The United States debt hit $40 trillion recently. That news might make it through a news cycle or two before fading. To most decision-makers, it’s a recurring irritant, but not enough to affect more than rhetoric. It’s not clear exactly when servicing this debt will seriously impact our standard of living, but turning our heads and kicking the financial can down the road has always been a lot easier than addressing a growing challenge.
The can ceased its journey for a few years when Democratic President Bill Clinton and Republican House Speaker Newt Gingrich took advantage of some fortuitous economic trends to compromise on a series of balanced budgets. That kind of bipartisan cooperation is far in the rearview mirror.
Responsible use of debt
is part of governing. Borrowing money for a one-time expense for a bridge or public building spreads the payments over the life of that asset. Things get messy when governments borrow for recurring expenses such as payments to individuals.
It makes sense for people to obtain a mortgage and to pay it back over time. It makes little sense to borrow each month to pay for groceries, and even less sense to borrow to pay for entertainment and travel. Eventually, the bill comes due. Responsible people budget accordingly. After all, they don’t have much choice. They can’t just print money.
So why do governments have so much trouble budgeting responsibly? Unlike families, the people making the decisions aren’t the ones to pick up the pieces. There’s always going to be more pressure to spend money now than to save for later. It’s always going to be easier for those in office to write checks that those who follow will have to cash.
That doesn’t make anyone evil. It makes them rational, responding to the set of incentives they face. Of course, many, if not most, responsible elected officials heed their more responsible angels and resist temptation. James Madison summed it up well in Federalist No. 51. Without some structural controls to counter the short-term disincentives, the less angelic among us will get us in trouble. And they have.
“If Men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and the next place, oblige it to control itself.”
A legislator who serves in 2026 doesn’t answer to the taxpayer of 2050 and those whom they elect. Consider the politician facing a public-sector union in a budget negotiation. Raising current salaries costs money now and will show up in the budget they’re obliged to balance. Pension commitments come due later. State pensions in Illinois, municipal pensions in Chicago, along with those in many cities around the nation, have massive unfunded liabilities accumulated over decades.
It’s a lot easier to respond to demands when the bill doesn’t come due for 20 or 30 years and the elected official who authorized it will likely be retired or have left this earth. The burden will fall on future taxpayers and the leaders they elect.
The ratio of debt to gross national product has been growing steadily regardless of which party is in power. Democrats spend beyond their means on social programs. Republicans do so on national defense and tax cuts without reduced spending.
Finding effective governmental safeguards to counter this perverse disincentive to responsible spending is proving especially difficult. The emerging narrative from Democratic Socialists is all about spending, lots of it, and sooner rather than later.
Taxes on wealth provide funds, but only for a while. Meanwhile, Republicans have abandoned any of the balanced-budget zeal from the Tea Party days. Look for the debt monster to turn on its handlers - or more likely their children.
William Lyons is Professor Emeritus of Political Science and Associate Director of The Institute of American Civics at the Howard Baker School of Public Policy and Public Affairs at the University of Tennessee. He also served as Chief Policy Officer for Knoxville Mayors Bill Haslam, Daniel Brown and Madeline Rogero. The opinions expressed are those of the author and do not necessarily reflect the official policy or position of the Institute of American Civics or the University of Tennessee.
This article originally appeared on Knoxville News Sentinel: Perverse spending incentives are real. The bill always comes due | Opinion
