Mostly good news emanates from Washington this week, but a very dark threatening subject is being ignored.
President Donald Trump continues to be a bundle of energy tweeting on different topics, but not the topic I'm most worried about. He is clearly in command of the agenda in Washington, much to the exasperation of the national media. Trump has done a stunning job of getting a preliminary agreement with Jean-Claude Juncker (chairman of the European Commission) on a free-trade zone with Europe. We have not seen the fine details of the trade agreement, so the jury is still out. However, this is great news for those of us who are basically "free traders."
We have heard a plethora of news this week: the 4.1 percent growth rate, the low unemployment rate, the possibility of Trump seeking a government shutdown over his desired border wall, a potential meeting with Putin, the possibility of another tax cut — this one administratively created without a vote in Congress — and $12 billion in proposed massive new subsidies for farmers to offset the tariff damages. In addition to his normal presidential duties, Trump also manages to fend off various critics and investigators. Whether one agrees with him, it cannot be denied he is a man of energy and steely determination. I wish I had his level of energy.
Yet amid all the vigor, tweets, meetings and speeches, still spectacularly missing is attention to the deficit.
Neither Trump nor the media nor Congress have discussed adequately the huge deficit that is continuing to balloon upward. From January through June of this year, corporate tax payments fell by a third from 2017. That was largely a result of Trump's tax cut. The administration argues that in the long run the economy will do better and more revenue will result. Many good economists disagree. So far, tax revenues are way down and the deficit is up.
Steven Mnuchin, the Treasury secretary, announced this week that the Trump administration may reduce taxes on the rich even more if it can find a legal way to do it. It is still too early to determine what the result of the Trump tax cuts will be, but it appears that it will help to raise the federal deficit to nearly $1 trillion. This could result in a classic economic train wreck.
How would this train wreck come about? It would start with the failure of an auction of U.S. bonds at the Treasury. Suddenly, no one would want to buy our bonds or invest in our debt anymore. Other countries have had failures of their debt auctions, such as Greece, but there have always been bigger economies around to bail them out. The U.S. has such a big economy that nobody would bail us out. We would have a culmination of the severest inflation and a complete collapse of the value of the dollar. Economic chaos and a multiyear depression could easily result. Severe immediate cuts in government spending and substantial tax increases would be required. That would choke our economy.
Strangely enough, Bill Clinton was the last president to balance the U.S. federal budget. He did so with the help of Newt Gingrich and other Republicans and Democrats. He also did so with the tax increase, but it laid the foundation for several years of growth, including the growth we are enjoying now.
I have been very disappointed in Trump and the congressional Republicans for the lack of concern about the deficit. Republicans are actually adding more to the deficit than Democrats lately. As I mentioned earlier, Trump proposes to add $12 billion worth of farm subsidies to offset the damage of some of his tariffs. Of course, if the farmers get $12 billion, you can be sure that there will be at least $100 billion distributed elsewhere to manufacturers and others affected. If this continues, it will result in a catastrophic economic event in our country, one that will have a wrenching effect on average people's financial lives.
I am an old-fashioned moderate Republican, having served 22 years in Congress (as a representative from 1975 to 1979 and as a senator from 1979 to 1997). I used to keep a debt-o-meter in my office to emphasize to my constituents that I kept my voting within a balanced budget. Today, constituents seem to have forgotten all about the deficit.
So, in the wake of Trump's remarkable ability to address countless subjects simultaneously, there is one thing he, Congress, the media and the country are overlooking — that is the growing federal deficit. I fear it will catch up to us all with a vengeance.