Tag: deficits

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deficits and debt folly national politics & policies

On Trees

trees and consequences

There’s an old saying — some say it’s an ancient “Chinese saying,” but I first heard it attributed to an Indian philosopher — to the effect that “the best time to plant a tree is thirty years ago; the second best time is today.”

Eric Boehm, writing in Reason, riffs on it regarding federal spending: “The best time to stop borrowing heavily was yesterday (or several years ago), but the second-​best time would be today. Instead, Congress is likely to make this problem even worse — again — by continuing to spend like there’s no tomorrow.”

In November, the federal government ran a $249 billion deficit, which, Boehm informs, is up $56B from the previous November.

Talk about November chills.

But worse yet is that Congress is gearing up for more. The omnibus spending bill in the works “will add between $240 billion and $585 billion to this year’s budget deficit.”

After a lifetime of deficit spending, this may seem only worth a furrow above the eyes, not an actual arched brow. But it does make a mockery of President Joe Biden’s boast of decreasing deficits on his watch. As Boehm explains, that’s merely an artifact of the Trump Era humungoid pandemic giveaways. There had to be some sort of let up from that binge. Nevertheless, the “underlying figures showed all along that the deficit situation was continuing to worsen, and that President Joe Biden’s policies were adding trillions of dollars to the deficit over the long term.”

It’s almost as if they think “money grows on trees.”

Would that it were the case, though, since there are only a limited number of trees. Taxation and especially debt are, to politicians, closer to infinity.

This is Common Sense. I’m Paul Jacob.

Update: Senator Mitch McConnell said, yesterday: “I’m pretty proud of the fact that with a Democratic president, Democratic House, and Democratic Senate, we were able to achieve through this Omnibus spending bill essentially all of our priorities.” The Republican Leader predicted passage on the 22nd.

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Illustration created with DALL-​E2, John Tenniel, Thomas Cole, JG

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national politics & policies political economy too much government

The Slow Bullet

slow motion bullet, debt,

Modern government finance is like Russian Roulette … but with incredibly slow bullets.

We spend money. We create money out of thin air. We borrow it. We promise the Moon. We deliver rocks. With each action, we spin the chamber and pull the trigger. That slowround doesn’t immediately hit, so we do it again.

Calling the perennial deficits and ballooning debt a “predictable crisis,” Nick Gillespie at Reason writes that our federal government’s debt “is already choking down economic growth, but in the future, it could lead to ‘sudden inflation,’ and ‘a loss of confidence in the federal government’s ability or commitment to repay its debts in full.’” And worse: “‘Such a crisis could spread globally’ causing some ‘financial institutions to fail.’ That’s all according to the nonpartisan Congressional Budget Office (CBO), which has been warning Americans about the long-​term consequence of the ballooning debt for years.”

This is an old warning. I have been talking about it for years, too. So have you. But once politicians start playing the game, it’s hard for them to stop. They see and we see the benefits, but that slow motion slug has yet to strike the target. 

Gillespie makes a better analogy than “slow bullets” (which don’t exist): “Like the coronavirus, the debt problem has the potential to seemingly appear out of the blue and turn our world upside down in a matter of weeks.”

Nassim Nicholas Taleb gained fame talking about “black swans,” major events we cannot predict. But he insists that the financial crisis resulting from government overspending is not a black swan. It’s predictable. We just do not know when.

Here’s a fourth analogy:

In free fall, you don’t feel a thing … until you hit the pavement.

This is Common Sense. I’m Paul Jacob.

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responsibility too much government

The Ten Trillion Dollar Decade

It’s Tax Day tomorrow. Waiting till the last moment to file because you’ll have to write a check?

It hurts, but you must be financially better off than the federal government, which itself owes $17.5 trillion, all because Congress and the President refuse to balance budgets.

In the last ten years, according to a convenient Department of Treasury website, the federal government’s debt has not merely doubled, it has ballooned … by more than $10 trillion.

During the Reagan Administration, we were aghast at the idea of a “mere” one trillion dollar debt. I remember “No Trillion Dollar Debt” signs.

Waving signs didn’t help.

But something’s gotta give. As J. D. Tuccille writes, “you have to think that it’s going to occur to people that the United States government seems neither willing nor able to stop borrowing, and to start paying the sum down, even a little bit.”

Debts must be repaid, with interest. That goes for the last decade’s additional ten trillion tonnage of “bricks” now hanging over our heads.

Writing your check to the government isn’t made any more pleasant by pondering how paltry your payment is compared to what’s needed to make a dent in the debt. Moreover, even amid constant talk about “cuts,” federal government spending continues to increase. Thus, getting out of debt is not about writing checks to government. It’s about government writing fewer and smaller checks.

This is Common Sense. I’m Paul Jacob.

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national politics & policies responsibility too much government

Death by a Thousand Non-Cuts

As I write this, the United States of America is $16,275,179,205,442 in debt. By the time you read this, we’ll have piled up millions more.

Much debt is of recent vintage. When George W. Bush became president in 2000, the national red ink totaled $5.7 trillion. In eight years, Dubya nearly doubled it to $10.6 trillion. Since his 2008 election, President Obama has far outpaced Bush, sinking us another $5.3 trillion in debt in just half Bush’s time.

And, by continuing to run yearly deficits of over $1 trillion, we’re digging the hole deeper at top speed.

For all the hysteria over draconian cuts, forced at the so-​called fiscal cliff, those somewhat slippery savings would at best amount to about 10 percent of our yearly deficit, leaving us spending 9/​10ths of a trillion dollars we don’t have.

In the “other cuts” department, the Obama Administration had been supporting paltry reductions to federal Medicaid spending of $17.6 billion over ten years (that’s less than $2 billion a year), but just flipped its position. Why? State governors are deciding if they can afford to take part in Obamacare’s massive Medicaid expansion to cover those earning up to 133 percent of the poverty line.

Not content to spend recklessly alone, the Feds picks up the entire tab of new Medicare recipients’ first three years. After that, Washington pays 90 percent and the states pay 10.

States are wondering how they’ll come up with that additional 10 percent — seven governors have already declined to join in the spending program. No one in Washington has given a second thought to paying the 90 percent.

They figure they can always raise taxes.

This is Common Sense. I’m Paul Jacob.

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national politics & policies too much government

Slowest Spending in Decades?

Government tends to grow in spurts, with budgets not decreasing after each spurt. This “ratchet effect” of fast growth then tapering off amounts to a long-​term trend: growth.

You’ve probably seen Rex Nutting’s MarketWatch squib, the subject of many a Tweet and Facebook post. Entitled “Obama spending binge never happened,” it begins, “Of all the falsehoods told about President Barack Obama, the biggest whopper is the one about his reckless spending spree.” Nutting reframes the issue as one of the rate of spending growth … just as Republican apologists did in the ’80s, even though spending under Ronald Reagan’s first term grew at a whopping 8.7 percent — a bigger rate increase than Obama’s. Nutting entitles his graph comparing administrations’ spending growth rates “Slowest spending in decades,” indicating not how much Obama has been spending over revenue, but year-​to-​year rates of increase.Barack Obama, Spree Spender

The prez gets a bad rap.

Well, yes and no. The graph should make party-​loyal Republicans and Bush admirers cringe with shame. Sure. But Obama and the current Congress are still spending. Hugely. And rapidly — those dollars fly out the door!

Further, by maintaining high annual deficits, Obama has increased the federal debt so that this year it has shot above 100 percent of current Gross Domestic Product, a first for my lifetime.

Obama can be blamed for not doing the decent thing after the horrible six years of united government under the Republicans, he didn’t reduce spending.

In other words, he’s no Warren G. Harding, who presided over a huge contraction of government spending, thereby helping usher in a quick recovery from the post-​Great War bust.

We could use a man like Warren Harding again.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Big Government Bigger Than All Else

No sooner had the president signed the new debt limit, and then up went federal debt — to $14.58 trillion. 

Brave new world, that has such numbers in it.

What’s so amazing about this number is that it is larger than last year’s GDP of $14.53 trillion. 

I know, Gross Domestic Product figures are a mess, and don’t measure exactly what we think they measure. But they are the most popular form of national income accounting, and indicate, in a very rough sense, “the size of the economy” for a given year.

And, boy, for our federal government to owe the amount of the whole economy it rules, and more — what a milestone!

The last time debt was more than GDP? The late 1940s.

Recovery happened swiftly, then. This should give us hope: There is a way out.

But remember: World War II didn’t bring us out of the Great Depression, the end of the war did.

And remember, further: Most of the big names in economics — by then, Keynesians all — had predicted a huge economic downturn as government spending plummeted and wartime regulations (chiefly wage and price controls) hit the dustbin. 

Bad prediction. The economy soon took off.

Why? Less government spending, less regulation.

Alas, I don’t see that happening, today or tomorrow. With the budget deal, overall spending is now set to rise still further. The medical industry — a huge growth sector for government spending as well as private spending — is set for increasing regulation.

Brace yourself.

This is Common Sense. I’m Paul Jacob.