,519 of those people might be alive today.
Under Giuliani, the murder rate dropped 75 percent in New York City, and it dropped even further under Mayor Mike Bloomberg.
And finally, as The Economist reported: “Of those murdered in 2018, 84% had previous arrest records – as did 86% of the suspects.”
So, why did 2,519 Baltimoreans have to die unnecessarily.'
It's partly because Baltimore has schools that fail to have a single student performing at grade level – even while the system is spending $16,184 per student.
As Sanford Horn wrote for The Federalist: “Project Baltimore reported that in 13 of 39 city high schools, zero students were proficient in math. Zero. Let that sink in for a minute. In six more Baltimore high schools, only 1 percent tested proficient. In roughly half the schools, 3,804 students attempted the exam, with a mere 14 proficient in math. Not 14 percent, 14 actual students. It’s no wonder the poverty rate in Baltimore is 22 percent.”
Horn continued: “Incompetent so-called leaders and teachers’ unions have corrupted the public school system. They hide behind tenure while indoctrinating students instead of educating them, condemning the next generation to the consequences of the corrupt and broken system they created. It’s not all their fault, though: the children they teach have largely grown up in chaotic homes that do not value learning.”
We were warned about the collapse of schools a generation ago. In 1983, The Reagan administration issued a report titled “A Nation at Risk,” warning that: “The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a Nation and a people.… If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war. As it stands, we have allowed this to happen to ourselves.”
The 1983 report continued: “We have, in effect, been committing an act of unthinking, unilateral educational disarmament. Our society and its educational institutions seem to have lost sight of the basic purposes of schooling, and of the high expectations and disciplined effort needed to attain them.”
I participated in press conferences and workshops launching “A Nation at Risk” 36 years ago. After a generation of effort, disasters like Baltimore have convinced me that we cannot reform the teachers’ union and the bureaucracy that protects it.
From the standpoint of the teachers’ union, the system works perfectly because it pays salaries on time – no matter how many children’s lives are destroyed through a lack of learning.
Furthermore, in most cities the teachers’ unions are the most powerful local power center and can make it too expensive for elected officials to try to reform the schools. In many ways, the corruption of the school systems, which take money for work not accomplished, is at the heart of the sickness of our most self-destructive cities.
Endemic corruption throughout the local government means a lot of the business community accepts and sustains corruption. Politicians don’t bribe themselves.
While there are areas of excellence and prosperity in Baltimore (John Hopkins University and Medical Center, for example) they are islands in a sea of poverty, despair and dysfunction. Nearly 81,000 of Baltimore’s 480,000 adults do not have a high school diploma. And many with a diploma can’t perform at the education level the diploma implies.
The death of Freddie Gray in April 2015, and the riots that followed, spurred a serious effort to turn things around for the poverty- and crime-ridden parts of Baltimore.
President Obama and his administration went to work. Republican Gov. Larry Hogan provided state level leadership and funds. Democratic Rep. Elijah Cummings worked hard to draw attention to Baltimore’s needs.
A number of local leaders committed themselves to helping Baltimore recover. Then, as Erin Cox reported in The Washington Post: “Years before Trump’s attacks, Freddie Gray’s death sparked a huge effort to heal Baltimore. It wasn’t enough.”
The Cox article is a useful outline of the passion, resources, courage, and personal time different people poured into Baltimore in response to what had become an overwhelming crisis. Ultimately, it failed and, if anything, left the reformers more depressed and more discouraged than ever.
Given these realities, I think it is virtually impossible to reform the current Baltimore system. The corruption is too great, the bureaucracies are too powerful, the culture of despair and dependency is too widespread, and the stunning decentralization of authority and activism is too great.
As David Warnock of the Warnock Foundation wrote to me: “Until we deal with the systematic and pervasive corruption in our city, we will not be able to create the civic institutions that thrive in other cities. Until we prosecute the people who paid off Catherine Pugh for example, another new set will come along to take down the next generation. It’s literally been going on since Garrett ran the B&O railroad in the 1870’s – one white oligarch after another controlling one mayor after another.”
Warnock continued: “Until the citizens of Baltimore demand better educational outcomes, and that political leaders stand up to the educational status quo that produces some of the worst K-6 outcomes in the country, we are not going to end the cycle of violence in our city and create young people prepared for today’s job market. At Green Street Academy, only two – count ‘em two – out of 125 children who will start with us this fall in 6th grade read at grade level. They were chosen by lottery. Google the probability of a high-quality life if you can’t read by third grade if you want to see the future of Baltimore unless we get serious about educational reform.”
Faced with a problem this large, I always turn to two great leaders and their advice on solving really hard problems.
President Dwight Eisenhower said: "Whenever I run into a problem I can't solve, I always make it bigger.”
Albert Einstein said: “We cannot solve our problems with the same thinking we used when we created them.”
We should take the advice of Eisenhower and Einstein and make the problem of Baltimore even bigger and then suggest a dramatically new and different plan for getting to a prosperous, safe, educated, healthy, and honest Baltimore.
We owe it to the children whose futures are being crippled in bad schools, the families whose incomes are being crippled in neighborhoods without jobs, and those whose lives are being threatened by a totally unacceptable level of violence to have the courage to follow Eisenhower and Einstein down a path of new solutions and new courage.
