Debt Digest | Trump Says He’ll Balance the Budget, but GOP Budget Resolutions Tell a Different Story
Links & Fiscal Facts
Here are this week’s reading links and fiscal facts:
Congress should reinstate the earmark ban. John Hart, CEO of Open the Books, highlights that the 2011-2021 earmark ban saved taxpayers $141 billion in the 10-year period. However, as I’ve previously written, Congress revived this pork-barrel spending—lacking necessary oversight and scrutiny— in FY 2022, and “both parties quickly remembered how valuable earmarks are for personal political gain, and Democrats and Republicans re-engaged in this horse-trading.” As Hart argues: “Today, reinstating a ban on earmarks would represent immediate savings to help Congress and DOGE reach their goal of a balanced federal budget. Perhaps, more importantly, an earmark ban could repeat the same effect of denying Congress its favorite gateway drug and compel them to get serious about reducing our unsustainable debt and deficits. When our interest payments on our debt exceed our national defense, Congress should not be directing scarce capital to pet projects.”
Trump and Republicans are avoiding the spending cuts needed to balance the budget. “In the near future, I want to do what has not been done in 24 years: balance the federal budget,” President Donald Trump declared in his address to Congress. However, achieving an overall budget balance—requiring $15 trillion in 10-year savings—is unlikely given the size of current deficits. If Trump and Republicans are serious about moving toward a sustainable budget, they could aim to achieve a primary balance (excluding interest payments), which would require a more moderate $6.5 trillion in 10-year savings (before accounting for the prospect of extending expiring tax provisions). That said, both the House and Senate budget resolutions fall far short of this target, increasing deficits rather than achieving any reductions. This is because lawmakers are unwilling to address the unsustainable growth in entitlement spending or adopt other politically contentious spending cuts. Unless Congress takes on health care and retirement program reform, President Trump’s promise to balance the budget will turn out to be an empty promise.
Bloated bureaucracy fuels inefficiencies. James Varney from RealClear Investigations highlights complexities in the federal government’s accounting systems that result in errors and make the job of the Department of Government Efficiency (DOGE) more difficult. Varney includes my quote: “Complexity isn’t an accident; it’s a consequence of a government that has grown far beyond its core functions and is tied down by a self-serving bureaucracy and public-sector union power [...] That complexity isn’t just an inconvenience – it shields waste, fuels inefficiency, and makes reform harder [...] A government that has grown too big and too far-reaching makes it difficult to track what’s spent, let alone rein it in.”
Cut corporate welfare. A new study by Cato’s Chris Edwards finds that the federal government spent $181 billion on corporate welfare in 2024, which includes direct subsidies (e.g., grants, loans), indirect industry support (e.g., government-funded applied research), and spending on government businesses that should be privatized (e.g., Amtrak). Notably, this figure doesn’t include tax expenditures (tax preferences and loopholes) that amounted to another $154 billion. Edwards argues that corporate welfare burdens taxpayers who fund the subsidies and results in deadweight losses. He highlights other reasons to cut corporate welfare (12 in total), including the subsidies misallocating resources, raising costs, and fuelling fraud and abuse. He concludes: “Rising federal deficits should make spending cuts a high priority for the new president and Congress. Policymakers should start by cutting corporate welfare, which undermines economic growth and runs counter to the American ideal of equality under the law.”
The US fiscal system has become more progressive and redistributive. A new study by University of Chicago scholars Thomas Coleman and David Weisbach challenges the widespread perception that the US fiscal system has become less progressive and less distributive over time. The authors examined all existing research on the topic from the past decade, finding: “[T]he consensus of existing research is that the tax and transfer system redistributes substantially more now than it did in the past 40–60 years—regardless of the research method or measure of redistribution used. [...] Regardless of how income is measured, how it is allocated to individuals, or what units are chosen for measurement, the findings demonstrate that the dominant change in the tax and transfer system over the past 50 years has been a substantial increase in transfers to the lowest income groups.”
