Minding the Fiscal Gap: The Plan to Save Our Fiscal Future

WASHINGTON, D.C. — In a brand-new episode of the Republican Study Committee’s (RSC) Right to the Point podcast, Rep. Lloyd Smucker (PA-11), Vice Chair of the House Committee on the Budget, sits down with Kurt Couchman, senior fellow in fiscal policy for Americans for Prosperity (AFP), for a discussion on the nation’s fiscal outlook, the drivers of federal debt, and potential solutions to addressing rising deficits.

Rep. Smucker and Mr. Couchman examine how the U.S. accumulated over $40 trillion in debt, tracing it back to years of poor policy decisions made by Democrat leadership during the 2008 financial crisis, which included bailouts to specific interest groups and regulations that slowed economic growth. They also point to the outdated budget process and the amount of federal spending currently set on autopilot without any oversight.

They discuss how inflation is a direct result of America’s debt but emphasize that the fiscal challenges can still be solved. Rep. Smucker and Mr. Couchman highlight recent Republican efforts to reduce federal spending and strengthen budget enforcement, such as the Working Families Tax Cuts Act. The legislation included program integrity measures to root out waste, fraud, and abuse in federal programs, cleaned up the tax code, prevented the largest tax hike in history, and reduced future spending by $2 trillion over the coming years.

You can listen to the full episode on Spotify and Apple Podcasts.

Read highlights from the conversation below:

Rep. Lloyd Smucker (PA-11): “Let’s talk just a little bit about the debt that we have today, $40 trillion now in debt. Of course, it’s taken a while to get to that point…How is it that we got to $40 trillion in debt? And what does that mean for the average American, who may not be all that familiar with it, but how is it affecting them today?”

Kurt Couchman: “There’s a broken budget process as we’ve talked about, but there are a couple of episodes and other factors, long running things that contribute to it…It was only about 37 percent before the great financial crisis in 2008. And at that time, you may recall, the Speaker of the House was Nancy Pelosi…There were actually a lot of bailouts for specific interest groups that Nancy Pelosi thought was part of her coalition. And so that really ran up the tab. At the same time, there was a regulatory onslaught between the Affordable Care Act, so-called, and the Dodd-Frank Wall Street something or other Consumer Protection Act, and that slowed economic growth. And so, when you pile up the deficits, the new borrowing on top of the existing debt, while you are restraining economic growth, then you’re going to have an increase in the debt burden.”

Kurt Couchman: “We’re experiencing lower economic growth as a result of this high debt burden…That means that you’re just earning less than you otherwise would if businesses had the confidence to go out and invest. And there is more of that confidence because of something we'll probably get into soon. But that is definitely a headwind for the economy. Inflation is a direct result of all of U.S. debt. The Federal Reserve has absorbed a lot of the new debt, and that’s expanded the money supply. When the money grows faster than the economy, you’re going to have inflation…That’s pushing up consumer interest rates and the prices people are having to pay for things…Then there’s the threat of a debt crisis, right. And if that happens, all of these factors just accelerate and explode. And it’s not just a financial sector or an economic crisis. It could be a security crisis. If we suddenly pull back U.S. forces from the rest of the world, in order to save a buck, it could be a democratic crisis, small d, if people are feeling desperate and they vote for someone who makes big promises that they can't keep.”

Rep. Lloyd Smucker (PA-11): “Look at throughout history, there’s been many countries, empires, that have dominated for long periods of time, centuries in some cases, and then have gone by the wayside, either a sudden collapse in some instances or a decline over a long period of time. And there’s a number of reasons for that. But one of the factors that generally exists in all of those situations is poor fiscal policy…And so, like this is a problem that is very, very predictable. We know how this ends ultimately if we can’t change our trajectory.”

Rep. Lloyd Smucker (PA-11): “The last time we were at this debt to GDP ratio was after World War II, after we had ramped up and saved the world. Essentially, we reached levels of debt similar to what we see today. Today, if we have a major crisis, there would be concern about whether we actually have the financial capacity to be able to ramp up to do something similar to that. But let's put that aside for a second. This is still solvable...We just have to start moving in the right direction. We need to keep the confidence of investors in U.S. Treasuries. We need to convince them that we have the will. We have the ability to begin to move in the right direction. And that buys us more time to work, to work through it.”

Rep. Lloyd Smucker (PA-11): “One of the things that was great about the [Working Families Tax Cuts] Act was how it did a lot of program integrity measures, things that don’t seem at all controversial to me. That’s just good government. And I think in a different circumstance, there could have been bipartisan support for a lot of that. And there should have been, frankly. It’s unfortunate that the Democrats are trying to demagogue what is just cleaning up these programs. There’s a lot more work to be done. Medicaid has a lot of waste in it still…And now the Vice President’s anti-fraud task force, they’re taking it seriously. And that presidential leadership is really important.”