The Coming Austerity Crisis

In the past, fiscal conservatives warned that future generations would pay the debt Democrats were accumulating. If the Democrats have their way, that future will arrive much sooner than we think.

by Chuck Warren for American Greatness

The U.S. government’s debt is 150 percent of the gross domestic product. The current inflation is just the first problem caused by the debt. If deficit spending continues, soon high interest rates and the decline of U.S. debt credit will follow. Instead of incrementally fixing the problem, austerity economics will be the outcome. The Greeks went through it in 2007 and 2008, and they will be the first to tell you it was no fun. Congress, and especially during sessions with Democratic majorities, bears much of the blame for this.

Every time Democrats controlled the Congress during a Republican administration over the past two decades, they appropriated more money than the president requested. These additional expenditures, including the interest paid on them, well exceed $1 trillion in isolation. 

But each budget builds on the previous budgets enacted. For instance, the Trump Administration’s proposed budget for 2021 would have cut the deficit by $850 billion in 10 years. Adding up the money saved annually over those 10 years, it would have been trillions of dollars. If Congress had committed to the budgets submitted by Presidents George W. Bush and Donald Trump, the money saved would have totalled trillions more. 

On top of this, recall how Congress in 2007 rejected President Bush’s Social Security reforms, a program which remains the largest item on the federal budget by far. There is no study to show how much U.S. taxpayers would have saved if Democrats in Congress had not added money to the budget or reformed Social Security, but one can easily estimate that it would have been trillions of dollars.

Why Democrats didn’t do it is twofold. Spending is always popular if nobody has to pay for it, and they thought that the debt would never become a problem, or that, if it did become a problem, they would no longer be around to fix it or suffer the consequences. 

But others had a more ideological reason.

Leveling wealth disparities is a perennial progressive goal, and taxing is the easiest way to accomplish it. Many progressives have hoped that, when the problems with debt begin manifesting themselves, then the government would have no choice but to tax high-income and middle-class Americans.

In 2020, Democratic presidential candidates proposed increasing taxes on the wealthiest Americans only. But all studies show that, even if the wealthiest Americans paid 100 percent in taxes, they still couldn’t finance the enormous spending proposals of the Democrats. If the top 1 percent paid all of their incomes in taxes, that would be around $800 billion, not enough to pay one year of deficit. The middle class will also need to pay more in order to finance Democratic and progressive projects.

Such policies are already under way. During the 2020 campaign, Joe Biden pledged not to raise taxes on middle-class Americans. But according to the center-left Tax Policy Center, his American Jobs Plan proposal would have added an average $300 to the tax bills of three out of four middle-class Americans.

The Inflation Reduction Act is the beginning of this. By nearly doubling the IRS budget, Democrats hope to extract more money from middle-class Americans. Congressional Democrats, including Senators Mark Kelly of Arizona and Catherine Masto of Nevada, voted against an amendment by Senator Mike Crapo (R-Ind.) to limit new audits to only Americans with incomes above $400,000.

If Democrats’ target is only “the rich,” then why would they do this?

Under progressive Democratic policies, the rich and the middle-class will pay more in taxes. The narrow majority of Democrats in the Senate, with the supposedly moderate Democrat Joe Manchin from West Virginia, has so far tamed their ambition. But if Democrats succeed in increasing their majority in November, it won’t just be spending increases. Taxes for most Americans will rise.

Democrats have claimed they just want to help those who are in need. But they also want to punish those who have. In the past, fiscal conservatives warned that future generations would pay the debt Democrats were accumulating. If the Democrats have their way, that future will arrive much sooner than we think.