Donald Trump promised to balance the federal budget and reduce the federal debt. He originally said “We’ve got to get rid of the $19 trillion in debt,” but even he recognized within a month on the 2016 campaign trail that that promise was too big of a fiscal whopper, even for him.
The national debt rose above $26 trillion for the first time this week, as the U.S. government spends at a historic pace while pumping trillions into coronavirus relief.
The debt has been climbing upward at a startling pace. According to data released by the Treasury Department, the national debt hit $24 trillion on April 7 and $25 trillion on May 5.
Meanwhile, the government recorded a budget deficit of $1.88 trillion for the first eight months of this budget year, larger than any annual shortfalls in U.S. history. The deficit for the October-May period was more than double the $738.6 billion for the same period last year, according to Treasury Department numbers released Wednesday.
The Congressional Budget Office is forecasting that this year’s deficit will hit $3.7 trillion, which would be more than double the record $1.4 trillion deficit set in 2009 [Evie Fordham, “National Debt Tops $26T, Record Deficit Reported as Coronavirus Relief Spending Goes into Overdrive,” Fox News, 2020.06.11].
Eight years of Obama budgets added $8.588 trillion to the national debt. That’s $1.07 trillion a year. Two and two thirds years of Trump budgets have added $5.652 trillion to the national debt. That’s $2.12 trillion per year.
But hey, Latin readers, tremble not! We’re using deficit spending for its best purpose: investing in shoring up the economy (and all the people who comprise it) when the free market can’t:
Economists say that borrowing money to prevent economic collapse is a good investment, and if done right can lead to both better economic outcomes and lower debt levels than austerity measures in a crisis. For example, nearly a fifth of the spending in the 2020 fiscal year, which began in October, went toward income security [Niv Elis, “Annual Deficit Hits $1.9 Trillion in Just Eight Months,” The Hill, 2020.06.10].
Modern Monetary Theory says we don’t have to worry much about fiscal or economic consequences to the Trump debt:
In 2020, Congress has been showing us — in practice if not in its rhetoric — exactly how MMT works: It committed trillions of dollars this spring that in the conventional economic sense it did not “have.” It didn’t raise taxes or borrow from China to come up with dollars to support our ailing economy. Instead, lawmakers simply voted to pass spending bills, which effectively ordered up trillions of dollars from the government’s bank, the Federal Reserve. In reality, that’s how all government spending is paid for.
MMT simply describes how our monetary system actually works. Its explanatory power doesn’t depend on ideology or political party. Rather, the theory clarifies what is economically possible and shifts the terrain of policy debates currently hamstrung by nagging questions of so-called pay-fors: Instead of worrying about the number that falls out of the budget box at the end of each fiscal year, MMT asks us to focus on the limits that matter.
At any point in time, every economy faces a sort of speed limit, regulated by the availability of its real productive resources — the state of technology and the quantity and quality of its land, workers, factories, machines and other materials. If any government tries to spend too much into an economy that’s already running at full speed, inflation will accelerate. So there are limits. However, the limits are not in our government’s ability to spend money or to sustain large deficits. What MMT does is distinguish the real limits from wrongheaded, self-imposed constraints.
An understanding of Modern Monetary Theory matters greatly now. It could free policymakers not only to act boldly amid crises but also to invest boldly in times of more stability. It matters because to lift America out of its current economic crisis, Congress does not need to “find the money,” as many say, in order to spend more. It just needs to find the votes and the political will [Stephanie Kelton, “Learn to Love Trillion-Dollar Deficits,” Minneapolis Star Tribune, 2020.06.11].
So for every reason—to acknowledge the hypocrisy of Trump, Rounds, Thune, Noem, and every other past fake Republican deficit hawk, and to acknowledge the reality of how modern economies and governments work—let’s look forward to a big election year in which nobody tries to bring up the national debt as a voting issue.