Democrats Plot a Fiscal Apocalypse
And why Republicans are complicit.
Bruce Thornton is a Shillman Journalism Fellow at the David Horowitz Freedom Center.
As promised, the Democrats are preparing a budget that will cost $4.1 trillion over the next decade, including $3.5 trillion in new spending ––“the largest spending increase in American history,” the Wall Street Journal reports. The legislation will turn into law a progressive wish-list: green pork for “renewable energy” grifters; “a robust expansion of Medicare,” as Chuck Schumer gloated, despite the program’s impending bankruptcy; “cash for universal pre-K, paid family leave, a new federal child-care program, free community college,” and “more money as well for permanently higher ObamaCare subsidies, teachers unions, affordable housing, home healthcare, food subsidies and welfare programs,” as the Journal catalogues this drunken-sailor fiscal binge.
Of course, there’s no money to pay for all this largesse, and making the “rich pay their fair share,” as the Dem’s canard goes, won’t even come close to funding it. Indeed, confiscating the collective wealth of the country’s 614 billionaires––$4.56 trillion–– wouldn’t even cover the fed’s budget for FY2020, $4.8 trillion. And this proposed new splurge comes on top of the $5.3 trillion already allocated over the past year for “covid relief,” which has lifted our national debt to $23.3 trillion, a dangerous 127% of GDP.
If the Dems’ current spending spree actually happens, we will be facing a fiscal apocalypse.
And Republicans will share in the responsibility for this catastrophe, since for decades they have gone along with the progressive redistributionist welfare state, often at the expense of military preparedness.
Progressives for a century have championed bigger government and the redistribution of wealth managed by unelected, unaccountable technocrats in government bureaus and agencies. Like all tyrants, they dole out entitlements to the masses as the bribe for tolerating this vast expansion of intrusive power. Throw in a crisis like a depression or pandemic, and conditions are ripe for a power-grab.
FDR, for example, exploited the Great Depression to create numerous government programs, foremost of which is the Social Security Act of 1935. We are so used to this devourer of 23% of the whole federal budget that we no longer wonder why state governments could not have created such old-age insurance programs if their citizens thought they were necessary. Indeed, by bribing state governments to participate in the fed’s program, dissenting Supreme Court Justice Pierce Butler warned, the act sanctioned the federal government to “induce, if indeed not to compel, state enactments for any purpose within the realm of state power, and generally to control state administration of state laws.”
The subsequent 85 years have proved Butler prescient, as federalism has been serially weakened by federal largesse, from infrastructure to student loans, that always comes with federal control and interference in affairs that should be the purview of the sovereign states, businesses, and civil society.
Equally important, Social Security has been the malign template for the relentless expansion of bureaucratic agencies by increasing both benefits and beneficiaries. The original act covered more than just old-age assistance: unemployment compensation, aid to dependent children, and welfare for women and children were also included. Over the years, more and more beneficiaries have been added: benefits for the permanently disabled (1950); Social Security Disability Insurance beneficiaries expanded (1956), and age restrictions eliminated (1960); state programs for the blind and disabled federalized (1972); cost of living increases for SS beneficiaries added (1975), and the State Children’s Health Insurance Programs created, jointly funded by states and the feds, but administered according to federal requirements (1997).
And don’t forget the next most expensive entitlements: the 1965 Social Security Act created Medicare for retirees, and added Medicaid for the poor in 1967. Other amendments to those acts added more benefits and liberalized eligibility requirements. As a result, the number of beneficiaries has increased dramatically. The moral hazard of such growth is obvious. As economist F.A. Hayek presciently wrote about Social Security, “No system of monopolistic insurance has resisted this transformation into something quite different, an instrument for the compulsory redistribution of income” and “a tool of egalitarian redistribution.”
Democrats, of course, are the main drivers of such redistributive spending and regulatory intrusion. But over the years Republican presidents and lawmakers have gone along with this metastasizing federal power and shrinking power of the states and civil society. Indeed, according to economist Nicholas Eberstadt, in any given year the growth of entitlement spending has been over 8 percent higher under Republican administrations.
For example, Ronald Reagan’s Social Security Disability Benefits Reform Act of 1984 included liberalizing the health conditions eligible for benefits, adding ailments like back pain and mental illness, both vulnerable to subjective and fraudulent claims. As a result, the number of recipients has exploded. And George W. Bush in 2003 added to Medicare benefits subsidies for purchasing medications, with no dedicated funding to pay for it. This new entitlement has contributed to Medicare’s diminishing trust fund, which according to its Trustees will start to run out of money in 2024. Leviathan Inc. is a bipartisan creature.
But we the people aren’t free of responsibility for this short-sighted economic malpractice. Attempts to reform these programs, especially Social Security and Medicare, are easily demagogued into electoral disaster for any politician even talking about reform. That’s partly why these entitlements may face minor tweaks, but are accepted by everybody as untouchable “rights” rather than transfers of other people’s money, or money borrowed from future generations, or money created out of thin air.
And no, we don’t “pay” for those benefits with our payroll taxes. Most recipients of both entitlements will take from a third more, to double the amount they contributed. With increasing longevity and new, expensive treatments for the diseases of old age, that ratio is destined to grow larger––as will the costs of contributions to those programs given their trillions of dollars in unfunded liabilities, which without serious, politically toxic reforms, are on course to consume every dollar of tax revenues.
Finally, history teaches us that getting people used to receiving other people’s money creates a serious moral hazard. A particularly revealing example is democratic Athens in the 4th century B.C. Despite its huge debt incurred during the Peloponnesian War decades earlier, and the reduction in revenues that followed the loss of their tribute-paying imperial subject states, the Assembly voted to create another payment to citizens, this one, called the theorikon, which financed their attendance at religious festivals, including tragic performances. At first, excess revenues were divided between the “theoric” fund and the military fund. But in a few years, a law was passed that put all surpluses in the festival fund, and a few years later another law made it a capital crime to transfer money from the “theoric” to the military fund.
This money, moreover, was in addition to the “state pay” Athenians already received for attending the Assembly, serving on juries, and filling some public offices. As historian M.H. Hanson writes, by the mid-fourth century “many Athenian citizens could expect a [state payment] on working days, and theorikon on festival days,” which were numerous and celebrated throughout the year. This thoughtless spending on themselves was dangerous, because Phillip II of Macedon had begun his ambitious program of aggression against the city-states of central and southern Greece.
The great orator Demosthenes, who for decades tried to spur the Athenians to wake up to Phillip’s threat, explicitly linked Athenian torpor to their receiving state money, which created a “habit of mind” that subordinated military preparedness and service to getting something for nothing. In another speech he made the same point: “The politicians hold the purse-strings and manage everything while you, the people, robbed of nerve and sinew, stripped of wealth and allies, have sunk to the level of lackey and hanger-on, content if the politicians gratify you with a dole from the Theoric Fund or a [religious] procession.”
The historian Theopompus––writing after Phillip’s victory at Chaeronea in 338 ended Greek political freedom for centuries–– agreed: the theorikon had made the Athenians “less courageous and more lax,” for the Athenians “thoroughly squandered their state revenues,” spending “more on public festivals and sacrifices than on the management of war.”
Twenty-five hundred years later, we are displaying the same fecklessness in the face of aggression. Communist China, which scorns our liberal-democratic “rules-based international order” and human rights, is relentlessly working on supplanting us as the global hegemon. While our corporations lust for China’s huge market and investment opportunities, and we the people are accustomed to cheap goods, China breaks every canon of global free trade in institutions like the WTO in order to increase its economic power and damage ours; threatens and bullies our allies bordering the South China Sea; and very likely engineered a pandemic that put the appeasing Biden regime in the White House.
Worse, China is rapidly building up its military capabilities and stockpiles of advanced weapons, while our top brass in the Pentagon and DOD fret over the phantom threat of “white supremacists,” and lecture our soldiers about “systemic racism.” Meanwhile, the Democrats plot to exponentially increase entitlements and debt, even as our military spending remains static and our weapons age.
As a result, we are not preparing for two lethal threats: bankruptcy and Chinese dominance. The only question now is: What will it take to concentrate our minds and change our improvident ways?