The other day, Representative Tom Emmer – the House Majority Whip and the number three Republican in the House of Representatives – made a statement that, on the surface, doesn’t seem all that unreasonable, to the effect that the GOP budget/debt ceiling bill enacted by the House would impose exactly the same federal government spending levels next year as in this year. In addition, it would limit future spending growth to one percent per year.
Unhappily, if one actually thinks this through, which Emmer either did not or doesn’t want anyone else to, there are major economic and legal problems with such a spending cap.
First off, the federal government employs not quite three million people in civilian capacities and has 1.4 million service members on active duty. Pay raises have already been enacted for these people. In addition, the pay of military retirees is automatically indexed to inflation, as are all Social Security benefits. Active duty military pay and benefits last year ran over $51 billion, and military pay has been boosted by 4.7% for 2023 – which will require an additional $3.3 billion.
Likewise, the current annual civilian payroll for the federal government is roughly $200 billion, and the increase in payroll for this year will be $10 billion. Currently, 67 million Americans receive almost one trillion dollars in Social Security benefits annually, and benefits are automatically indexed to inflation, and next year’s mandated increase is roughly $90 billion.
The government also purchases hundreds of billions of goods and services, from paper clips to multi-billion-dollar aircraft carriers. If inflation stays even at 5%, holding the budget at the same level would result in an actual decrease in purchasing far more than just 5% because of the increases already mandated in pay and benefits will leave less funding for all other government programs. Then add in the need to replenish the amount of military equipment we’ve sent to Ukraine, and a wide range of other government programs will have to be decreased.
I could list budget category after budget category, but they’d all show the same thing.
Now, it’s true that inflation increases people’s incomes, but because federal income tax brackets are indexed, tax revenues don’t increase nearly as much as does the cost of government.
But the problems with the GOP proposal would only get worse every year. Why? Because for only three years out of the last 30 has inflation been below 1%, and the total inflation since 1993 has been 109%. All of that means that, under the Republican proposal, almost every federal program except Defense, Social Security, medicare, medicaid, and federal retiree benefits would face 15-20% cuts in less than five years, with greater cuts occurring each succeeding year.
So… the GOP proposal, if you think again, is far less reasonable than it sounds.
By the same token, Democrats can’t just keep everything as it is, because the mandated increases, and merely keeping up with inflation, will increase budget deficits. So they either have to cut back in some places or increase taxes, so some combination of both, to avoid even more inflation.
Personally, given that half of the current inflation was caused by increases in corporate profits, while the real incomes of more than half the population didn’t keep up with inflation. I’d favor higher corporate taxes, with no loopholes, and higher taxes on incomes above, say $2 million, and much higher taxes on incomes above $10 million.
Yet, from what I can see, neither side is looking at the problem rationally.