The Real Bleep-Hole Moment—–$40 Trillion And Counting

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by David Stockman, David Stockman’s Contra Corner:

You can call it the bleep-hole moment (per the Fox “family channel”) or the shit-hole moment (per the rest of the MSM), but what you can’t call yesterday’s contretemps in the White House is evidence that sentient adults are in charge of the Imperial City.

And, no, we are not getting down on the Donald for using a swear word—nor are we trying to out race-card Don Lemon as to the obvious implications of the President’s crude phraseology.

Indeed, even prior to yesterday’s outburst it was hard to deny that Trump is a semi-literate bully and that he never got (read) the memo on racial comity and respect. But we actually happen to think that the Donald’s potty-talk eruption resulted not from some dark place in his mind and heart, but from sheer frustration as the intractability of the immigration issue closes in on him.

What we mean is that neither party has its cards face up on the matter—-which goes way beyond the potential deportation of the 800,000 dreamers, chain migration, the diversity lottery and the Wall. Underneath it all there is a brutal, raging political struggle for dominance which is almost existential in import.

To wit, the sundry Dem caucuses want more immigrants, and the browner the better, because it’s their only route to electoral dominance. By contrast, the hard core GOP immigrant-thumpers are desperately attempting to hang-on to Red State rule in the face of the forbidding demographic math of the white population—and the fact that not many Norwegians want to come to America anyway.

It would not be too far-fetched to say that the partisan battle for office is morphing into a racial-ethnic war.

Fox host Laura Ingraham is both exceedingly articulate and thoughtful on many issues, but on immigration she is a screecher. So her diatribe with respect to Thursday’s doings goes right to the heart of the matter:

“Number two, Democrats favor granting citizenship to illegal aliens because they believe it is the absolute key to achieving a super-majority, just like the one they currently have in California. They want that in every key battleground state. So, there’s so much more at stake than just the future of the DREAMers. This deal could decide the fate of the country.

We happen to agree with her, but for a vastly different reason. To wit, the immigration issue threatens to destroy the Republican party—either because it terminally rips it apart or because the nativist immigrant-thumpers completely prevail and thereby marginalize the GOP electorally.

Yes, there is nothing in the constitution or American history that requires a politically healthy GOP or  even a Republican party at all. Unfortunately, however, there is nothing in the constitution which requires fiscal rectitude, either. Yet that’s exactly where Laura Ingraham’s “fate of the country” comes in.

Washington is drifting rapidly into a hellacious fiscal calamity and the only thin reed of resistance is the once and former party of fiscal rectitude. If it does not get its act together and screw-up some courage and focus on the matter soon, the nation’s budgetary doomsday machine will become unstoppable—-with the national debt soaring to $40 trillion and 140% of GDP within the next decade.

Moreover, this isn’t just a risk; it’s a near certainty based on the built-in budgetary math and the sheer auto-pilot nature of its driving forces. For instance, the income entitlements including social security, disability, SSI, food stamps, family assistance, the earned income credit, government pensions and veterans benefits cost $1.5 trillion in the year just ended, but in the absence of Congressional action will automatically soar to $2.4 trillion by 2027.

The tab for the giant open-ended medical entitlements—Medicare, Medicaid, CHIP and ObamaCare—is racing upwards even more rapidly: at nearly 7% per year. Consequently, last year’s spending of$1.2 trillion on these programs will become $2.2 trillion by the end of the current 10-year budget window.

These big numbers are bad enough in the telling, but their place in the structure of the Federal budget is what screams out calamity ahead. To wit, last year outlays for the combined income and medical entitlements amounted to just under 14% of GDP, but if Congress were to go AWOL for the next tens years, they would automatically absorb 18% of GDP by 2027.

And that’s where the rubber would meet the road. Owing to the Christmas Eve tax cut special, the revenue base will drop by $280 billion in the year just ahead (FY 2019), bringing Uncle Sam’s take down to just $3.4 trillion or 16.5% of GDP—-the lowest level since the eve of the Korean War.

In other words, what is now in place owing to the folly of the GOP tax cut and 30 years of bipartisan fiscal can-kicking, is a revenue base that is not even large enough to pay for the big entitlements.

And, of course, that omits entirely the roughly $2.7 trillion that current GOP policy would require by 2027 for national security, roads, education, agriculture, space, small business, medical research, rivers and harbors, courts and prisons, the Census Bureau, the Washington monument  etc.—and what will be nearly $1.0 trillion per year of interest on the national debt by then.

To be sure, they have this sheer absurdity—-$2.7 trillion of non-entitlement expense and zero revenue to pay for it—papered over with a motely array of  budgetary gimmicks. These cause projected revenue to rise back to just over 18% of GDP by 2027, but this is overwhelmingly fake revenue. Even then, it’s still is not enough to pay for the vast reaches of government outside of the entitlements summarized above.

For instance, the individual tax cuts, which will allegedly go to 90% of taxpayers and which are being ballyhooed by the White House as showing up in revised withholding tables by February, will cost $189 billion in the first full year (FY 2019).

But thanks to the disappearing ink in which they were written (i.e. the 2025 “sunset”) that number swings to a $32 billion tax increase by 2027. Of course, that’s never going to happen: The GOP tax-writers have already baldly confessed that the sunset is just a gimmick to avoid the fiscal discipline required by the budget rules. The only thing they haven’t confessed is on the eve of which up-coming election will they vote to cancel the sunset, thereby saving 140 million individual tax filers from what would otherwise be upwards of a quarter-trillion per year tax increase.

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