Who hasn’t looked upward on a clear night and gazed at the grandeur of the heavens? Distances measured in light years, galaxies numbering 100 billion. It is all imponderable. The Milky Way – the galaxy which contains our Sun and its solar system – for millennia has mesmerized poets, artists and starry-eyed romantics alike by the magic of its magnificence.
On our little planet Earth and in our great country, however, there is a new sphere of immensity measured in trillions known as “fiscal space.” U.S. Secretary of Treasury Janet Yellen used this term recently to describe the power of the federal government to spend trillions of dollars – denominations of money no less inscrutable than the stars in the sky – to address emerging national emergencies. And while the universe may be expanding, our country’s fiscal space is rapidly disappearing, and may not be around when we need it most.
Who can truly comprehend the scale and consequences of the stratospheric spending of the Trump, and now Biden, administration? Over $4 trillion of “fiscal space” was used up in 2020 in response to Covid, and upon taking office, President Biden added an additional $1.9 trillion to that pile of debt. Now he seeks an additional $4.5 trillion in spending for infrastructure, jobs creation and family assistance programs.
Give him credit for remembering the elderly and including in his mega-package an 8-year, $400 billion proposal to reduce the waiting list for “aging in place” options and avoid placements in long-term care facilities. Unlike with the previously-authorized $6 trillion in spending, this and the other $4 trillion-plus initiatives Biden proposes purportedly will be funded by new or increased taxes. In theory that makes his latest plan budget-neutral. But as the Wall Street Journal reported last week, relying on revenue more than 10 years into the future to pay for the here-and-now is risky business and may mean massively more red ink.
Speaking of which, the Wall Street Journal ran a story last week reporting a record $1.9 trillion budget deficit in the first seven months of this fiscal year. This staggering 30% increase from the previous year is a remarkable feat considering that IRS tax receipts today have never been higher. And even the good news coming from Washington is bad news. The jobless claims report from last week announcing the lowest level of worker applications for unemployment benefits since before the pandemic is of little consolation when the numbers are more than double the 2019 weekly average.
What does all of this mean? I previously blogged on the danger, even in pandemic times, that this kind of unprecedented spending presents to the economic and social interests of the elderly. Borrowing and spending in these astronomical amounts inevitably drives up inflation and interest rates. Indeed, inflation already is surging, with the April increase in the consumer price index the highest year-to-year spike since the height of the housing crisis 13 years ago. When inflation goes up, those living on fixed incomes suffer, and that means our elderly and disabled will be in harm’s way.
And what’s worse, Medicare may not be there for them. Use up all of your “fiscal space” now and there won’t be any in the future to prevent the collapse of our nation’s health insurance system for seniors. Astronomers, like economists, are paid to make long-term predictions. They expect the Milky Way and Andromeda Gallaxy to collide in around 4.5 billion years. The Congressional Budget Office economists tell us that the collision of Medicare and bankruptcy will take place in about three years. That is 2024! Shouldn’t lawmakers and the president be talking about this dreadful and imminent possibility before committing to trillions in new spending?