Let's Talk Deficits and Debt, Lest We Forget

Let’s Talk Deficits & Debt, Lest We Forget
The View from the Middle

As a people, Americans can be very distractible, and you can be sure that our politicians in Washington D.C. love that about us. As they spend our money hand over fist, borrowing one out of every four dollars they squander, they will say, “Pay no attention to the way we waste your money, look at this illegal immigration problem that we have been marinating for you for over 40 years now.”

They will whistle right past the grave yard of deficits and debt and try to focus your attention on just about anything else – North Korea, Iran, that obviously racist Betsy Ross flag on the back of Nike’s shoes. Anything will do. They will even lie right to your face. Back in 2013, Nancy Pelosi famously said, “We don’t have a spending problem. We have a revenue problem.” She said this just before she boarded her private jumbo jet for her weekly commute back to California at a cost of about six million dollars a year to the US taxpayers. No spending problem here!

There’s a reason why “we don’t have a spending problem” did not become a rallying cry for either political party. It’s a loser. Ronald Reagan once suggested that he wouldn’t say that Congress spent money like a drunken sailor because that would be an insult to drunken sailors everywhere, and I think that captures the sentiment of most Americans.

So, consider this my warning to all Americans. Do not be distracted from the existential threat that our deficits and debt pose for our country. Before the beginning of the 21st century, all of our Presidents combined had accumulated a US debt of about five trillion dollars. George W. Bush doubled that debt in his eight years in office adding five trillion dollars of debt to our total and ended his Presidency with a 10 trillion-dollar national debt. Barack Obama then double our debt again, adding another 10 trillion dollars to the country’s debt load bring our total debt to just under 20 trillion dollars. This kind of debt creation is just not sustainable.

The only thing that is keeping this from becoming an economic disaster for our country today is the unusually low interest rates that we are paying on this debt. Even at the current, ridiculously low interest rates, service on our debt costs us all over $350 billion a year. If interest rates would ever return to historically average rates like 5%, our debt service would triple to about a trillion dollars a year and would became the single largest element of our country’s budget. Interest payments on our debt would become almost 50% higher than our entire military budget and would be larger than our Medicare and Medicaid budgets combined. And where, exactly, are we going to come up with an additional $650 billion dollar for our government to spend from which we will receive zero benefits. That money will just be paid to our debt holders like Japan and China or to our own, soon to be insolvent, social security trust fund.

If all of this doesn’t frighten you, it should. It should especially panic our young people who will either have to repay this debt (never going to happen) or bare the burden of our debt’s crushing consequences. Young people will be paying dearly for my generation’s recklessness. And then there’s the threat to America’s financial preeminence in the world, which currently delivers untold benefits to our citizens.

The US currently ranks 8th in the world, out of 180 countries, in our debt to GDP ratio, and this isn’t a metric in which we want to be dominant. The only countries above us are countries like Japan, where the government, in effect, own the banking system and thus controls its own interest rates, and financial weaklings like Greece, Portugal and Italy. Let’s face it. We cannot be like these countries and maintain our position as the most important world financial superpower and boast the world’s predominant currency. China, our biggest financial competitor, has a third of our debt in terms of real dollars and half of our debt burden as a percent of its GDP. You can quickly grasp their plan for global financial dominance.

Debt is the one area where Trump has disappointed me. I’m good with the sanction and tariff pressure on North Korea, Iran and China. I’m a big fan of the tax cuts and regulatory relief of this administration. I can support his immigration policies which I believe includes both border security and paths to citizenship for the DACA kids and possibly legalization for many more, but so far, the debt clock has not slowed down.

Last year we spent almost $800 billion more dollars than our government took in. This year, some estimate the deficit to be more than a trillion dollars. We all should want to hear his plans to reverse this trend and even balance the budget over time. Trump’s current budget shows a balanced budget by 2027. We all need to hear more than just vague promises about this deficit reduction plan during the 2020 campaign because if the current trends are not reversed by that time, global warming (sorry, climate change) will be the least of our problems.