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Federal Funding Deal Increases Spending, Waives Debt Ceiling

March 5, 2018

President Donald Trump approved a congressional continuing resolution authorizing more federal spending and temporarily waiving the debt ceiling.

President Donald Trump approved a congressional continuing resolution authorizing more federal spending and temporarily waiving the debt ceiling.

After funding lapsed overnight on February 8, Congress approved the Bipartisan Budget Act of 2018, a two-year funding deal that will increase spending by a total of about $419 billion over the biennium. The bill, signed into law by Trump on February 9, also waives limits on the federal government’s borrowing authority until March 1, 2019.

The new law alters provisions of the Budget Control Act of 2011, raising caps on domestic spending by $296 billion, a 311 percent increase, over the next two years. Military spending limits will be increased by $160 billion, and $89.3 billion will be allocated for government disaster relief funds over the same period of time.

The Bipartisan Budget Act will be partially offset by about $100 billion in projected savings, realized by extending the duration of the Budget Control Act’s across-the-board spending reductions and several tweaks to Medicaid and Medicare operations.

‘Boilerplate Rhetoric’

Gary Galles, a professor of economics at Pepperdine University and a policy advisor for The Heartland Institute, which publishes Budget & Tax News, says the spending bill demonstrates Congress lacks interest in fiscal restraint.

“Our lawmakers offer up boilerplate rhetoric on behalf of liberty and citizens’ rights, but what they authorize is strikingly at odds with what they say,” Galles said. “Congress reveals its absence of interest in either respecting constitutional constraints or America’s general welfare. In particular, however, they show even less respect for future generations, whose burdens are constantly expanded by decisions such as the recent deal, which is not even nearly paid for.”

Debating the Debt Ceiling

Galles says the debt ceiling is a stage prop many politicians use to act as if they care about restraining the growth of government.

“The debt ceiling is more of a circus than serious policy, because Congress, which created the constraint for themselves, can just decide to ease the constraint whenever they choose,” Galles said. “Ultimately, we all know the debt ceiling will be lifted whenever necessary, so no one believes it means anything real anyway. The only real effects of the debt ceiling are to allow politicians to play-act as responsible, when they are anything but responsible.”

Nan Swift, federal affairs manager for the National Taxpayers Union, says the debt ceiling may not be an effective way to restrain federal spending, but it’s better than nothing.

“The debt ceiling continues to be raised as spending continues to outpace revenues,” Swift said. “Until Congress can find a way to meaningfully reform their budget process and maintain restrictions on spending growth, that won’t change. Eliminating the debt ceiling entirely would be the same as throwing credit card bills in the trash or simply turning up the radio when the rattling sound in your car gets worse. The problem is still there, and ignoring it won’t make it go away.”

Multiplier Effect

Galles says every dollar the government spends is a dollar or more unavailable for use by everyday people.

“Every dollar of government spending comes out of private pockets, since government has no resources it does not first commandeer from its citizens,” Galles said. “Every dollar taken from the private sector costs society not just the dollar but [also] the added burdens imposed on society from the voluntary trades, and the wealth that would thus have been created, that are eliminated by the taxes, which economists call the excess burden or welfare cost of taxation.”

Fiscal Storm Warning

The consequences of high spending may not be immediately noticeable, Swift says, but they are coming.

“This probably won’t be perceived in the everyday lives of most voters, at least not at first,” Swift said. “This is the consequence of dispersed costs. The real toll of overspending and failing to address our debt disaster could soon come in the form of reduced Social Security and Medicare outlays, higher taxes, and lethargic economic growth.”

Taxes, Today and Tomorrow

Galles says spending and taxation are inexorably linked.

“We must remember that whenever government spends resources, it is committing to pay for them,” Galles said. “If it doesn’t tax citizens today, it must tax them tomorrow, [because] deficits are just delayed taxes, which will be even more costly.”

Galles says the additional government spending is not worth the cost.

“What does government do well enough that we want it to do more of?” Galles said. “Neither current taxation nor future taxation via deficits is worth running for expenditures that fail to meet the efficiency test, which is most of it.”

‘It Is Our Money’

Government naturally does not handle money as well as individuals do, Swift says.

“People should care about how the federal government spends and budgets because it is our money they are spending,” Swift said. “When people make budgets, they do so to set priorities and plan for the type of future they want for their family. They do it because they have limited resources and they need to make sure that they spend those resources wisely to meet their needs. Unfortunately, the government doesn’t take this approach.”

Owen Macaulay writes from Hillsdale, Michigan.

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