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September 18, 2017

The National Debt: Gradual, Then Sudden Catastrophe

Both parties deserve ample amounts of “credit” for facilitating the nation’s steady march toward fiscal Armageddon.

The national debt has officially topped $20 trillion. And in an era where “bipartisanship” is almost a dirty word, both parties deserve ample amounts of “credit” for facilitating the nation’s steady march toward fiscal Armageddon.

During the eight years of George W. Bush’s administration, the nation racked up nearly $5 trillion of additional debt, with the phrase “compassionate conservatism” used to justify the record-setting recklessness. Yet like a one-two knockout punch from a heavyweight slugger, the Bush administration’s record as the most spendthrift administration in history was quickly broken by Barack Obama’s administration that nearly “doubled down” on the insanity, adding another $9.3 trillion dollars to the nation’s almost unfathomable pile of IOUs.

Actually, $20 trillion is a bit misleading. Right after Trump signed a deal with Democrats to raise the debt ceiling — as a tradeoff for getting $15 billion in hurricane and disaster recovery aid — the debt rose by $318 billion, pushing the actual total to $20.1 trillion.

Unfortunately, the overwhelming majority of Americans pay almost no attention to this unfolding disaster.

Perhaps that’s inevitable in a nation where many younger Americans are mis-educated enough to need computers to calculate even the simplest math problems, many older Americans are cynical enough to believe they will be gone before the real devastation begins, and many Americans of every generation are so inured to the entitlement mentality that even the most stalwart politicians are hesitant to embrace the statesmanship necessary to set things right.

Regrettably, we also have a statesmanship deficit every bit as onerous as our debt — if not more so.

Yet nothing less is required to acknowledge that Medicare, Medicaid, ObamaCare, and Social Security, which consumed 52% of all tax dollars in FY2016, need serious reform.

Why? “Mandatory” spending consumes 65% of the federal budget. “Discretionary” spending consumes 29% of it. The above entitlements are on the mandatory side of the ledger, meaning they run on “autopilot” — as in the agencies running them are authorized by law to spend whatever is necessary to keep them going.

Coupled with the interest on the current debt, which consumes just over 6% of federal spending, these programs will account for 83% of projected spending growth over the next 10 years. And absent reform, spending on health care programs, Social Security and net interest on the national debt — as in no reduction whatsoever of the debt itself — will consume all federal tax revenues by 2033.

How difficult is reform? During the 2012 election campaign, then-vice presidential candidate Paul Ryan attempted to introduce a budget proposal that addressed these spending drivers. A group called the Agenda Project Action Fund promptly ran an ad depicting a Ryan-like figure pushing a grandmother in a wheelchair over a cliff.

That’s the level of “intellectualism” that inevitably informs any discussion of fiscal reform.

Then there’s baseline budgeting, a concept that virtually assures Congress will continue to spend more money than it takes in. That’s because baseline budgeting includes automatic spending adjustments engendered by inflation, along with anticipated increases in the number of people participating in a particular program. And since inflation is a virtual constant, and the number of people participating in many programs is increasing, the overwhelming majority of those spending “adjustments” are headed upwards.

Nonetheless, our oh-so-clever political class, aided and abetted by the media, play a cunning game with a largely uninformed public. If an agency’s budget is projected to grow by $50 million, but only grows by $30 million, we are told that agency sustained a $20 million cut in spending. This bit of fiscal trickery allows so-called budget hawks to claim they are “restraining” spending, while the budget chickens bemoan the effort to balance the budget “on the backs of vulnerable Americans.”

Both groups are lying with impunity.

Just as infuriating, if not more so, is the Kabuki theater surrounding the aforementioned debt ceiling. Every time the nation bumps up against this artificially imposed spending limit, we are regaled with tales of impending horror, lest we don’t raise it to pay for obligations we have already incurred. After a round of orchestrated Ruling Class hand-wringing, the federal government then raises the debt ceiling, and promptly goes back to spending more many than it takes in — until we reach the next debt ceiling.

What are some “experts” suggesting we do to “fix” the problem? “A debt limit that is never followed is worthless to have,” states CNBC.

It’s even more worthless to continue spending money we don’t have with impunity. Unless the federal government embraces serious and genuine spending cuts, all we are doing is postponing the inevitable arrival of national bankruptcy.

Yet there are those who insist the inevitable will never happen, largely because the U.S. dollar remains the world’s reserve currency, meaning it’s accepted for trade all over the world, based primarily on the strength of the U.S. economy. Moreover, in times of economic crisis the U.S. dollar has been viewed as the ultimate monetary save haven. They also believe the nation would never default on its debt.

Yet millions of Americans are already feeling the consequences. Minuscule interest rates, engendered by the Federal Reserve to keep borrowing costs cheap, have devastated responsible Americans, whose pitiful return on their savings isn’t even keeping pace with inflation. If interest rates rise, not to their historical mean, but only to levels seen during the Clinton administration, “then we’re going to be paying $1.4 trillion a year just in interest on the existing debt; which is to say, interest payments alone will account for 45 percent of all federal taxes that will be collected in 2015,” wrote columnist Kevin Williamson.

Williamson wrote that column two years — and two trillion dollars — ago, when the national debt was “only” $18 trillion.

An exchange contained in Earnest Hemingway’s “The Sun Also Rises” is quite apropos. “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”

Nothing lasts forever. China, Russia and other nations would like to adopt a world currency and Venezuela just announced it will no longer take U.S. dollars for oil. If the dollar is ultimately abandoned, we can expect to endure the “suddenly” part of the equation that not only includes massive levels of unemployment, but the very same need to adjust any number of policies that any beggar nation needs to do so it can continue borrowing money — including the evisceration of those same entitlements Americans view as sacred cows.

In short, America will no longer control its own destiny.

Even worse, we would be exposed as the fundamentally immoral nation we are rapidly becoming. That is an apt description of a country so addicted to spending it is willing to mortgage the future of its own children and grandchildren, saddling them with unconscionable levels of debt they didn’t accumulate, and from which they’ll never benefit. Keep that reality in mind when Congress debates amnesty for “Dreamers” many Americans believe should be exempt from the “sins” of their parents.

Also keep it in mind when the national debt reaches $25 trillion. At the rate we’re going, it won’t be long until we get there.

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