- Back in full control of the levers of government, the party that long espoused fiscal prudence is projected to send America's deficit to record highs.
- The Treasury Department forecasts that it will need to borrow more than $1 trillion in each of the next two fiscal years, driven in part by the expectation of lower revenues from the new tax law Congress rushed to pass last year.
- This is not how Republicans intended to govern when President Trump was inaugurated in 2017.
Republicans are learning that the easiest way to solve a problem in Washington is with money. Lots of it.
Back in full control of the levers of government, the party that long espoused fiscal prudence is paving the way for substantial new federal spending that — combined with Republicans' sweeping tax cut — is projected to send America's deficit to record highs.
The Treasury Department says it will need to borrow more than $1 trillion in each of the next two fiscal years, driven in part by the expectation of lower revenues from the new tax law Congress rushed to pass last year. That figure doesn't factor in the reported $300 billion in increased spending that Senate leadership is negotiating as part of a two-year deal to fund the government. Washington will also need to raise the national debt ceiling before the end of net month.
"I think we do have a very unsustainable, dangerous fiscal outlook that will hurt our economy and hurt the prospects for the next generation," said Michael Peterson, chief executive of the Peter G. Peterson Foundation, a fiscal think tank. "The current wave of activity is making matters worse."
This is not how Republicans intended to govern when President Donald Trump was inaugurated in 2017, giving the party control of the legislative and executive branches. White House budget director Mick Mulvaney proudly presented the Trump administration's spending blueprint last spring as the first balanced budget in at least a decade — and that was just the beginning.
"It begins to reduce the size of the debt relative to the size of the economy in year one, OK?" Mulvaney said at the time. "That's how important it was and is to this president to try and bring some fiscal discipline."
That outline — which featured more money for the Defense Department and massive cuts to just about every other federal agency — never became reality. Instead, Congress has passed six stop-gap funding measures that largely kept current spending levels in place as Republicans struggled to reach a fiscal compromise within their own party, much less with Democrats.
Now, with lawmakers once against staring down the barrel of a government shutdown, even the GOP's loudest fiscal hawks are bowing to the political reality that spending money is a lot easier than taking it away. The conservative House Freedom Caucus this week supported a bill to fund the government through March 23 that authorized an additional $30 billion in defense spending and two years of funding for community health centers.
Securing passage in the Senate, where Republicans must work with Democrats on any deal, will likely require hundreds of billions of dollars more.
"I'm very frustrated with the process," Sen. David Perdue, R-Ga., told reporters Tuesday. "The bottom line is it's going to be more debt."
Similar dynamics dogged the Republican rewrite of the U.S. tax code: House Speaker Paul Ryan's original plan called for deficit-neutral reforms founded on the principle of lowering rates but broadening the tax base.
What eventually passed was $1.5 trillion in tax cuts. Even the Trump administration, which has fervently argued that lower rates will eventually pay for themselves with faster economic growth, acknowledges that the broad benefits could take time to materialize.
Peterson estimates that the true cost of the tax law is closer to $2 trillion over a decade. He also pointed out that a stronger economy is also likely to generate higher interest rates, another hit to federal coffers. Net interest payments are projected to jump from $269 billion last year to $818 billion in 2027, making it the third-largest category of federal spending behind Social Security and Medicare.
"This problem will get solved either on our own terms or someone else's terms" Peterson said. "America will do the right thing once it has exhausted all the poor alternatives."