“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
— Wilkins Micawber, “David Copperfield”
Jones, 1st District congressman 1973 to 1987 and chairman of the House Budget Committee for four years, visited with the Tulsa World editorial board recently on behalf of Fix the Debt, a bipartisan advocacy group of budget hawks.
Jones says he’s genuinely worried about the nation’s growing deficits and the mounting national debt.
In 2018, the federal government’s revenue will be about $3.3 trillion, an enormous amount of money driven by the most successful economy in the history of the world.
But federal spending will be about $4.1 trillion, driving the gross national debt to more than $21 trillion, an even more monumental number.
The entire federal budget didn’t top $1 trillion until 1987, but Jones says the deficit alone will soon top that figure. Fix the Debt’s projections have the deficit soaring to $2.1 trillion by 2028, based on current taxation and spending patterns.
As bad as that sounds, it’s worth noting that it would be much worse if it weren’t for unsustainably low interest rates. The Federal Reserve has held interest rates historically low for years, which has helped the economy grow and reduced federal costs. It’s also undercut the earnings of thrifty savers, many of whom were counting on their CDs to support a better quality of life in retirement.
But interest rates are rising and so are the federal government’s costs for money it doesn’t have. Fix the Debt has an interesting chart showing projected interest costs rising much faster than projected spending on programs for children. The two lines cross in 2020, the point that the nation will be spending more on the past (interest payments) than it will be spending on the future.
One more bad statistic: This year, the national debt will be 78 percent of gross domestic product, the total of all the goods and services produced by the U.S. economy. By 2030, it will be at 100 percent for the first time since the end of World War II.
There’s three possible solutions: Cut spending, raise taxes or pray for the economy to grow magnificently.
They aren’t unrelated. Cut spending or raise taxes too much and the economy could shrink, making things worse. Whatever course is taken, it has to balance carefully national needs and economic forces.
Meanwhile, demographic realities are works against all three possibilities. An aging population will demand more government services, pay less taxes and do less to promote economy growth.
To avoid a potentially calamitous economic future, the nation has to re-examine taxes and spending, Jones said.
“It’s just common sense that you can’t live beyond your means forever,” he said.
Taxes are currently about 18 percent of GNP. He says 21 percent is probably the historically appropriate level.
A hard look at spending will have to go beyond what are traditionally considered discretionary programs, he said. The nation will have to take a hard look at all of its costs, including entitlements and military spending.
Potential solutions are on the table, he said, but the biggest problem is the lack of political will and leadership.
Jones said he doesn’t see the kind of leadership needed in Washington to turn the nation in the right direction. Pressure to change the nation’s economic course will almost certainly have to come from outside the established structure.
“Until we get people who really want to step out and use their brains … we’re just going to be sliding down.”