The Exploiting Deficit


The Congress recently passed and the President signed into law a 2.2 trillion dollar spending bill to provide for businesses and individuals to survive the terrible measures that had to be taken to stem the advance of the COVID 19 virus.  It also includes massive spending to support health services. I agree that it was necessary though sadly some, mostly Democrats, added spending that had nothing to do with the problem. Thankfully that is a very small percentage of the bill. It almost seems ungracious to look at the issue of deficit spending during this time.  However, the issue of the deficit is an important one, and the growing deficit could lead to devastating consequences. It is important for disciples of Yeshua to know something about this issue. In my book Social Justice, I argue that deficit spending is a social justice issue.  Believers in Yeshua should be biblical justice warriors but on a sound basis of evidence.

When I was majoring in philosophy at Wheaton College, I considered those interested in business and economics to be inferior to those of us who cared about the important issues of life.  I was so foolish. The business people created the wealth that paid the bills that enabled me to study philosophy. I was a left-leaning returning to faith student. I actually called myself a Christian socialist in the early 70s.  Then I studied a few books on economics. What an eye-opener. I actually learned how money is created and how economies expand. My socialist views simply would not hold up since the expansion of wealth would not take place long-term in a socialist economy.   In this study, I learned something about deficits. The theory is that a nation should keep a surplus, balanced budget or an almost balanced budget unless there is a recession. Deficit spending in times of recession would lift the economy, but in times of economic expansion, the deficit can be paid down.  There are reasons why this is a social justice issue. Mainly the big reason is that deficits compromise the possibility of the government being responsible in taxing, spending and social programs.

  1. An expanding economy is necessary to increase wealth for the mass of the population.  A shrinking economy increases poverty. As President John Kennedy said when approving a massive tax cut to spur business expansion, “A rising tide lifts all boats.”  There is a social justice issue in business expansion. It is that the expansion has to really benefit the average employee. As such, tax incentives should be motivating business expansion for all, and limiting tax shelters and executive compensation packages that are given to those who do not really expand businesses for all.
  2. Taxes provide necessary services for the public; infrastructure, transportation, national defense and more.
  3. Taxes also provide social services, including welfare payments when needed, support for job training, education, health care, social security, and more.  Welfare needs to have incentives for people to go to work or get trained so that welfare does not create a perpetual poor or underclass. I am one that does believe in social services and am not a libertarian.  However, I want those services to lead to greater self-sufficiency.

Basically, a deficit is produced when the government takes in less in tax revenue than what it spends.  The government then prints more money. The idea is that the amount of money created is justified by the size and expansion of the economy.  It is able to print more money because it sells bonds or obligations to finance the deficit. The deficit is not only on paper but is a real obligation to pay those who hold the debt.  It can be individuals holding government bonds or even nations that buy our debt. People are willing to do this for the return they get and until maturity, the bond can be sold. The government can issue new bonds to pay off the old bonds that mature.  The government is not obligated to pay the principal of the debt but only the interest. When the government continually increases debt, more and more of the budget goes to finance the interest. We also have a problem of future commitments to legally mandated spending for such things as social security and Medicaid etc. (read: entitlements). These programs are perpetual and take up the largest share of the federal budget.  The projections of revenue and these mandated obligations are such that economists project a huge deficit as well for these programs, even if not a present deficit.

Economists generally agree that if you take too much out of the private sector to finance government programs, business expansion slows down. The growth in the wealth pie can even shrink.  More people become poor. The big debate is among economists who have differences as to where that point of too much taxation is. However, a growing deficit adds another big challenge. A point is reached (as with Greece) where the interest is so large that the Government no longer has the funds for its spending for the public good including social welfare programs.  Higher taxes are no longer an option. As such the expanding deficit at some point can destroy social welfare.

Why does this happen?  It is because politicians spend for the immediate future and for their own re-election.  Taking the long-term view is not to their personal benefit. Politicians lack self-control at a huge level.  They want the program for their constituents now and will increase the deficit to achieve this. It also is to their political benefit.  Deficits are too abstract an issue for most voters. Who votes for fiscal responsibility? People vote on the basis of their immediate prosperity.  However, slowing the expansion of government so that the government lives within its means, will over the long haul produce much more funds for social spending.  But social spending is squeezed when so much goes to the deficit. There would be so much more to spend today if politicians had not piled on deficit after deficit in the past. The end result of all this is either cutting benefits or massive inflation to continue to pay the face amount in money that is of much less worth.  It can lead to national bankruptcy, and no country wants to default on its obligations or there would be deep depression. Deficit spending ultimately will destroy justice-social welfare spending ability.  This has happened in other nations. This can then lead to social upheaval and disintegration.

If this is not dealt with, there will be a day of harsh reckoning.  There may be coming a day that only private help and mutual help in the community and family will be available.  We no longer have politicians even talking about this. It hardly seems recent any more (2010) that one Democrat Erskine Bowles, and one Republican Alan Simpson, were shouting the alarm and were leading a commission to deal with this.  The day of reckoning will come. Had the United States been responsible then we could have swallowed the 2. 2 trillion bill just past without much difficulty. However, with the deficit we have, now everything in the future will be squeezed.  As many say, our children and grandchildren will pay for it. That is why this is a biblical social justice issue. I hope that many of you will obtain my book, Social Justice.