Debt Digest | DHS Shutdown Reflects Congressional Dysfunction and Executive Expansion
Links & Fiscal Facts
Here are this week’s reading links and fiscal facts:
The DHS shutdown reflects congressional dysfunction and executive expansion. Gabe Fleisher writes in Wake Up To Politics: The Department of Homeland Security “has already been shut down longer than any federal agency in history — and now both chambers of Congress have skipped town, virtually ensuring that the shutdown drags on in their absence for two more weeks, at least.” He points to a broader breakdown in legislative responsibility: “Bills passed without any semblance of deliberation. Members posturing on social media rather than actually showing up to take tough votes or exerting their power to stop bills they claim to oppose. Leaders singlehandedly blocking votes on bipartisan bills that otherwise could pass. And lawmakers skipping town so the executive branch can sweep up their messes, allowing the president to expand his power at the expense of their own.” Lett and Boccia emphasize why Congress must not forfeit its spending powers to the executive: “The Founders vested the power of the purse in Congress for a reason—no free people should trust one person with their treasury.”
Means-test Social Security by lifetime income to avoid punishing savers. Scott Sumner comments on the CRFB’s proposed $100,000 cap on annual Social Security benefits per household. The cap is based on benefit levels reflecting lifetime earnings rather than income at retirement. Sumner illustrates why this distinction matters with two neighbors who both spent careers earning near the taxable maximum: “Smith was a high spender who would buy the latest BMW, while Jones was a high saver who always bought used cars. Smith saved very little while Jones maxed out his 401k plan.” Both retire entitled to roughly $50,000 a year, but “Smith starts whining to his congressman that the proposed cap is unfair. It should only apply to ‘the wealthy’. His neighbor Jones is now pulling $100,000/year out of his 401k and doesn’t ‘need’ his Social Security benefit to rise with inflation.” His prediction: “Congress listens to the whiners and applies benefit cuts only to those with high current incomes, not those with high lifetime wage incomes. They punish savers and reward spendthrifts.” Boccia and Nachkebia urge Congress to “rethink the program’s structure entirely, transitioning towards a less expensive flat benefit that ensures seniors are protected from poverty when they can no longer work, while also freeing up resources for younger workers to save more on their own”. They outline their ideas in their book Reimagining Social Security.
Veterans Affairs spending grew 446% in 20 years. The Washington Post editorial board writes: “The Department of Veterans Affairs doesn’t factor much in budget conversations. Yet its budget was over $400 billion last year, which was nearly half the baseline Pentagon budget. […] Between fiscal years 2004 and 2024, Veterans Affairs spending grew by 446 percent — 229 percent in inflation-adjusted terms. That was faster than any other department in America’s rapidly growing federal government.” Furthermore, much of VA spending escapes congressional oversight, as “69 cents of every dollar that Veterans Affairs spends is classified as mandatory spending.” The authors continue, “Such a significant increase in spending ought to be accompanied by better outcomes for veterans, but the record is mixed. Veterans have a higher median income, are less likely to be unemployed and are less likely to be in poverty than nonveterans. All of these facts also held when the department was spending much less money.” They conclude, “Simply throwing money at the problem is politically convenient but ultimately fails to help those who deserve it most.”
The Essential Air Service program should end. The Washington Post editorial board argues the program “was supposed to expire 38 years ago” but persists because “a small constituency, with outsize influence in the Senate, fights for it while few others care enough to push back.” Trump’s new budget proposes $372 million in cuts, but “key lawmakers in both parties declared that dead on arrival.” The editorial board continues “from 1978 to 1982, the number of passengers on EAS-subsidized flights fell by over 50 percent even as total passengers grew nationwide […] The floor to continue receiving subsidies is an average of just 10 passengers per day. The cost of the subsidies has soared in recent years. The total annual price of the government contracts has risen by 60 percent after remaining flat from 2016 to 2022 when adjusted for inflation.” They conclude, “Trump is not even trying to eliminate the subsidies, just reduce them. If Washington was serious about fiscal restraint, that would be on the table.” As Lett writes, “Cuts like these are worth pursuing and long overdue, even if they are swamped by the scale of the defense increase” in President Trump’s budget blueprint.
Bankruptcy gradually, then suddenly is a policy choice. Marcus Nunes, writing in Money Fetish, uses the Hemingway analogy, bankruptcy gradually then suddenly, the same one that Boccia used as the title of a Cato policy report in 2023. He writes, “The phrase has become a cliché of financial commentary precisely because it captures something true about how fiscal crises actually unfold. They are almost always visible in advance. They are almost never addressed in advance. The United States is currently somewhere in the gradual phase, and the political conditions required to exit it are, by any reasonable assessment, almost entirely absent.” For example, “The One Big Beautiful Bill Act [OBBBA] was enacted in 2025 at a cost of approximately $2 trillion over five years. The timing was, by any conventional fiscal standard, extraordinary. As the IMF’s Alan Auerbach observes, in 1990 policymakers chose consolidation when the deficit was rising toward 5 percent of GDP. Now, confronting a much worse fiscal position (a debt/GDP ratio more than twice as high), the political choice [OBBBA] ran in precisely the opposite direction.” Nunes concludes, “The fiscal position is not a crisis today. It is a slow-moving emergency that the political system has chosen, repeatedly and deliberately, not to address.”