State of the Union

President Trump’s Speech Ignored Fiscal Reality

The State of the Union address didn't grapple with the nation's deteriorating finances.

Feb 1, 2018 | 5 min read | Print Article

The State of the Union is always an occasion when presidents highlight what they believe to be their greatest accomplishments – and preview plans for the future.

President Donald Trump’s speech this week was no exception. He talked about how the tax package passed in December will provide relief to taxpayers, how the stock market is soaring, and suggested investments in infrastructure, job training, border security and the Pentagon. It all sounds great, right?

While I wouldn’t expect any president to dwell on missteps or challenges in a speech that is traditionally about inspiration and aspiration, I do expect some acknowledgment of reality. The glaring omission from this speech was any recognition of fiscal reality and the inconvenient truth that governing and budgeting is about making choices. Trump’s speech contained not a single hint of how his grand plans would be paid for.

Of course, this is not the first president or the first Congress to want to spend more money than we take in as a country. In the last 100 years, the government has run a surplus in only 20 years, and only four years out of the last 50. But the gap between proposed (however vaguely) spending and revenue is both unusually large and problematic because of the timing.

Since the passage of the tax cut package, the fiscal starting line is more than a $1 trillion in the red. Any new extraordinary investments – and lots of ordinary ones – will be deficit financed. Add a whopping $716 billion for the Pentagon, $20 billion for an unbelievably wasteful border wall, as much as $130 billion in disaster relief, and up to a trillion dollars or more for infrastructure. (Some reports suggest that the infrastructure package will be “only” $200 billion, leveraging far more from the private sector and states. But keep in mind this president not only promised us Mexico would pay for the wall, but described himself as the “King of Debt.”)

Whatever the cost of the infrastructure plan, the costs of these proposals are enormous – $20 billion here, $100 billion there, and pretty soon you are talking about real money. This huge increase in deficit spending also comes at an odd moment economically. Most major increases in deficit spending have come in times of major economic challenges – the recession sparked by the financial crisis in 2008 or World War II. This is not a time of economic challenge. The fact is we’re in the third longest economic expansion in more than 150 years. Unemployment is below 5 percent. This is not to say that many families are not struggling, only that the economy doesn’t need another economic stimulus package, it needs some grown-up choices.

October Emergency Supplementals

Cutting taxes and decreasing revenues doesn’t set the stage for making well thought out new investments with federal tax dollars. Nearly every federal infrastructure trust fund(highways, aviatio, and inland waterways – with the notable exception being harbors) is stretched thin due to a glut of demand from lawmakers and communities but a dearth of willingness to raise funds for these projects. And all these infrastructure programs suffer from an unwillingness to prioritize only the best, most important, most economically beneficial projects over less critical projects.

Letter to Speaker Johnson from E2 and Taxpayers for Common Sense

Beyond infrastructure, an unwillingness to make tough decisions is clear, too. Even before passage of the tax cut bill annual federal deficits were forecast to rise. Now we wait as the Congressional Budget Office rejiggers its numbers, but it’s a safe bet they won’t be better.

Like Wall Street investors who lose their inhibitions as steadily rising stock prices lead to irrational exuberance, lawmakers can easily forget just how quickly things can sometimes change. It’s not in most lawmakers’ natural inclination to pump the brakes and ask to see the meat behind a proposal. To demand a full life cycle cost for a project rather than a rosy construction schedule based on optimal funding and zero delays. To ask their constituents exactly which government enjoyed service should be cut when the bubble bursts and trillion dollar deficits return. But that’s what we need.

Instead of ritz and glitz, showmanship and ribbon cuttings, we need to work on satisfying our spending appetite with a level of revenue we can stomach. If we don’t, then the state of our infrastructure, our finances, and our union will suffer.

As the president would say: SAD!