Kyle Sammin: Eating the seed corn

The federal government is shut down. The state budget is months late. County budgets are stretched thin and often grasping for unsustainable revenue sources. It’s all part of the same problem: government spending is growing faster than we can afford, and the bills will be paid by the generations yet to come.

We’re eating our seed corn, leaving the next generation to start out with a bunch of debt they didn’t contract. We’ve seen taxes go up at the state and local levels, but the commonwealth and its counties still can’t bring in enough to keep pace with the growth in spending. So they’re depending on federal funds to top up the budgets, using temporary funds to pay for permanent programs. 

And that federal money? It’s also someone else’s, but instead of beggaring our neighbors, we’re effectively raiding the coffers of our children and grandchildren, borrowing money that they will have to pay back. We’re looting the future to pay for the present, a kind of time-traveling theft you might expect from some shady fly-by-night business or a pump-and-dump stock market scheme, but one that is beneath the dignity of a nation that still wants to call itself great.

We haven’t had a great sense of financial prudence in this country in a while, but it’s worth looking at the numbers to see just how bad it has gotten. After our brief flirtation with a balanced federal budget a quarter-century ago, we sunk back into deficit spending, but even then there were people in Washington trying to fix things. 

Deficits were decreasing as George W. Bush’s term ended — even with two wars on — but then the 2008 recession blew things up again. Obamacare expanded the deficit, but that too paled in comparison to what would come later. It was expensive and not the best way to manage health insurance by a long shot, but it at least had some new taxes to help pay for part of the growth in spending. Not all! But a part.

In fact, as I’ve written before, while federal revenue has doubled since 2000, federal spending has tripled. This has been a bipartisan effort, but the worst of it came in the last four years. Why? When Republicans elected Donald Trump, they moved away from being serious about debt. Trump was not a deficit hawk, either as a businessman or as a politician. Like every real estate guy, he understood debt and used it. 

In government, it’s fair to say that he used it too much. But buy-now-pay-later is always popular in the short term and it worked for Republicans as an electoral matter. Democrats could have taken Republicans’ place as the adults in the room, but they’re really not cut out for it. Instead, led by Biden (or whoever was running the White House,) they set out to achieve the impossible dream: a European welfare state with an American level of taxation. 

They offer plenty of empathy but zero responsibility, and it’s not sustainable. Trillions of dollars of deficit spending later, here we are: broke, shutdown, and facing the consequences of our actions.

Even the King of Debt, Donald Trump, sees that it’s gone too far. But in the meantime, states and counties have gotten hooked on that federal opioid of free money. They took the “temporary” spending of ARPA and other Covid recovery programs and built new bureaucratic empires. They pushed out “temporary” subsidies to Obamacare and SNAP secure in the knowledge that when the programs expired they’d find a way to make those “temporary” handouts permanent.

The Democrats made one of the dumbest (yet most common) mistakes in politics: they assumed they’d never lose another election. But they did, and Republicans have now found enough backbone to say that the gravy train needs to lose a few cars. 

Counties are crying poor, states are crying poor, and Congress is cutting off the handouts. So who’s going to pay? Well, that depends on what you think the Democrats who run all five counties around Philadelphia will do: reduce spending to pre-Covid levels, or raise taxes. As our own Wally Nunn has been saying for years now, the taxpayers are going to be stuck with the bill. 

This is the stuff of death spirals. Look at Connecticut and Illinois to see where it goes from here: taxes going up every year even as people flee for more business friendly states in the South and West. Once that spiral starts to turn, it’s hard to pull out of the gyre. Unpleasant as it is, we should give some credit to the Republicans in the federal congress and the state senate for being the bad guy here. Some one has to do so if we’re going to save the next generation from our mistakes.

Kyle Sammin is the managing editor of Broad + Liberty.