The National Debt, Srsly

6 Jul

Washington is debt crazy. But in modern, polarized and uber-politicized 2011, crazy means incoherent brinksmanship. Let me try to add a bit of sanity and food-for-thought to your grey matter as you try to make sense of the current fiasco involving the extension of the debt ceiling.

1) Don’t wish for compromise. Compromise and “bi-partisanship” is what got us in this mess (“this mess” being $14 trillion in total federal debt, $8 Trillion of which has come in the last 11 years, $4.5 Trillion in the last three). Bi-partisanship means Republicans get tax breaks and President Obama gets stimulus programs and the total debt get keeps going up. In an interview that starkly laid out the two sides, Tom Ashbrook of On Point on NPR talked with veteran Congressman Jim Clyburn (D-GA) about the way forward. His answer? We’ve always worked it out before and we need to do so again. Wrong. Working it out as before will make the problem worse. Our country is bad at solving big spending problems. Don’t fix it like before. Fix it a new way. If you are going to wish for something, long-suffering citizen, wish for a lightning bolt of rational planning and decision making to leap from the sky. If that sounds unlikely, then you get the idea.

2) Ignore anyone from either party that says the federal debt is like household debt. If citizens or businesses have to balance their books, then its “common sense” that so should the federal government, and the US government needs to “stop putting things on the credit card.” While Clyburn uses the last argument, Republicans are usually guilty of the former, especially Congressman Jim Jordan (R-OH) on the NPR program noted above. Its a load of bollocks. Managing a national economy, defending the nation, making wise targeted investments, meddling in overseeing education, running social service program ad nauseum is a little more complicated than a mortgage and car payment, and there are legitimate (though few) reasons to borrow. More on that in a second.

3) Ignore the China argument. We’re not overly putting our security at risk by borrowing from China – we have their money, and the stuff we bought with it. They have a slip of paper. The worth of those slips of paper is directly related to the strength of our economy. The oligarchs who run China need the US to be strong at least as much as we do. We need to stop borrowing so much, but not because of China.

4) Clamping down the debt ceiling is not a political gimmick or trick. Republicans are not gaming the system or using some obscure parliamentary law to derail the system. They have “discovered” the third step in the funding process. First, Congress Authorizes an agency to spend a certain amount of money on a certain program. Then they Appropriate the funding to the agency, never more than the initial Authorization, and often lower. Then, in all of modern history, Congress votes to raise the debt ceiling to allow borrowing of sufficient funds to meet the Appropriation. Congress has FAILed at controlling themselves in the first two steps, but nearly always considered the third a formality. It is no crime to introduce rigor and provide an opportunity for redirection. However, that leads us to . . .

5) Republicans are about to snatch defeat from the jaws of victory. Prior to the 2010 election, President Obama was a stimulator, and the conventional wisdom agreed that significant borrowing was required to pull the country out of the Great Recession. Eighteen months later, with the two year old “recovery” yielding record corporate profits, wage stagnation and perhaps systemic high unemployment, President Obama is Deficit Cutter-in-Chief. Republicans successfully changed the conversation from stimulus to debt reduction, and are on the cusp of the “deal of the century,” to quote David Brooks. Now is not the time for tax policy puritanism. An honest discussion of revenues would examine the amount of money the federal government brings in from taxes, not the tax rate itself. Revenues are at 60 year lows, 15% of total economic output instead of the traditional %18, and $500 billion below their peak. Contrary to popular wisdom on both the Democratic and Republican sides, this is mostly due to the economy, not tax policy. Revenues peaked during the boom following (chronologically only) the Bush tax cuts. However, continued tax cutting since has hardly provided a spike to revenues or the economy. Republicans need to catch up with the times – even conservatives economists and experts are finally admitting tax cuts aren’t a cure-all for economic development. Republicans cannot, and should not, be taken seriously about their concern for the federal debt until they endorse increased taxes or reduced subsidies on someone, anyone, somewhere at some time. The initial thirty year old Reagan conservative idea of generally reducing taxes has morphed into an inflexible, irrational, extreme article of faith. Its like some quasi-religious telephone game – after cycling through eight series of Presidential elections, Reagan’s plan to reduce the top marginal rate from 70-ish% has yielded a packed stage at a recent CNN Republican debate where no one would raise a tax anywhere for any reason. As long as Republicans hold out on taxes, Democrats can accurately accuse them of gamesmanship and an utter lack of seriousness, and we stay stagnated. But bend on taxes, and the lack of any real independent competing Democratic plan is instantly unveiled. Will Republicans seize the opportunity? David Brooks, once again, lays out the scathing case for why they won’t.

6) If you are still wondering what the big deal with the debt is at all, ask yourself this question: under what circumstances is it moral and/or ethical to borrow money from your grandchildren? To invest in their future? To secure and defend the country for their safety? To allow their eventual prosperity? Compare those options, and your own answers, to our actual spending now. We’re borrowing to invest not in the future, but the past. We’re spending half our federal budget on social security and Medicare. We’re spending another third on military excursions and interest on the debt. We’re spending a pittance on research, development, education, infrastructure or any other program that could reasonably be called an investment. In other words, we’re borrowing from the future to maintain our (probably unsustainable) quality of life today. The first step in balancing the moral imperatives of providing what was (unreasonably) promised the elderly in their dotage and investing in our children and future is admitting how lopsided the ledger currently is, and where our borrowed dollars are currently flowing. . . even before the Baby Boomers really start retiring en masse.

18 Responses to “The National Debt, Srsly”

  1. Leo Wilson July 6, 2011 at 7:19 am #

    I agree with almost all of this… except, I can’t support tax increases unless and until after substantive and immediate spending cuts and caps are already in place. “Republicans cannot, and should not, be taken seriously about their concern for the federal debt until they endorse increased taxes or reduced subsidies on someone, anyone, somewhere at some time.”

    Congress has no credibility at all on slashing spending, but who ever doubts them when they promise to raise taxes?

    It is far too soon to waiver on tax increases, especially when the increases proposed address only 1/4 of the problem. The other 3/4 in immediate, this-year spending cuts and caps need to be solidified into law that is unchallenged in the courts before that discussion takes place at all.

  2. Ray Walter July 6, 2011 at 9:17 am #

    Someone has been reading up on Bruce Bartlett. Great post – spot on.

  3. Black Rock Lifer July 6, 2011 at 10:27 am #

    The republicans need to look at increasing revenue as a condition to spending cuts. Their obsession with tax cuts has bankrupt America and greatly increased the already obscene disparity in wealth. Time for those that have benefited most from our nations resources to pay for that privilege.

  4. Leo Wilson July 6, 2011 at 11:50 am #

    This year, in which no budget has actually been passed, is the best opportunity our country has had to actually slash spending.

    This article starts with an untruth: “Washington is debt crazy.”
    The truth is, Washington (and Albany, and Sacramento, and too many state capitals to list) is SPENDING crazy, just like irresponsible high-school grads who get their first six credit cards. Debt and the craziness we’re witnessing in relation to debt are just indicative symptoms of spending crazy.

  5. peteherr July 6, 2011 at 2:54 pm #

    @Leo – I love the “spending crazy” meme. It’s so much fun, because people say it like it’s new. Reagan wanted to starve the social programs so they would, as Gingrich said “wither on the vine and die”….. it’s always been the Conservative ideology. So, Reagan started the practice of borrowing from the Social Security trust. His administration spent money like crazy fighting the commies, and since people were terrified of those crazy pinkos coming and bombing us, they didn’t care a bit. Spend, spend, spend. ZOMG, we don’t have enough money….those damn poor people are taking us for freebies in Medicare and Social Security and WELFARE…..we don’t have enough money for THAT….we’re trying to invent the Star Wars Defense System with our money. This ain’t new, and it ain’t all Obama.

  6. Leo Wilson July 6, 2011 at 3:34 pm #

    @peter – I seem to remember that Johnson started borrowing from the SSI trust, mostly to finance medicare. I won’t quibble.

    I consider myself a liberal, Pete, stabbed in the back repeatedly by politicians claiming to be liberal and spouting liberal rheroric as they set up huge, parasitic programs that deliver only stipend quantity and quality services while they loot our good and benevolent intent and consistently insist on increased funding.

    Medicare is a good program, with goals that I support. Management has been atrocious and inept at everything but gauging us for more funding. Why doesn’t the PPACA’s 80% medical loss mandate apply to the UMMC as well as to private insurers? Why do they fail to pay providers who save lives every day, and never mention to the public that they realize less than a 30% medical loss at the same time they claimed to “already pay for half the medical procedures in the country”?

    My take is that, when a program with admirable and supportable goals scrapes more than 70% of its funding to do things we never intended it to do before it ever gives aid to my deserving fellow citizens, the services it advertises aren’t its goal… the 70% of the funding that gets misappropriated is.

    I agree without reservation that it ain’t all new, and it ain’t all Obama…. but, the lion’s share IS bad, poorly managed (even in comparison to private insurers that meet their mandate, pay providers fully and remain profitable, too!) and is in desperate need of radical reform that benefits recipients more than politicians.

    Democrats would never lose an election, if they only delivered as much as we pay for. Nobody would ever complain about taxation that delivered actual economies of scale and reduced cost rather than increasing it.

  7. Leo Wilson July 6, 2011 at 3:44 pm #

    And, Pete… you’ve probably read my take on the current fiscal dillema being a result of disasterous trade policy, what presidents put those policies in place and which party controlled both houses of congress when they did it to us. First you throw away the legitimate revenue stream, turn the working middle class into the new hand-out class, and now expect that the answer is to repeat what Great Britain did in the sixties with taxation? when their ultra-rich left because of that, they took their riches with them and never went back, even after those punative tax policies were repealed.

  8. Leo Wilson July 6, 2011 at 3:53 pm #

    And, Pete… what about the proposed tax increases in relation to the annual budget deficit? How should the other 3/4 of that annual deficit be addressed?

  9. Chris Charvella July 6, 2011 at 3:55 pm #

    A good friend of mine has an analogy he likes to use when talking about the dangers of compromise.

    Imagine two guys are looking at a litter of puppies. The first guy says, ‘I want to kill all these puppies.’

    The second guy says, ‘That’s crazy, we shouldn’t kill any of these puppies.’

    So the first guy says, ‘Fine, let’s compromise. we’ll just kill half of them.’

  10. Derek J. Punaro July 6, 2011 at 4:02 pm #

    Good post… but it’ll take me all week to read all the linked pages. Could you please be less thorough?

  11. Brian Castner July 6, 2011 at 6:59 pm #

    @ Ray – a little birdy passed on the Bartlett. Thanks.

    @ Derek – That’s how I feel about Chris’ morning grumpy. So if you read nothing else, read the David Brooks piece. Excellent.

    @ Leo – You need a job in government – your spin of debt into spending is incredible. I would advise you to examine the tax loopholes being defended, and the balance of tax increases to spending cuts. It currently is 1000:1 spending cuts to tax increases, and we’re down to arguing about 7 years depreciation on corporate jets versus 5 years for passenger jets with United and Delta. Worth holding out over? Anyone who thinks so I would call non-serious on the debt.

  12. STEEL July 6, 2011 at 7:49 pm #

    Seems like you gave it a good analysis.  I might quibble with a thing here or there.

    Here is the truth – The Constitution REQUIRES congress to pay our debts so based on the constitution the Congress has to raise the debt ceilling.  This whole debt ceilling should be treated as a moot question. you can not bargain away the constitution for tax cuts.

    Taxes as a percent of our GDP are lower than any time since the 50s.  Since we are not even talking about real cuts to our ginormous military spending raising taxes should not be a controversial subject – it should be done – for the wealthy for sure and for everyone else on a lesser basis.

    The wealthiest now control more of the national wealth than at any time in our history so, talk of letting them have more at this time with the state of our finances and economy should be treated as silly talk.  The wealthy have been given their tax breaks and they have not created the promised jobs.  Its time for the wealthy to start paying back what they have stollen from Americans especially over the last 4 years.  

  13. Leo Wilson July 6, 2011 at 8:32 pm #

    @Brian – thanks, I’ve served in the military and paid taxes for decades. That’s enough government service for me. Worse than my “spin” are the queens of denial who don’t admit the problem is spending, Debt isn’t the result of equivocal generation, it comes from spending money that isn’t ours to spend. Most adults eventually figure out that it doesn’t go away because you get more income, too, It goes away when you stop spending.

    And, I said “too soon” in my first post, not “never ever”… AFTER the spending is controlled and capped in a way that stands up to challenges in court, I’m all for increasing taxes, too.

  14. Leo Wilson July 6, 2011 at 8:47 pm #

    meh. I’d rather support any alternative revenue stream than taxes, too. Why such one-trick ponies?

  15. Brian Castner July 6, 2011 at 8:59 pm #

    Alternative revenue stream = taxes by another name? Tim Pawlenty crows he never raised taxes in MN, but he did oversee a ‘Health Impact Fee’ on cigarettes.

  16. Leo Wilson July 7, 2011 at 6:56 am #

    Taxes by another name? Perhaps. I’d increase fees on exploiting resources, then create jobs by insisting that they actually be exploited. I’d stop making no-strings grants for research and start having a piece of the its results. There are opportunites that don’t exist without public money that should pay back the same way the Gatorade folks had to shovel bushels of money at UF.

  17. Leo Wilson July 7, 2011 at 7:05 am #

    And still the question remains, Brian… the proposed tax increases or tax relief expiration only covers 1/4 of the annual spending deficit. How should the other 3/4 of that yearly plunge into debt be addressed? Once that algorithm has been decided, all that’s left is getting the job done, and that leads to the credibility of politicians in doing the job. They have credibility in raising taxes, so we can believe that they’ll do it even after an election cycle. What we should demand is that the Willie Sutton portion of the problem, cutting spending, is done BEFORE the next election cycle.

  18. Black Rock Lifer July 7, 2011 at 8:07 am #

    @Brian- The question is do we tax those that have benefited most from the resources and opportunities our country has afforded them or do we continue to nickel and dime the average person with high sales taxes, fees, and various other schemes meant to squeeze every last penny from the least politically powerful?

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