In no way, shape or form does the United States have a fiscally responsible mix of taxation and spending. To the contrary, already saddled with structural budget deficits, the federal government slid further into the red because of the tax cut enacted by the Republican Congress and signed by President Donald Trump in 2017. This measure, skewed heavily toward upper-income households and businesses, and not paid for by offsetting spending reductions, added an estimated $1.5 trillion to projected federal debt through 2017.
For the time being, the deficit, set to hit about $900 billion this year, is not doing harm to the U.S. economy; over the longer term, however, it creates a range of risks, from diminished fiscal space to deal with another recession, to a loss of confidence by global bond markets. A well- functioning U.S. government would be planning to restore long-run balance between revenue and expenditures, but by that criterion, among many others, the government is not working optimally.
Instead, Americans have been obliged to settle for the achievement of such minimal goals as avoiding government shutdowns and extending the federal debt limit, so as to prevent a default. Even those have proved perilously difficult in recent years - and now, yet another debt ceiling deadline is upon us, as revenue growth continues to lag spending, despite a robust economy. Treasury Secretary Steven Mnuchin recently confirmed that his department will exhaust debt-shuffling "extraordinary measures" - which have helped to avoid a default since the government hit its $22 trillion debt limit in March - sooner than previously calculated, possibly in mid-September, rather than as late as November.
Congress must extend the debt ceiling, sooner rather than later, and ideally before it leaves for an extended August recess. Lawmakers should also wrap in a fresh agreement on federal discretionary spending levels for the next two years, to replace the one they struck in February 2018, which expires at the end of September. The last thing Americans need right now is a default, which could badly rattle global financial markets; the second-to-last thing we need is another government shutdown. For all their bitter disagreements, both the GOP and the Democrats in Washington share an interest in avoiding those worst-case scenarios, given the potential for both of them to get the blame ahead of the 2020 election.
House Speaker Nancy Pelosi, D-Calif., has called for Congress to accelerate budget talks and reach a new spending deal, tied to a debt ceiling increase, before August, which is ambitious as to timing but pragmatic as to the ultimate objective. Any deal must be bipartisan, but too often in the past, the Trump White House has made agreement more difficult to achieve by insisting on funding for its divisive pet project - a border wall. That would be even more futile now that Democrats control the House. So we can only hope that Trump's team won't waste any time on it, or other politically unfeasible demands, but will respond to Pelosi's overture in the same practical spirit.