Any business or organizational leader who has had to reduce deficits and debt must be puzzled by the approaches taken by President Trump and his budget czar Elon Musk.
First, budget balancers look for additional sources of revenue. Why then, did Musk chop the ranks of the Internal Revenue Service (IRS)? The Yale Budget Lab has estimated that the deep cuts to the revenue agency – more than 6,000 jobs – could reduce federal tax revenues by as much as $500 billion per year. Fewer tax enforcers allow more avoidance games by taxpayers, especially high-income taxpayers who hire crafty lawyers and accountants.
That revenue loss alone is 7% of the current federal budget of about $7 trillion.
Be aware that deep staff cuts across multiple federal agencies will be nowhere near enough to offset the half trillion dollars revenue reduction. It’s just plain arithmetic.
So, why would long-time Republican fiscal conservative like Reps. Glenn Grothman, Scott Fitzgerald, Tom Tiffany and Sen. Ron Johnson roll over for Musk’s colossal mistakes. Musk pumps his chest about the terminations, but has lost the big picture objective for cutting the annual federal deficit and reducing U.S. debt of a godawful $37 trillion.
The same financial illogic applies to Trumpian tax proposals. The GOP will surely extend the 2017 tax cuts from Trump’s first term. As attractive as that may seem to taxpayers, especially individuals with high incomes and corporations, the lower revenues will serve to keep big deficits in place.
That level of red ink may have become acceptable to Republicans, but why cut even further? On the campaign trail, candidate Trump proposed eliminating a wide variety of other taxes, such as taxes on tips, on Social Security disbursements and on overtime for workers. Here on the grassroots level, I have not heard any push from anyone for those added cuts.
Republicans would also like to increase the $10,000 deduction for state income and local property taxes. Why, in tough budget times?
In terms of long-term expenditures, one place not to cut is the $40 billion per year we are sending to Ukraine to keep its heroic warriors in the fight against the barbaric Russian invaders.
It is a current expense of about 5% of our annual defense budget. That is a pittance compared to the damage that Ukraine fighters and Western weapons are wreaking on the economy and military capacity of Russia, America’s most rapacious and immoral enemy.
Has our president never heard of table-stakes poker? His casinos did go insolvent, but he should still understand that he has a much bigger pile of chips than Putin and that he who has the most chips almost always wins.
As noted before, the U.S. economy runs at $30 trillion and Europe’s is about $20 trillion. Russia runs at a weak $2 trillion.
Presidential candidate Ronald Reagan visited West Bend in 1987 and conferred with then-Mayor Mike Miller.
Remember how another Republican president used that enormous economic leverage. During the height of the Cold War, Ronald Reagan raised the stakes against the Soviet Union by launching his “Star Wars” strategic missile defense system. He understood fully that Soviet leader Andropov could not match that kind of military expenditure. In the years that followed, the Soviet Union dissolved.
This is bit of a rambling column, but almost everyone on both sides of the political aisle agreed that financial common sense and political savvy need to drive the budget-making process. Financial smarts have been missing in the Trump/Musk blunderbuss approach to getting our deficits and debts under control. Here are some additional ways Trump could get the budget in order:
- Forget the small stuff, like eliminating the agencies and its handful of civil servants who maintain the nation’s strategic agricultural seed repository. Such minuscule cuts save next to nothing.
- Go after spending that can wait for better budget cycles, like the billions being spent on Musk’s SpaceX explorations. Do the space research when we have a national surplus. (The recent rescue of the two stranded astronauts alone cost an estimated $150 million).
- Cancel the $11 billion in tax credits for Musk’s Tesla venture.
- Forget for now the billions proposed by Trump for putting a human on Mars.
In short, let’s get pragmatic and down to earth, instead of ideological or grandiose.
(Torinus is a former chairman of the Wisconsin Taxpayers Alliance.)
