There is an old French adage that applies to the Republicans in Congress and perhaps the Trump Administration: "Plus ca change, plus c'est la meme chose" ("The more things change, the more they stay the same"). The appetite for ever greater government Spending appears to be no different than in previous years. This uncontrolled addiction, unless reined, in will cast a dark cloud over entire term of the Trump presidency.
Rather than an outright repeal, the hierarchy of the Congressional leadership has just given birth to an amended version of Obamacare that does not eliminate subsidies but recasts them as tax-credits, continues Medicare subsidies to the States, and forwards to the states a gratuitous $100 billion not included in Obamacare, thus perpetuating and accelerating the level of government spending that would have occurred under Obamacare. (Beyond the spending in the bill, this legislation is essentially an acknowledgment that the Democrats have won the battle and there will be, sooner rather than later, a single payer government run health care system in the United States.
Beyond the spending and other provisions in the bill, this legislation is essentially an acknowledgment that the Democrats have won the battle and there will be, sooner rather than later, a single payer government run health care system in the United States which will assuredly bankrupt the country. Based on the current per capita cost of the National Health Service in England, the outlay in America when, and if, that day occurs will be in excess of $1.1 Trillion per year (in addition to the current spending on Medicare and Medicaid) or nearly 30% of the current Federal Government budget.
Disappointingly, President Trump and his Administration have thrown their support behind this plan and are apparently determined, with perhaps a few minor amendments, to pass this lobbyist written legislation to the point where Trump is openly ridiculing Republicans, such as Senator Rand Paul, who are opposed to it. And, in what could be a major blunder, he apparently is open to the eponymous Trumpcare.
Additionally, the Administration continues to discuss a $1Trillion (over ten years) infrastructure package ostensibly structured as a private/government partnership, but very few of the projects under consideration are conducive to a partnership with private capital as there is no mechanism for a return on investment for potential investors. Thus, leaving the taxpayer to fully fund the vast majority of any proposed projects.
A pet scheme of the Administration is a proposal for mandated six-month maternity leave and government funded (through tax credits) childcare. The price tag is estimated to be at least $500 Billion over ten years and that number does not take into account the cost of the mandated maternity leave on the private sector.
There is an absolute need to a dramatically increase Defense spending, which was deliberately underfunded over the past eight years. That vital spending will amount to an increase of approximately $1.5 Trillion over the next ten years.
Without any changes or overhaul, the mandatory spending on Social Security, Medicare and interest on the national Debt will increase in excess of $3.2 Trillion over the next ten years as the nation's population ages and the debt continues to expand exponentially.
In January of this year the Republicans in the Senate passed a budget resolution that included an estimated $10 Trillion dollars in new debt over the next ten years. However, that budget resolution did not include the cost of such items as the childcare proposal or the very real potential for rising interest rates, which would impact the annual interest payments. These two items alone could potentially increase the deficit by another $1.5 Trillion.
Today the national debt stands at $20 Trillion ($10.6 Trillion in 2008). The debt is now 108% of the U.S. Gross Domestic Product (GDP) or the monetary value of all finished goods and services produced in a year. By comparison, the comparable debt for all the nations of the world totals $58 Trillion and this debt is 73% of the global GDP.
Thus, the United States with less than 5% of the world's population, and whose Gross Domestic Product accounts for 23% of global GDP, is responsible for nearly 35% of global sovereign debt.
By adding another potential $10 Trillion in debt over the next ten years, the United States is projected to increase its share of the global debt to nearly 40%. Meanwhile, even with a robust average GDP growth of 3% per year (which the Republicans assumed) for ten years (it has averaged 1.4% per year since 2008), the debt to GDP ratio would increase to 120%.
While there has been talk of spending reductions by the Trump Administration, the potential cuts do not begin to offset the new proposals. Their adamant refusalto propose any reforms of Social Security and Medicare, which account for nearly 60% of all federal government spending, guarantees massive deficits into the foreseeable future. The long-term unfunded financial commitment of these programs and other entitlements, if not dramatically revised, amounts to over $105 Trillion, or more than five times the current GDP. At the pace the nation is presently committed to spend, by 2028 the unfunded liabilities will amount to over $145 Trillion or six times projected GDP.
The Trump team is relying on annual economic growth in excess of 4.0% per year to increase tax revenues and thus minimize the debt over the next ten years; however, the United States has not experienced a prolonged period of 4% annual growth since a four-year period in the late 1990's, when the national debt was $5.5 Trillion and just 58% of the GDP.
Further, with the changing demographics and global competition, the odds of this kind of growth occurring for an extended period of time are extremely remote and far too nebulous to rely upon, particularly in light of the potential for serious global financial instability over the next few years.
While President Trump has done some very good things, this unwillingness to tackle head on the out-of-control spending, in particular the entitlement programs, is very disappointing and will, in the long-term, cast a shadow over his presidency. Regardless of whatever else he accomplishes, if the nation is financially worse off at the end of his term than before, his will be a failed presidency.
Donald Trump may well be the last President that can reverse this headlong dash into national insolvency. He must grab the reins, as there is little chance this Republican Congress will be more than their usual feckless selves easily swayed and intimidated by the media, the Democrats and lobbyists as they proved once again with the dreadful proposal to replace Obamacare and their unwillingness to curb overall spending. Donald Trump, on behalf of the nation's children, grandchildren and future generations, has to make reining in government spending his first priority.