Doylestown Wealth Management - LPL

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P: (267) 864 - 2000 | F: (267) 864 - 2010

September 2017 Monthly Budget Commentary

The Times They Are A’Changin’

In 2010, a wave of “Tea Party” congressional members arrived in Washington, appalled at the trillion dollar budget deficits of the 2008-2010 recession and promising fiscal restraint which would rein in government spending and put the nation on a path to a balanced budget.  Whatever you think of the merit of these policies, this group of representatives and senators has accomplished very little in practical terms.  True, the annual deficit has fallen, but only because the economy and the corresponding tax receipts have improved, while outlays for recessionary spending like unemployment insurance and food stamps have fallen off.  The reported annual deficit has settled into comfortable lodgings in the $500-700 trillion range and the total federal debt has now crossed over the $20 trillion mark.  Regular readers know that this commentator does not cite this number to raise an alarm—the national debt is a bit of a red herring—but rather to point out that the conservative focus on reducing the deficit has accomplished little or nothing in concrete terms over the last seven years.

It now appears that the political parties have even tired of the debt ceiling dance once so well-beloved of pundits and posturers.  The fearsome September deadline for raising the borrowing limit was dispelled in a matter of minutes with minimal fulmination and indeed a palpable sense of relief.  Suggestions that the ceiling be eliminated altogether have even been bandied about in unexpected places.  It appears that the “Tea Party” conservatives have been outmaneuvered and are no longer able to make credible threats to shut down the government, and while the GOP leadership still genuflects as they pass the altar of balanced budgets they no longer feel the need to propitiate the idols with sacrifices.  



The debt ceiling makes headlines, but the real brake on government profligacy in recent years has been the budgetary framework that requires new tax cuts or spending to be offset with reduced outlays or revenue increases in other areas.  These curbs, combined with legislative gridlock, have had the practical effect of putting spending and tax regimes essentially on autopilot, resulting in the large but stable deficits of recent years.  But whatever the virtue of fiscal restraint as policy, it does take a great deal of the fun out of being a Congressman, one of the chief rewards of which is being able to spend money on new initiatives and programs (preferably in one’s own district.)  Now, however, it appears to this writer that fiscal conservatism is a spent force and that the willingness to accept a substantially larger budget deficit has returned.  Of course, this new attitude will be disingenuously expressed in “temporary” measures which will “pay for themselves” somewhere in the distant future to avoid the appearance of fiscal heresy, but the pressure to “do something” has become so great that it just may force a break in the budgetary logjam which has paralyzed Washington for the last seven years.  After all, despite all the bluster, it is mathematically impossible to make significant changes to the tax code without either reducing revenues or shafting the upper-middle class; and large spending cuts are difficult and unpopular.  Allowing the deficit to increase is the easiest way forward.  


There is an old Washington adage about the political system: that one party is Evil and the other party is Stupid.  (Take your pick as to which is which.)  Normally they disagree, but every once in a while they get together and pass a law that is both evil and stupid, and this is hailed as bipartisanship.  While raising the deficit is perhaps neither wholly evil nor stupid, the fiscal conservatives in Congress ought to be very nervous indeed.   


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  

Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Doylestown Wealth Management, Inc. are separate entities from LPL Financial.