Beyond Fixing the U.S. Government's Debt

After a number of failed attempts over decades to solve a problem, it is natural that the problem itself would barely get mentioned, let alone any cure. I submit that the U.S. federal debt is a case in point. President Reagan made it an issue in 1980, and Congress has tried to mandate for itself automatic spending cuts and tax increases, but to no avail. The desire for instant gratification outstripped self-discipline. This could perhaps be said of the society generally. 

The full essay is at "Beyond Fixing the Debt Problem."

The Debt-Ceiling vs. the Fiscal Cliff as Negotiating Leverage

It is likely a drawback of democracy that hard decisions—that is, those in which fixing the problem goes against instant gratification or financial advantage—get pushed back, or “kicked down the road,” rather than addressed in a definitive way such that difficult problems are fixed. This structural problem can be seen in how Congressional leaders and the U.S. President delayed the “fiscal cliff” for two months at the beginning of 2013. More generally, the political tactic of holding the federal budget and the debt-ceiling as ransom evinces a fundamental flaw in democracy itself.

The full essay is at "Structural Flaws of Democracy."

U.S.Budget Deficits: Of Virtue or Vice?

Chronic government fiscal deficits, and thus debt, may suggest that a people is not up to self-governance. Moreover, the imbalance may be a drawback of democracy itself. That is to say, a people may not have sufficient will to constrain its own consumption to that which the people are willing to pay.

 

The full essay is at "U.S. Budget Deficits."

Instant Gratification Rules in American Fiscal Policy

With an expected deficit of $1.2 trillion for 2018-2019, the U.S. Government in December, 2017 enacted a tax cut with an expected revenue loss of nearly $1 trillion over a decade (assuming some growth from the tax stimulus) and, two months later, a budget deal passed adding $300 billion to federal spending in the next fiscal year.[1] All this was done with the U.S. debt at over $20 trillion—higher than the annual GDP at the time. With the  economy humming along with a low unemployment rate, the prospect for any fiscal discipline was bleak. Put another way, if budget surpluses could not come at the boom end of an economic cycle, then deficits would be likely in good times and bad. Behind the structural imbalance of contiguous deficits and an ever-growing debt is the all-too-human preference for instant gratification without a corresponding value being placed on self-discipline.

The full essay is at "$20 Trillion in Debt!"

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[1] Neil Irwin, “Austerity Era Comes to End,” The New York Times, February 10, 2018.

Pressuring Employees to Act as Lobbyists on the U.S. Debt: Ethical?

How far a boss can ethically become involved in an employee’s political role as a citizen is a question perhaps more important than whether a business should make demands regarding what an employee does in the privacy of his or her own home (e.g., smoking or drinking products that are legal). It would obviously be objected, for example, were a supervisor to insist on accompanying a subordinate into the voting booth to verify the vote. What about pressuring an employee to lobby as a private citizen in the company’s interest without being paid for that work? Is it even work when it is “voluntarily” done on “off-time”? Finally, would it make a difference if the issue held systemic importance—meaning if it were vital to the country itself or at least the economic system—and the particular stance being advocated by the boss had value in solving the systemic problem (i.e., not just in the company’s interest)?

                 Federal U.S. deficits as a percentage of GDP from 1792 (2012-2016 projected). Notice that the projections take the deficits down from 2008-2010 levels. Notice also 1960-2010 as differing significantly from the "episodic" pattern in the 1792-1930 period. Why?

The full essay is at "Pressuring Employees."

Sources:

Damian Paletta and Kristina Peterson, “CEOs Flock to Capital to Avert ‘Cliff,” The Wall Street Journal, November 28, 2012.

Christina Wilkie, “’Fix The Debt’ CEOs Underfund Employee Retirement, Demand Cuts For Elderly,” The Huffington Post, November 27, 2012.

Ethan Rome, “Goldman Sachs CEO Lloyd Blankfein Wants Seniors to Get Less,” The Huffington Post, November 27, 2012.

Averting the "Fiscal Cliff": A Solution Overlooked

With just days to avert the beginning of automatic, across-the-board cuts in the U.S. federal budget and the end of the Bush tax cuts and payroll tax reductions, President Obama met with Congressional leaders at the White House following a brief respite over Christmas. The discussion was doubtless on what could pass Congress in time. The U.S. Secretary of the Treasury was also attending, so the upcoming debt-limit could also have been part of the discussion. It could be argued that the perspective itself at the meeting must have been too narrow—too small—even though the crisis demanded leadership.

The complete essay is at Essays on Two Federal Empires, which is available at Amazon. 

Aid to Egypt vs. Paying Down Debt

The debt of the U.S. Government—some $16 trillion in 2012—can be difficult even to grasp conceptually. One does not run into a trillion of anything in daily life, much less sixteen times a trillion. Without any tangible examples that can give us some inkling of the magnitude of the number, “sixteen trillion” can easily become a number one rattles off as if a “oh, by the way,” as in, “Oh, by the way, that sort of number will never be paid off.” One can point to the debt as a symptom of a systemic imbalance, as in that of consolidation over the constitutional federalism. That is to say, the magnitude of the debt can point to the lack of limitations facing Congress in its appropriating capacity. It could be argued that the ballot box is such a limitation, but what if the electorate themselves have a similar imbalance in terms of spending what they don’t have. With student loan debt at $1 trillion as of 2012 and a third of the amount in default, the federal debt can easily be seen as a manifestation of a more basic or fundamental imbalance of the psyche that transcends yet subtly fuels policy.

 

 

In reading of the Obama administration’s preparation of a pact to cut $1 billion from what Egypt owes the U.S. Government for agricultural purchases, I was stunned to read that “money that would otherwise pay down the American debt” would instead be spent on “training and infrastructure projects in Egypt intended to attract private investment and create jobs.” To be sure, rising unemployment in Egypt could undermine the democratically-elected Morsi government, so a strategic argument could be made on behalf of the American aid. However, the almost cavalier attitude toward paying down the federal debt is rather strange, and misplaced, given the gravity of the problem. Put another way, to put a strategic objective primarily oriented to the unemployment of a state that is not in the U.S. above paying down U.S. debt can be viewed as a questionable priority. It seems to indicate a desire to fix another’s problems at the expense of making a dent in one’s own. The scenario of the homeowner who lets his own grass grow out of control yet lends his mower to his neighbor whose lawn is has become “unbecoming” captures this sort of mentality.

 

In short, the debt of $16 trillion can be read as a mirror of sorts of a certain mentality—one that falls far short of that which a virtuous and responsible citizenry would have. It is no accident that Jefferson and Adams agreed in their later correspondence that such a citizenry is necessary for a republic to remain viable.

Source:

Steven Myers, “U.S. Is Near Pact to Cut $1 Billion from Egypt Debt,” The New York Times, September 4, 2012. http://www.nytimes.com/2012/09/04/world/middleeast/us-prepares-economic-aid-to-bolster-democracy-in-egypt.html?pagewanted=all

 

The Federal Reserve to Buy More U.S. T-Bills but No State Debt

According to The New York Times, “At their first meeting of the year, Federal Reserve policy makers voted unanimously … to continue the central bank’s controversial $600 billion plan to spur the recovery by buying government bonds.”[1] In other words, the central bank would continue to “print money” to buy up U.S. Government debt, allowing that government to go into more debt without putting pressure on the interest rate to go up (which would cost the government more in interest payments to bondholders).

The full essay is at "The Federal Reserve."

1. Sewell Chan, "Fed to Continue Bond Buying Program," The New York Times, January 26, 2011.

Military Sacred Cows: A Matter of Contrived Camulflage

"The most significant threat to our national security is our debt."

Micheal Mullen, Jount Chiefs of Staff Chairman, August, 2010.

The defense budget in 2010--$664 billion (not counting the Iraq and Afghanistan wars)--equalled that of the rest of the world combined.  One dollar of every five spent by the U.S. Government was for defense. The amount spent represents 80% growth since 2000. Why?  One reason: the big weapon systems oriented to fighting other empires (e.g., Russia and China). For example, $600 million for the littoral combat ship and $13 billion for amphibious landing vehicles (whose purpose has even been questioned by Sec. of Defense William Gates).  It would seem that the military contractors--the military industrial complex, moreover--are firmly entrenched and in control. That is to say, the defense spending is indicative of the influence of big business over government in the United States.  That this influence goes unhampered may tell us something about the leanings of our societal norms.

The full essay is at "Military Sacred Cows."