The phony baloney-ism of the GOP's persistent mantra about the need to contain federal deficits was suddenly exposed last week.
The stock market nosedived, with the Dow Jones Industrial average falling more than a 1,000 points (about 4 percent). I don't think it was a coincidence that the market sank during a week in which President Trump's State of the Union speech ignored mentioning the budget. Trump had good reason to lay rhetorically low because it turns out that the United States Treasury is going to have to sell nearly twice the bonds that it did last year in order to finance government operations, much of the reason being a shortfall in revenues "due to sweeping tax cuts," according to the widely-followed financial website Marketwatch.com.
I spent a little over a decade ('78-'89) as a member/floor trader on the Chicago Board Options Exchange and learned very quickly that rising interest rates are the fastest way to put the brakes on a bull market. Considering that the United States Treasury is probably the biggest single borrower of money in the world, the need to raise a trillion dollars more than it did last year has already affected interest rates, pushing them higher, and probably will continue to do so for the rest of the year.
It's little wonder that President Trump chose to ignore the subject altogether last week. The financial markets weren't quite so oblivious, of course, pounding stocks and bonds unmercifully throughout the week.
Meantime, our GOP reps in Congress have dropped their hypocritical tirades against expanding federal deficits. Rep. Kristi Noem once voted to shut down the entire government as a statement against increasing federal debt. Sen. John Thune on his website has said "our country is on an unsustainable fiscal path." Sen. Mike Rounds in 2016 sounded alarms over federal debt, saying we're in "for a grim future ... if we don't rein in spending ... and address our $18 trillion dollar debt."
So how did these three follow up on their respective crusades against increased federal borrowing? By completely ignoring the holy grail of Republican dogma against out-of-control budgets and voting enthusiastically for a tax cut that has already sent this year's borrowing requirements skyrocketing.
So tough is the situation that Congress will have to raise the debt ceiling by late March in order to make interest payments on U.S. Treasury notes. This will present our heretofore debt-averse reps in Washington with the exquisitely uncomfortable prospect of thinking about the unthinkable, i.e., increasing federal red ink.
Our reps had plenty of advance notice about this. The Congressional Budget Office itself warned about the tax cut increasing deficits by more than $1 trillion. But did our congressional delegation care? Not much. They made some history-defying supply-side noises about increased economic growth creating more tax revenues, but now that the financial rubber is hitting the fiscal road, the United States Treasury can't depend on that political voodooism to materialize.
It's planning on a boatload of borrowing needs this year. As that transpires, South Dakotans can plan on higher interest expenses as we compete against our own government for money.