Posts tagged with: national debt

In my 2009 commentary addressing the nation’s debt crisis I included words from Admiral James B. Stockdale. The full quote comes from an essay on public virtue from the book Thoughts of A Philosophical Fighter Pilot. In his 1988 publication, Stockdale declared:

Those who study the rise and fall of civilizations learn that no shortcoming has been surely fatal to republics as a dearth of public virtue, the unwillingness of those who govern to place the value of their society above personal interest. Yet today we read outcries from conscientious congressman disenchanted with the proceedings of their legislative body and totally disgusted with the log-jamming effect of their peers’ selfish and artful distancing of themselves from critical spending cutbacks, much needed belt-tightening legislation without which the long-term existence of our republic itself is endangered.

The religious left, on cue, descended to the temple of irresponsible spending to circle the sacred debt wagons. I’ve already addressed the problems of baptizing Christ into the big government for the poor mantra. Just to briefly add to that, we have a $1.5 trillion deficit this year alone. Our total national debt is just over $14.5 trillion. The annual federal budget was $1.86 trillion in 2001. This year the budget is estimated to end up at $3.82 trillion. For the mathematically challenged prophets circling Washington, that number has more than doubled in one decade.

Is robbing our citizenry and its future inhabitants of opportunity the best we can do for the poor and for the common good? Is the crumbling failed experiment of government as overseer and caretaker the best the nation has to offer those who are marginalized and need help? Because if the answer is feeding a government that has grossly mismanaged all the income it collects by continually extending its credit limit then we suffer from the poverty of sense and ideas.

If it is not the answer, then unfortunately some clerics in Washington are using the poor as pawns or calves in their temple sacrifice to protect their ideological god who needs another “revenue” boost before it comes crashing down like a toddler after a sugar high. The fact that so many religious leaders are stoked up about necessary budget cuts only serves as a reminder of just how big, bloated, and politically useful big government has become.

Blog author: jmeszaros
Wednesday, July 20, 2011
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John Boehner recently stated, in the debt-ceiling talks, that “We’re going to continue and renew our efforts for a smaller, less costly and more accountable government,” which most Americans agree with in principle.  However, citizens say that keeping benefits the same for the three big programs, Social Security, Medicare, and Medicaid, is more important than taking steps to reduce the budget deficit by a margin of 60 percent compared to 32 percent for Social Security, 61 compared to 31 percent for Medicare, and 58 compared to 37 percent for Medicaid.

So Americans purportedly want thriftier government, but still want benefits? What gives?  Part of the problem, according to James Kwak, is “the idea that there is one thing called ‘government’–and that you can measure it by looking at total spending–makes no sense.”

What Kwak means is that total expenditure is a misleading measure of the “size” of government. He presents this example:

The number of dollars collected and spent by the government doesn’t tell you how big the government is in any meaningful sense. Most government policies can be accomplished at least three different ways: spending, tax credits, and regulation. For example, let’s say we want to help low-income people afford rental housing. We can pay for housing vouchers; we can provide tax credits to developers to build affordable housing; or we can have a regulation saying that some percentage of new units must be affordably priced. The first increases the amount of cash flowing in and out of the government; the second decreases it; and the third leaves it the same. Yet all increase government’s impact on society.”

So increased spending (or decreasing it) does not necessarily mean the “size” of government has grown (or shrunk). Think how regulation is synonymous with big government, but it does not involve a tax or direct spending of any kind.

In fact, “big” government is often viewed through the lens of regulation, rather than cost. For instance, Kwak explains:

When people say government is too big, they often have in mind something like the Consumer Financial Protection Bureau–a regulatory agency that tells businesses what they can and can’t do…the CFPA’s budget is about $300 million, or less than one-hundredth of one percent of federal government spending.”

Again the divergence between cost and “bigness” is seen.  The CFPA may be viewed as “big,” intrusive, and unnecessary but it is not large in terms of cost like Social Security and Defense spending.

Kwak states, “popular antipathy toward the regulatory state has been translated into an attack on popular entitlement programs.”  Many people dislike certain government regulations and, due to the budget debate, dislike of regulation, the amount of government spending, and specific government programs may have become accidentally intertwined.

As mentioned before, Americans view Social Security, Medicare, and Medicaid as important and worth preserving.  Kwak elaborates: “Rationally speaking, your opinion about Social Security or about Medicare should be based on how much you put in and how much you get out–not on the gross size of the program, and not on how big the rest of the federal budget is. Yet instead the total size of the budget has become the driving force behind potential structural changes in Social Security and Medicare.”

Kwak suggests that “we should make decisions on a program-by-program basis, just like a business is supposed to do.”  His advice is: “If there’s a program that the American people, through our democratic system, agree will provide benefits greater than its costs, we should do it, independently of the existing spending level. And if there’s a program that isn’t covering its costs, we should kill it.”

Instead of focusing on a generality, “government size”, our elected officials should evaluate programs on a cost-benefit level.  Then government agencies that are viewed as too costly or intrusive (the CFPA) could be eliminated and government programs that are viewed as beneficial (SS, Medicare), but need reform, can be focused on in an unbiased way and not be harmed by the “too big” generality.

Jordan Ballor, in a blog post for Acton, wrote: “All government spending, including entitlements, defense, and other programs, must be subjected to rigorous and principled analysis.”  Indeed, although the American people think Social Security, Medicare, and Medicaid are beneficial, 52 percent think Social Security needs significant reform, 54 percent think Medicare needs reform, and 54 percent, likewise, for Medicaid.  However, without having a clear definition of what “too big” means, successful retooling will be difficult to achieve.

Ballor added: “This means that the fundamental role of government in the provision of various services must likewise be explored. This requires a return to basics, the first principles of good governance, that does justice to the varieties of governmental entities (local, regional, state, federal) and institutions of civil society (including families, churches, charities, and businesses).”  True reform requires not simply legal and budgetary change, but a reevaluation of what entities perform certain services, as Ballor suggested.

The Acton Institute is committed to real budget reform, and, to make sure that programs, like Social Security, are evaluated fairly and reformed properly, the United States should make sure it clearly defines the costs and benefits of individual programs before taking drastic action.

We’ve all heard of presidents, governors, and other civil leaders calling citizens to prayer in times of great need. In April, Texas governor Rick Perry called on his citizens to pray for rain because of an extreme drought.

It looks like the mayor of Harrisburg, Pa. is about to embark on a three-day fast and prayer practice for help with the city’s bleak budget deficit. The idea of the fasting and prayer is meant to help unite citizens to solve the crisis. Bravo, if that is the case. One would have to be concerned though if religion is invoked to avoid the hard choices facing government everywhere and it morphs into the ideological “What Would Jesus Cut?”

In a news story on the city’s prayer and fast effort, a local pastor explained:

The Rev. Herb Stoner, pastor of adult training at Christ Community Church of Camp Hill, said the answers to problems in Harrisburg and the region won’t be found in the wisdom or ability of humans.

This much is true, given the financial hole leaders of the city have dug for its citizens. I suspect we might see even more calls for divine help with the debt crisis, as it becomes even more apparent how serious and distressing it is for most of the people across this land. In a speech earlier this year, Indiana Governor Mitch Daniels called the federal debt “the new red menace.” If the comparison rings true, history tells us it will require colossal sacrifice and resolve to combat the national debt.

This week’s Acton Commentary:

Deficits, Debt, and Self-Deception

By Samuel Gregg

It passed almost unnoticed, but in late July the Obama Administration raised the Federal Government’s budget deficit forecast for fiscal year 2011 to $1.4 trillion. That’s up from February’s forecast of $1.267 trillion. In July alone, the Federal Government’s deficit was $165 billion, of which $20 billion was for interest-payments on debt.

The long-term outlook is even worse. The U.S. Government is now borrowing approximately 41 cents of every dollar it spends. It’s also predicting additional borrowing of $8.5 trillion until 2020. If that eventuates, America’s national debt would exceed 77 percent of its annual economic output.

At some point, most of us become dazed by all these numbers that track America’s upward spiral of debt. This numbness is only exacerbated by the fact that government debt-excesses in most developed countries have been matched and even surpassed by household and financial-sector debt.

In Spain, for instance, household debt rose from 69 percent of disposable income in 2000 to 130 percent in 2008. Britain was worse, with the ratio rising from 105 percent to 160 percent over the same period. Average American household debt increased from $27,000 in 2001 to $44,000 today.

The economic effects of servicing all this debt (let alone paying down the principle) are not hard to grasp. For many households, it means either bankruptcy or severe curtailing of lifestyles so that expectations match people’s actual incomes. For others, it translates into less access to credit, even for those with good credit records or well-conceived business plans that need only sufficient capitalization to succeed. The cost of servicing government debt also reduces the amount of private sector capital available for investment. This means slower growth which further impedes our ability to shrink government deficits. (more…)

My commentary this week is a simple message about the importance of returning to our founding principles and embracing the liberty granted to all of us as Americans. Independence Day should always serve as a significant reminder of the freedom narrative of this country that has provided so many people with opportunities to flourish and live out their dreams:

America’s Destiny Must Be Freedom

Ralph Waldo Emerson described America as “the land that has never become, but is always in the act of becoming.” Many Americans don’t feel that way as pessimism has replaced a once vibrant optimism about the future. Economic malaise, crippling debt, and a mammoth oil gush in the Gulf Coast are daily reminders of seemingly unmovable obstacles.

Bob Herbert wrote a New York Times column echoing the sentiment of an aimless America titled “When Greatness Slips Away.” While many claim to have the answers to our economic woes and lack of confidence, we would do best to return to the principles of the Declaration of Independence, the American Founding, and our freedom narrative. In past crises, they have been sources of American endurance and strength. They can be again.

Those sacred words from the Declaration—“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”—have been an inspiration to billions of people at home and abroad for centuries. Freedom from excessive centralization of power and the right of the citizenry to flourish without undue interference are hallmarks of what it means to be American. And while the federal government has used activism for good at times, most notably for securing civil rights in the American South, it is revealing itself more and more as the obstacle to progress.

Many in the academy and the modern left scoff at what they call the “Horatio Alger myth.” Alger wrote stories such as “Ragged Dick” and “Only an Irish Boy.” He told stories of poor children achieving the American dream through hard work, determination, and virtue. But Alger also depicted an important spiritual component to his impoverished characters. He gave them dignity and natural rights, just as our founding document did. His tales reflected the kind of egalitarianism that asserts that the value and dignity of a destitute human person is equal to that of another born into prominence and prosperity. These ideas grew right out of our religious heritage and founding.

But if Alger’s stories were not myths before, they will be soon. Future generations’ enjoyment of the liberty to flourish is in jeopardy. The Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, last week called the $13 trillion national debt the “biggest threat to our national security.” Annual interest on the national debt in 2012 will grow larger than the entire defense budget. Currently 43 cents of every federal dollar spent is borrowed.

This kind of dependency is antithetical to our tradition of self-reliance. Pick up any honest textbook about American history and the march of America is about freedom and opportunity. On the day of the invasion of the greatest army of liberation ever assembled, General Dwight D. Eisenhower told his armed forces “The eyes of the world are upon you. The hopes and prayers of liberty-loving people everywhere march with you.” These men are often called “The Greatest Generation.

Succeeding generations may call our own “the debt generation” as their dreams become enslaved to deficits so colossal that they sap their entrepreneurial spirit, savings, and earning potential.

Big government activists are already using the BP oil spill to double down on their claim that the federal government is too small, even while the federal response is crippled by a multilayered bureaucratic decision making process and excessive regulation. Others say the BP oil spill is the perfect sign that America’s economic and moral might has peaked.

In his 1993 Inaugural address, President Clinton said, “There is nothing wrong with America that cannot be cured by what is right with America.” It’s a simple yet profound point. Similarly, the primary reason Russell Kirk penned The Roots of American Order in 1974 was to remind his country of the moral bedrock at its base, and to thereby show the way to how it could maintain greatness. In the first chapter, Kirk quotes a passage from the book of Job saying if the nation lacks foundation and order “even the light is like darkness.”

As American citizens pontificate about the future of America this July 4th, they should ask themselves what they can do to curb the contraction of liberty and promote its expansion. It is the citizens, thankfully, who will decide America’s destiny.

Blog author: sgregg
Saturday, January 23, 2010
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This week’s Acton commentary:

As 2010 unfolds, many countries are confronting a public deficit crisis of disturbing proportions. Since 2008, countless politicians have underscored that a cavalier attitude to debt on the part of Main St. and Wall St. contributed significantly to the recent financial crisis. It’s therefore ironic to observe these contemporary preachers of thrift plunging developed economies into an abyss of public liabilities.

In 2009, for example, the Obama Administration spent more money on new programs in nine months than the Clinton Administration did in eight years, thereby increasing America’s annual deficit to $1.4 trillion.

To be fair, the federal government’s annual deficit rose steadily under the Bush Administration. Indeed, this spending-pattern helped create an atmosphere which made it easier for politicians to push through the stimulus packages of late 2008 and 2009. America’s long-term annual federal deficit is now at its highest level since the early 1990s. The Office of Management and Budget presently predicts that by 2019 America’s public debt will be $18.4 trillion – approximately 148 percent of America’s GDP.

In an age when political, civic, and religious leaders endlessly invoke “intergenerational solidarity,” that’s hardly a proud legacy to bequeath our children. It’s akin to forcing them into a form of indentured servitude to us which will last long after we’ve gone to meet our maker.

A former American Vice-President once reportedly stated: “Deficits don’t matter”. Actually, they do. For one thing, much economic policy of the 2010s is going to be dominated by efforts to reduce government deficits. This assumes, of course, that our political masters have retained some lingering sense of fiscal prudence. Here the Federal government’s recent lifting of borrowing limits for financially-disgraced Fannie Mae and Freddie Mac does not inspire confidence. Nor does Congress’s quiet Christmas Eve raising of the federal debt limit to $12.394 trillion.

Deficits also matter because reducing them presents us with difficult choices. One is to raise taxes. This, however, reduces incentives to create wealth. A second is simply to inflate the deficit away. But apart from poisoning a currency, inflation discourages savings and negatively impacts those on fixed incomes: i.e., the elderly and the poor.

Another option is to reduce government expenditures. But politicians would then not have as much taxpayer money available to pay off the various interest groups that support them during elections. Unsurprisingly, they’re not so inspired by this, all protestations to the contrary.

Naturally, it’s very easy to blame politicians for the deficit nightmare confronting America and other developed countries. But one of the Bible’s most useful pieces of advice is to “remove the wooden beam from your eye first; then you will see clearly to remove the splinter from your brother’s eye” (Matthew 7:5).

It’s true that many politicians in America and Western Europe consistently vote for public expenditures not covered by revenue. But they are not in office because they inherited their positions. They hold public office because many of us vote for them.

Some of us do so because we’re happy for them to use their legislative powers to make others to pay for particular projects that we can’t or won’t pay for ourselves. It’s part of an unspoken agreement between politicians and the rest of us. We want to have our pork and eat it too.

Others vote for such political candidates because we actually want the state to take care of us rather than assume responsibility for ourselves and our families. Yet others vote for deficit-enhancing politicians because we think we can have mutually-exclusive things, such as countless entitlement programs and low taxes.

And then there are those of us who vote on the strange basis of identity-politics or emotionally-satisfying-but-content-less slogans like “Hope and Change,” while ignoring the woeful fiscal records of politicians of all parties espousing such mottos. The same politicians habitually make absurd promises to solve all our problems, and we go along with it. In short, we routinely throw our reason out the door and succumb to messianic sentiment and utopian daydreaming. That’s what adolescents do – not mature, responsible citizens.

At some point, however, the irreconcilable must be reconciled. All those promises and pork-barrels must be paid for. Neither raising taxes nor cutting expenditures are electorally-palatable solutions for most politicians. So why not run large deficits?

But in the end, out-of-control deficits matter because they tell us something about who we are, what we want, and our unwillingness to make the necessary sacrifices to achieve our goals. Ultimately, it’s not just politicians who need to be held accountable and repent for our deficit crisis. It’s us.

Blog author: jballor
Wednesday, September 20, 2006
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NBC Nightly News has long had a special feature titled, “The Fleecing of America,” which investigates various instances wasteful spending by government officials.

To get a visual clue about the massive size and diversity of the federal budget, check out “Death and Taxes”, the 2007 edition, “a representational graph of the federal discretionary budget. The amount of money that is spent at the discretion of your elected representatives in Congress. Basically, your federal income taxes.”

The website also notes, “Don’t forget about the national debt! It’s the circle so big it doesn’t even fit in the box.”

I recommend printing out the graph in landscape orientation on ledger-sized paper and posting it somewhere near your desk. You’ll get plenty of questions from curious passers-by.

(HT: Mises Economics Blog)



Update: In response to the limitations of the graph noted by Tim in the comments section below, it should be noted that this graph does only refer to discretionary spending. This does not include either the mandatory spending that falls under the federal budget each year or the various entitlement programs, such as Social Security, which are “off budget.” With this in mind, of course, the pork in the graph above is the good news, relatively speaking.

With regard to speculation as to why the makers of the budget graph chose only to look at discretionary spending, I quote this Reason article: “Because discretionary spending can theoretically be zeroed out each year, it is generally regarded as the clearest indicator of whether a president and Congress are serious about reducing government spending.”