Tag: spending

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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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deficits and debt folly national politics & policies responsibility

Biden Blames Business

inflation, cash, money, fire

Inflation’s up, and President Joseph Robinette Biden, Jr., thinks he knows why.

Economist Bruce Yandle, famed for his “Bootleggers and Baptists” theory of regulation, reports in Reason that the aging president blamed “the country’s three largest meatpackers” for contributing to July’s CPI rate of 5.4 percent, and the fuel industry for its part in August’s 5.3 percent annualized rate. 

Profiteering!

I’ve always wondered how anyone can get away with this tired old accusation. Businesspeople aim to profit at all times and in every place. Profit is why they go into business. Are they making too much inflation-​adjusted profit during an inflationary period but not when inflation is low? Seems unlikely.

But Biden’s looking into it! “There’s lots of evidence that gas prices should be going down,” the prez claimed, “but they haven’t.”

What evidence? Biden presented none. 

After throwing so much money into the economy to “stimulate” it after the big hit commerce has taken from state-​perpetrated lockdowns, what could we expect but rising prices? “Inflation is always and everywhere,” a great economist has said, “a monetary phenomenon.”

Bruce Yandle is on that same page. Referring to Mr. Biden’s bizarre blame game, Yandle suggested that maybe — just maybe — Biden “should look inside the halls of the West Wing.”

Specifically at all the spending, like the current “$3.5 trillion spending package.” The puppet masters pulling Biden’s strings must, Yandle asserts, “be aware that calling for more spending to calm inflation is like pouring gasoline on an already smoldering fire.”

The real problem is “too much printing-​press money” backing deficit spending.

Blaming excess profits? A distraction.

A big lie.

This is Common Sense. I’m Paul Jacob.

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Catastrophic! Calamity! The Debt

U.S. Sen. Pat Toomey (R-Penn.)

“Once again, the stability of the U.S. financial system is at risk,” warned CNN State of the Union host Jake Tapper, “thanks to political brinksmanship in Congress.

“If lawmakers do not act, the federal government will shut down this week. And, next month, the Treasury secretary says, the U.S. will not be able to pay its bills … which … could be catastrophic for the U.S. economy.”

Incredulous, Tapper further bemoaned, “that has not convinced a single Republican lawmaker to get on board to raise the debt ceiling.”

But he made the mistake of inviting retiring U.S. Sen. Pat Toomey (R‑Penn.) on the Sunday program.*

“[O]n combining the debt ceiling increase or suspension with the continuing operations of the government,” Toomey declared his vote is NO. 

“And there is no calamity that’s going to happen, Jake.”

Toomey explained that “after Republicans vote no, Chuck Schumer is going to do what he could have done months ago, what he could have done weeks ago, what he could do tomorrow, and that is, he will amend the budget resolution so that Democrats can pass the debt ceiling all by themselves.”

Noting that Democrats were “in the midst of an absolutely unprecedented, very damaging spending spree on a scale that we have never seen,” Toomey emphatically refused to “authorize the borrowing to help pay for it.”

Over the weekend, a Washington Post editorial attacked Republicans for being “unwilling to lift a finger to avoid financial calamity,” while excusing Democrats. 

“For their part,” The Post justified, “Democrats … want the same political cover they gave Republicans during Mr. Trump’s presidency by raising the debt limit in a bipartisan fashion.”

The nation’s newspaper of record in full-​throated advocacy of political cover.

This is Common Sense. I’m Paul Jacob.

* Sen. Toomey has been a stalwart term limits supporter in Congress. He leaves having kept a pledge to serve only six years in the House, left the Congress for six years before winning a Senate seat and now stepping down after two terms in the U.S. Senate.

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On Glissando Skids

glissando

As corrupting as political power may be, not everyone is corrupted by it, at least not to the same grievous extent.

Yet, even if one starts out with some measure of integrity and good intentions, the longer one is entrenched in power, the more likely one is to lose one’s way. Little by little, and then in leaps and bounds, one goes along to get along, learning to appreciate the perks of power and the advantages of cooperating with party bosses, forgetting one’s desire to buck the establishment and always do the right thing.

Within just five years, formerly fiscally conservative U.S. Senators Jim Risch and Mike Crapo, both Republicans “representing” Idaho, started swerving toward the abyss. Now they’re on glissando skids.

Bryan Smith, vice chair of the Bonneville County Republican Central Committee, observes the dispiriting trajectory in a recent commentary.

He cites New American’s Freedom Index, which assesses how well lawmakers work for “limited government, fiscal responsibility, national sovereignty, and avoiding foreign entanglements.”

Risch and Crapo slid from a rating of 95% and 95% in 2012 to 80% and 80% in 2015, 50% and 50% in 2018, and 35% and 30% in 2020. Both have so far gotten a score of 90% the first half of 2021, yet both also voted Yes to the recent $1.2 trillion “infrastructure” bill.

Smith remembers how both men once proudly opposed runaway government spending.

This is hardly new — or confined to Idaho. As a 1994 Cato Institute analysis concluded: “members of Congress become more pro-​tax-​and-​spend the longer they serve in Washington.”

This is Common Sense. I’m Paul Jacob.

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national politics & policies tax policy

The Six-​Trillion Dollar Man

spending, taxes, government

“Mr. Biden is making a six-​trillion dollar bet that promoting popular programs will be popular,” offered NBC Meet the Press host Chuck Todd on Sunday, “and that he’ll be rewarded for getting things done, long before the actual bill comes due.”

That “Six trillion dollars”? New splurging “on social spending, infrastructure, climate change, health care and more.” 

The host intoned that this constitutes the “return of big government.” 

“We have to prove democracy still works, that our government still works,” Joe Biden, the 47th president, implored Congress last week, “and we can deliver for our people.”

Spend = Deliver. 
Deliver = Democracy. 
Democracy = Spend!

So goes a federal “democracy” wherein voters never get a straight, democratic choice on how much government should spend and tax.* Instead, politicians opt for their beloved “deficits forever” method. Purchase votes today — “People like it when you give them money” — and leave for future generations of voters the tax burden needed to pay that bill. No pain, all gain. 

Smart re-​election strategy, some say. 

“Democratic strategists are betting that the infighting in the Republican Party, the extremism on display during the Jan. 6 attack … and the sheer scale of the trillion dollar programs Democrats have pushed through this year,” reports The Washington Post, “leads to a reorienting of partisan divisions that can overcome historical patterns.” Meaning Democrats avoid the traditional loss of congressional seats for a president’s party.

“Will voters care about the scope of Mr. Biden’s plans?” Todd inquired. “… care about the price tag?” 

Likely to the degree they notice paying that price. 

“President Trump and the Republicans may have made it a bit easier for Mr. Biden by spending big themselves,” reminded Todd.

He’s not wrong there.

This is Common Sense. I’m Paul Jacob.

* Colorado voters have such a choice: a vote on any tax increase and on government spending increases. It’s called the Taxpayer Bill of Rights (TABOR) and was passed by citizen initiative back in 1992. The politicians and lobbyists just hate it, as I detail here. 

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Photo by Anno Málie

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The Accelerators

tax, spend, inflation, bankruptcy

“We can do $10 trillion,” declared Rep. Alexandria Ocasio-​Cortez (D‑NY) last week.

“I know that may be an eye-​popping figure for some people,” explained the photogenic pop-​eyed pol, “but we need to understand that we are in a devastating economic moment, millions of people in the Unites States are unemployed, we have a truly crippled health-​care system and a planetary crisis on our hands, and we’re the wealthiest nation in the history of the world.”

In other words, the sky is falling … and we still have checks.

The Bronx congresswoman, described as “one of the most influential members” by MSNBC’s Rachel Maddow, trumpeted that tidy sum in response to last week’s “go big” proposal by President Joe Biden to spend a special new $2.2 trillion under the loose label of infrastructure, which AOC argued “is not nearly enough.”

This new two-​tril spending bill is “a follow-​up to the $1.9 trillion stimulus approved in March.” And just Part 1 of a two-​package infrastructure and other stuff Biden plan. 

“The White House is reportedly willing to spend $4 trillion across the two packages,” Business Insider reports, “a sum that would bring recovery spending under his term to nearly $6 trillion.”

Biden’s term has been only 76 days.

A couple trillion here, a couple trillion there and pretty soon you’re talking real money … except under Modern Monetary Theory, which Ocasio-​Cortez embraces. The idea being: government can print as much money as politicians want to spend. 

While this road to bankruptcy has been paved with the partisan political intentions of big spending politicians of both major parties, right now it is the Democrats hitting the gas.

This is Common Sense. I’m Paul Jacob.

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