Wednesday, March 28, 2018

While everyone watches Stormy Daniels, a real crisis looms

At the risk of being a terrible bore, today I return to the topic of the United States’ out-of-control spending and threatening debt. No less than five of the country’s most distinguished economic leaders sounded the alarm in The Post on Tuesday. Michael J. Boskin, John H. Cochrane, John F. Cogan, George P. Shultz and John B. Taylor warned in their Post Opinions essay, “A debt crisis is on the horizon,” that “even if economic growth continues uninterrupted, current tax and spending patterns imply that annual deficits will steadily increase, approaching the $1 trillion mark in two years and steadily rising thereafter as far as the eye can see.” Unfortunately, these distinguished gentlemen don’t use exclamation points or useful words and phrases such as “panic!” or “apocalypse!” or “the economic sky is falling!” or “America is heading off a cliff!” Similarly, Fred Hiatt wrote in The Post last month that the sheer volume of spending from Congress “imperils America.” Well, the fact is that the topic of the national debt traditionally has little connection to porn stars and Playboy Bunnies, and it doesn’t lead directly to President Trump’s immediate demise, so it fails to become an obsession with the media. But the reality of what Boskin, Hiatt and the others say could not be more clear or more serious. Just 10 years ago, our debt was $9.4 trillion. Today, it is $21 trillion. Of that, more than $15 trillion is held by the public. And according to the experts, the public’s debt burden could quickly rise to $20 trillion in just five years. If that happens and interest rates rise to 5 percent —1.5 percentage points higher than that which the Trump administration predicts — the aforementioned economists say “the interest cost alone on the projected $20 trillion of public debt would total $1 trillion per year.” That is more than America’s current $654 billion defense budget.

Our political process is failing us. Even worse, it is failing our kids. We are digging a financial hole that they will have to live in. We cannot borrow our way to prosperity. Debt makes us weaker, not stronger. It is our perceived strength that makes others like China choose to lend us money. But the more debt we accumulate, the weaker we become. The debt that we offer looks less secure and will likely cost more. This problem will spiral out of control. There will be a crash. Still, few are even talking about it.

Read the rest here.

This country is heading towards a brick wall at about 80 mph. I don't know how long before we hit the wall, but when we do, it's going to be ugly.


lannes said...

When this country does crash, Mexico can have it.

The Anti-Gnostic said...

This problem will spiral out of control. There will be a crash. Still, few are even talking about it.

I've been told this all my life. My father reminds me he's been told this all his life. Nobody can really even gauge the value of money any more--why do we still bother to pay taxes?

I thought when you started printing money and buying your own debt with it that the jig was up. But 2008 is a distant memory and the valuations are back where they were.

If the Austrian economists are right this ends in the Mother of all Busts. Or maybe they're wrong and the debt can be rolled over into perpetuity based on ever-increasing technological advance. I don't know any more.

unreconstructed rebel said...

This all is quite scary. Not just bitcoins, but US currency has been the figment of some computer's imagination for quite a while now.

It's why I hold a wee bit of gold.

Greg DeLassus said...

This country is heading towards a brick wall at about 80 mph. I don't know how long before we hit the wall, but when we do, it's going to be ugly.

You know, my own politics are much to the left of yours, but there is very little in this post with which I can disagree. It seems to me that the importance of living within our national means is an issue on which we should be able to agree, but somehow that easy agreement never seems to materialize in actual policy choices.

Our political process is failing us.

And here you put your finger on it. It is the process---that is to say, the natural outworking of the institutions---that is failing us. Debt is just one of a dozen or so serious issues that we are (literally) constitutionally incapable of addressing. Our constitution is designed to favor the status quo by inserting multiple veto points into the process of change. This is fine if the existing arrangements are sound, but it means that if once you have a mistake in place, it is much, much too hard to correct. To be clear, I think that a bias for the status quo is a good thing within limits, but right now we have, as it were, too much of a good thing.

We need a constitutional amendment to remove some--not all, but some---of the veto points from the process. For whatever little my opinion is worth, I think that we need to re-work our elected branches of government to look more like Canada's. That is, I think that we should have a president who is elected by the House of Representatives, not by the Electoral College. That way, there cannot be a division between the legislature and the executive. Just as in Canada, the same legislature that installed the president could remove the president, so log jams could not linger for 3+ years until the next election. If differences between the legislature and the executive prove intractable, the legislature can simply replace the executive with someone who has the legislature's confidence.

Meanwhile, I would cut the Senate in half (only one Senator from each state). Each state's governor would be ex officio its Senator as well. That way, the person voting on behalf of the state in the Senate would also have experience implementing policy, and a knowledge that constituents will hold him/her responsible if a federal mandate turns out to be unworkable in practice. The Senate would not be able to introduce legislation. It would only be able to veto legislation that the House passes. Senators would have to be present, in person, in the Senate to vote. That way, because the Governors would all have duties back in their own respective state capitols, this veto power would only be exercised where it matters. No longer would we have Ted Cruz or Ted Kennedy grandstanding and obstructing merely for ego or show. There would not be time for such silliness, because the relevant persons would need to get back to their day jobs in Albany or Baton Rouge or whatnot.

unreconstructed rebel said...

Ummm, we did pretty well keeping debt in check until we decided to go off the gold standard. If you look into it, most of Europe went off the gold standard in order to pay for WWI. Things haven't been the same since.

The Anti-Gnostic said...

Gregory - parliamentary systems have their own issues but yes, on balance they are probably more representational. In other words, you really can vote to change the government.

The 17th Amendment was a huge factor in the destruction of the original federalist scheme.