Tag: national debt

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deficits and debt

Sitting on the Volcano

national, debt, federal, economics

“Wait, it gets worse.”

Over halfway through Eric Boehm’s Reason discussion of our government debt situation, he gets to a crucial point: “The federal government’s debt is particularly susceptible to rising interest rates … because so little of it is locked into long-​term interest rates. If you have a 30-​year fixed-​rate mortgage on your house, rising interest rates won’t bother you much. But the federal government overwhelmingly relies on short-​term debt, with an average maturity time of just 69 months.” 

So the standard approach to inflation, with the Federal Reserve raising interest rates, would hit the federal budget like an exploding volcano. 

When talking trillions, it’s hard to keep a sense of proportion. Boehm puts it this way: “A one percentage point increase in interest rates translates into a $30 trillion increase in interest costs.” 

Debt service is one of the reasons why the sages at the founding of America were, if not united in opposition to federal debt, overwhelmingly leery of it. But that leeriness did not stop federal borrowing. Only for one brief moment did the United States’ government not hold debt.

Borrowing was one thing when gold or silver fettered our finances to some limits. But paper and digital money have divorced us from a sense of reality.

We pretend that debt’s reality can be perpetually postponed, but we always “pay” — in lost prosperity; in inequality; in economic dislocation; in political unrest. But when the volcano erupts, then we really pay. 

As we awake to our indebtedness, let’s recognize that our political culture has allowed it to get so far out of hand. Fundamental political reform is imperative.

This is Common Sense. I’m Paul Jacob.

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Accountability folly general freedom government transparency moral hazard national politics & policies porkbarrel politics responsibility too much government

While the Clock Ticks

national debt, debt clock, Mercatus Center, economics, economy, folly,

Pushing annual federal spending over a trillion bucks into the red?

It has consequences. 

“Our debt is growing, and it’s growing fast,” writes Veronique de Rugy at Reason. “Though it’s a shame that lawmakers passed tax cuts without cutting spending to offset short-​term losses in revenue, there’s no doubt that Social Security and Medicare deficits are almost entirely to blame for our impending debt crisis.”

Ms. de Rugy, a senior research fellow at the Mercatus Center, has a typo in the version of her article that I read (it has probably since been corrected): “Based on current trends, the debt held by the public is set to reach $15.7 trillion by the end of this year and continue rising to $28.7 trillion by 2028.” She surely meant “$25.7 trillion,” since the current debt clock figure shows the U.S. public debt at over $21 trillion. Still, $25.7 seems a bit high … but at this point we can leave the exact numbers to the professionals.

We just know that the debt’s too damn high.

As de Rugy explains, it has present as well as future cost. And, yes, entitlements are the biggest problem — but even more than Ms. de Rugy suggests. Congress owes the Social Security “trust fund” (in Al Gore’s infamous and non-​existent “lock box”) nearly $3 trillion.

Our solons would have to (painfully) switch from revenue deficits to revenue surpluses just to pay off its debt to a much-​relied upon institution.

What will happen, though, is surely this: Congress will borrow more from elsewhere to pay what Social Security needs — which all too soon will be a lot more than $3 trillion. 

That’s not Common Sense. (But I am Paul Jacob.)

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Accountability folly national politics & policies responsibility

Failing in the Future Biz

future, predicting the future, political, politics, collage, photomontage, illustration, prophecy, fortune teller, mistake

If you can’t sell us the future, you’re doing it wrong. We all want to get there in one piece.

Right now, a horde of Republican presidential candidates and a small cohort of Democrats vie to present themselves as visionaries, leaders.

Yet, what they all have in common is that they ignore the most serious issue facing us. Bigger than borders and terror and ISIS and gay marriage and all that, is the financial stability of the United States. Our future is in peril because of the continual Washington stalemate of never-​ending deficit spending and continual debt growth — total debt being around $100 trillion.

The reason for this enormity? Politicians like to promise things, lots of things, very expensive things like wars and entitlements, to win our votes. But these same promiscuous over-​promisers have more than a little difficulty agreeing on the taxes that would pay for all those “things.”

Why the difficulty? Because Americans already pay plenty in taxes and very few of us non-​Omaha-​based non-​billionaires care to fork over even more of our hard-​earned pay to a wasteful leviathan.

Any respectable vision of the future must acknowledge the current predicament, and provide a way out — before it’s too late, like it may very well already be … for Greece.

Wanting something for nothing isn’t Greek to any of us, unfortunately. That’s why we need leaders with the honesty and courage to present a vision more real than government providing ever more goodies on credit ad infinitum.

Credit just doesn’t add up, infinitely. The more you rack up debt, the more finite your future.

This is Common Sense. I’m Paul Jacob.

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Future Fail

 

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national politics & policies too much government

Do the Right Thing – Later

Late in life, St. Augustine characterized his youthful, wayward ways in a droll prayer: “Lord, make me chaste and celibate — but not yet!”

Today, politicians of both parties understand the sentiment. 

On Monday of last week, President Barack Obama unveiled his budget to Congress with this nicely worded maxim: “We simply cannot continue to spend as if deficits don’t have consequences, as if waste doesn’t matter, as if the hard-​earned tax money of the American people can be treated like Monopoly money.”

Obama proposed a record budget of $3.8 trillion — including a deficit of well over $1 trillion. We can’t keep deficit spending like this, but we keep deficit spending like this.

Talking to reporters, Obama admitted that he and his friends in Congress “won’t be able to bring down this deficit overnight.” He cited the need for more job creation as reason to continue to spend so much money.

Money we don’t have. So it will be borrowed. Against future taxes. Or future default.

Sure, the president is proposing a freeze. To start next fiscal year. And he’s proposing a bipartisan committee to cook up some way to balance the budget. The committee hasn’t been formed yet.

That seems like too much procrastination for the state of our nation. I think St. Augustine would agree with me: Virtue is not something you put off until next year.

This is Common Sense. I’m Paul Jacob.