The debt – letter to the editor

The following letter was published in my local paper on Sunday. I made it necessarily brief to meet their 150 words limit. Please feel free to adapt and use.

If my Republican friends are so concerned about the debt, why did they do nothing to address it when they had the White House and majorities in both parties in 2017-18? In fact, they passed a tax bill that increased the debt by about $2 trillion. Democrats have been better at addressing the debt, but are far from laudatory in their efforts.

Per the nonpartisan Committee for a Responsible Federal Budget we need both spending cuts and tax increases to solve the problem, otherwise the math will not work. If a politician tells you otherwise, they are misrepresenting the facts, full stop.

Note one of my pet peeves is political groups that complain about things, but did not offer solutions when they had the baton. It is easy to point fingers and blame other folks. It is much harder to get up off our tush and do something about it. It matters not the party or group. Failure to make decisions and making bad decisions have a life beyond the term of the entity that was in charge.

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Social Security problems won’t just go away so some action is needed

The following is the executive summary of a newsletter published by the nonpartisan Committee for a Responsible Federal Budget on the subject of Social Security concerns. In spite of the president’s theatrics at the State of the Union, this issue remains to be a problem and needs thoughtful and responsible change now before the needed changes are more severe down the road. This serves as a microcosm of our overall debt problem.

“Social Security will be insolvent in as little as a decade. The Congressional Budget Office (CBO) estimates the combined trust funds’ reserves will be depleted by 2033. The Social Security Trustees have projected the trust funds will run out in 2035. At that point, the program will only be allowed to pay 75 to 80 percent of benefits under the law, meaning all beneficiaries will face a deep across-the-board benefit cut.

Lawmakers should reform Social Security to avoid this indiscriminate cut, while protecting the financial integrity of the Social Security program and the rest of the federal budget. A responsible reform package should abide by these five principles: 

• Strengthen Social Security as soon as possible to extend the life of the trust funds. Begin to phase in benefit and/or revenue adjustments as quickly as possible to strengthen Social Security’s finances. The sooner these changes are made, the less painful they will be — already we have waited to the point that many participants will be affected when they didn’t have to be. 

• Support the most vulnerable, who depend on the program. Enact reforms that avoid the abrupt across-the-board benefit cut projected under current law, while protecting benefits for those who rely on the program most and focusing adjustments on those who can best afford them. 

• Promote stronger economic growth and productive aging. Remove work and savings disincentives in the current program, while enacting reforms to support older workers and workers with disabilities, enhance retirement flexibility, encourage savings, and promote economic growth. 

• Rely on honest accounting, avoiding gimmicks and cost-shifting. Improve solvency by reducing costs and/or increasing revenue collection, not by shifting costs outside of Social Security, supporting further borrowing, pushing costs into the future, or relying on arbitrary expirations.

• Don’t criticize others’ solutions, especially if you don’t have your own. Reject partisan and special interest demagoguing of Social Security solutions, understanding that any final solution is likely to require compromise. Present alternatives rather than lobbing criticisms. Promising not to do anything is the most irresponsible promise one can make when it comes to Social Security.”

I will add no further comment at this point, leaving the words of one of the more reputable sources on government financing to sink in. I encourage you to dig further. The full paper can be linked to below:

https://www.crfb.org/papers/principles-social-security-reform

That debt limit and the real problem

The last time the Republicans shut down the government over the debt limit was led by Senator Ted Cruz. With other nations pleading with the US not to default on its debt, ten female Senators of both parties came together in the last 24 hours before we defaulted and came to an agreement. They told Cruz and his cronies to get out of the pool, it is time for an adult swim. Countries lend money to the US because we pay it back. Reneging on debt is NOT a conservative ideal.

Being concerned with debt is important, but where to be concerned about it is in revenue/ spending ledger. Per the nonpartisan Committee on a Responsible Federal Budget, we need revenue (tax) increases and spending cuts both as the math will not otherwise work. This was the conclusion of the bipartisan Simpson-Bowles Deficit Reduction Committee as well. While Democrats have tended to be better about dealing with the debt than Republicans, I felt when Obama shelved the Simpson-Bowles report it was a great disservice.

The hypocrisy that should be made clear is if Senator Cruz was so concerned about the debt and was willing to stop the government, why did he vote to reduce taxes in December 2017 to increase the debt by just under $2 trillion? This was a Republican law that largely reduced taxes for the wealthy and corporations, raising it on the middle class and throwing some bones at the lower economic class. And, it should be noted it was only passed, since the donors to the party said you need to do something for us or we will reconsider next year’s donations. I wish I were making this up.

Yes, the debt is a problem and we need to deal with it. Dealing with it with the credit limit looks like something major is being done, but until we adjust what we collect and spend every day, then it is all for nothing. By the way, the bill that just passed the House which is dead in the water in the Senate to reduce funding to the IRS has been estimated by the nonpartisan Congressional Budget Office to increase the debt by over $100 billion. It seems, policing tax filings is problematic for wealthy donors. It should be noted that the Trump Organization was penalized for tax fraud just following the week the dead-end bill was passed and its CFO was sentenced to a stay in a jail.

And, to be crystal clear, do not let any politician or opinion host tell you that we can solve our debt problem with only tax increases or spending cuts. We need both. The math will not work if we don’t do both. Full stop. But, don’t take my word for it. Please check out the website for the Committee on a Responsible Federal Budget and read.

A solution to US debt – listen to Maya MacGuineas

I have long said anyone can promote a tax cut. Actually, in the right crowd I may use a couple of more descriptive words to define how easy it is. In truth, it is not hard to sell. Same goes with beating on the IRS. No one likes the IRS (or your country’s version of it), but it performs a necessary service. Our government cannot function without revenue. So, tax cuts and being critical of the IRS appears to be, but is not necessarily good governance. Often it is just the opposite.

With our US debt the way it is fast approaching $30 trillion and building toward more than $40 trillion, some poor president is going to run on raising taxes and cutting expenses and last only one term if he or she delivers on that needed promise. Think of what happened to the Greece president who put them in an austerity program to avoid them going belly-up a few years ago.

If that happened in the US, the president will have done a great service, but will be fired for it. So, what we need is a person with smarts, diplomacy, and chutzpah. We need someone who has the respect of many across party lines.

I have just the person for the job. Her name is Maya MacGuineas who is the Director of the Committee for a Responsible Federal Budget. She is held in high regard by leadership of both parties. I would love to see her help set in motion the resolution to the problem.

MacGuineas is a Northwestern University graduate with a masters from Harvard University.

Per Wikipedia, “MacGuineas served briefly at the Brookings Institution early in her career, then spent two years at Paine Webber as an equity analyst on Wall Street. She also advised the 2000 presidential campaign of John McCain on Social Security.

She became a senior fellow and director of the Fiscal Policy Program at New America (organization)^] At New America, she oversaw its work on the federal budget, entitlement programs, and taxes.

In 2009, she did a stint on the editorial board of The Washington Post. She previously served on the Board of Directors of Common Cause. She also served on the Domenici-Rivlin Debt Reduction Task Force.

She currently serves on the Advisory Board of the Penn-Wharton Budget Model. She is Co-Chair of the National Budgeting Roundtable.

MacGuineas also serves on the Economic Strategy Group of the Aspen Institute. In addition, she is a Member of the National Academy of Social Insurance.

Committee for a Responsible Federal Budget

MacGuineas has served as president of the Committee for a Responsible Federal Budget, a non-partisan public policy organization dedicated to fiscal issues, since 2003. The Committee has been described as a “budget watchdog” by The Hill (newspaper). In 2018, she noted that she is a political independent and that the Committee is critical of both parties.

Under her leadership, the Committee grew in stature as it became a prominent voice for tackling rising national debt that is projected to reach record levels as a share of the economy in the years to come. A Roll Call article stated, “the previously obscure organization, a home for former federal budget officials, has been pulled into the spotlight, speaking to what its members and supporters argue is the overriding fiscal issue of the time.”^[15]

In 2012, she became head of the Campaign to Fix the Debt, a project of the Committee that seeks a comprehensive and bipartisan approach to addressing rising national debt. Business leaders, economists, and budget experts became involved with the Campaign, as well as thousands of grassroots supporters.

She has testified before congressional committees on several occasions. A Wall Street Journal piece described her as an ‘anti-deficit warrior.^‘“

We have a serious problem with our debt and it will get worse. The solutions must include tax increases and spending cuts. The math will not otherwise work. Do not let anyone tell you it will. They are blowing smoke at you. Both are needed. Let’s give her the job of president and tell the folks in Congress to listen to her guidance. She wields a data-driven set of approaches that will help if done in concert.

Grandstanding is not governance – not even close

As someone who follows the news and used to hold most elected officials in higher esteem, I am continually frustrated with the absence of good governance in Washington and various state capitols. Rather than governance, I see grandstanding for sound bytes to beat the other party over the head with. The purpose is to remain or regain power, where they will be in charge of doing nothing to govern.

Several Congressional representatives and Senators have retired or are retiring. The principal reasons are the disillusionment with the open hostility between factions and the fact over 1/3 of their time (some said 40%) is fundraising for the party. Let me say that last part in a different way. We taxpayers are paying for elected officials to hit us up for money between 33% and 40% of the time.

In essence, elected officials are more interested in keeping their jobs than doing their jobs. A further frustration is the number of folks who just don’t bother to reach out to all constituents and only care about their own party. The truth has become a casualty. And, what is sad is those who pay attention to the news know many of these elected officials are lying and know they know they are lying, but they lie anyway.

Grandstanding is a pronounced way of lying drawing attention to the person so doing. To me, it is akin to a gorilla beating on its chest to make an opponent cower and not fight back. Right now, we have an entire party that is OK with the US defaulting on its debts. Increasing the debt ceiling is to address what we have already spent or decided to spend, which the same folks did not seem to mind doing. Or, they cut revenue which also increased the debt.

In fact, many of these same folks voted on a tax bill in December, 2017 that reduced taxes on corporations and wealthy individuals which raised the debt by $2 trillion, approximately. In essence, we added to debt to make a pretty good economy a little better for a little while. Per the nonpartisan Committee for a Responsible Federal Budget, we must do both – cut spending and raise revenue to address our deficit and debt. The math will otherwise not work.

I have shared with several Senators it is OK to push back on spending to make sure we consider the best investments, but grandstanding on a debt limit that you helped make worse is not the place to do it. Before the pandemic, the US was around $22 trillion in debt with a $1 trillion annual shortfall on our budget ($3.4 trillion in revenue on $4.4 trillion in expenses). After needed pandemic stimulus, we are even worse off on debt and scheduled to be even further behind.

The last time we had a debt limit standoff was about eight years ago, led by Senator Ted Cruz (who by the way voted for the tax bill increase noted above increasing the debt). Our allies pleaded with us not to renege and when the US was within twenty-four hours of defaulting, ten female Senators from both parties told Cruz and others to get out of the pool for an adult swim. These ten women resolved the matter and the US did not default.

Our debt and deficit has been caused by both parties. Do not let either party say it is the other one’s fault as that simply is not true. And, we need for both of them to be involved to remedy this. Unfortunately, no one has the stomach to do what it really takes to resolve this. Any elected official can spend money and reduce taxes. Any elected official. But, that is precisely the problem. We need serious discussion with data and not grandstanding. Grandstanding is not governance.

Annual US Deficit projected to pass $1.5 trillion on 2028

One of two nonpartisan organizations that have been ringing alarm bells about US debt and deficits is The Concord Coalition (TCC). The other is the Committee for a Responsible Federal Budget. We should be listening to these folks and urging politicians to do the same.

In a press release, Bob Bixby of the TCC notes the Congressional Budget Office (CBO) projects the US deficit will pass $1 trillion this fiscal year ending 9/30/2020. In eight years, the CBO projects the deficit to pass $1.5 trillion. My guess is it will be sooner, given politicians being too infatuated with adding expenses and cutting taxes.

It should be noted we are now passed $23 trillion in US debt. Sans change we look to soar passed $35 trillion by the end of the decade. This means our annual interest cost will be a much larger chunk of our budgeted annual revenue which is around $3.65 trillion.

Two key points need to be made. With our pretty good economy going on 128 consecutive months of economic growth, we should be decreasing our deficit, not increasing it. Sadly, we were sold a tax break that helped a pretty good economy get a little better for a little while, but will add over $1.5 trillion to the debt.

The other key point needs to be said loudly. Our debt cannot be solved by only expense cuts or tax increases. The math will not work. It will need both. Do not let politicians tell you otherwise. It matters not how fervent or well they speak, the math will not work. We need politicians with thick skins and lots of courage.

We cannot solve US debt by charging more on our national VISA

The math problem is large. We have $23 trillion plus in US debt today, per the US debt clock. It is projected to increase by $10 trillion by 2027 FYE (September 30, 2027) before the tax cut in December, 2017. The tax cut added $1.5 trillion to the debt projection over ten years. A later budget change added $500 billion over ten years.

The budget bill just signed last week will add $500 billion over ten years per the Committee for a Responsible Federal Budget, yet they note all laws passed in 2019 have added $2.2 trillion over ten years. That would make it at least $37 trillion. So, a good working number is $37 trillion sans any action by the end of 2029 FYE.

Tax increases will not solve this problem, nor will spending cuts. Both are needed. Once the interest cost approaches the defense cost, we have a serious problem. At $37 trillion in debt, the interest cost to maintain it inches closer. So, it truly matters not what Democrats or Republicans like, some poor souls in charge will take the heat for trying to solve a problem passed along by poor financial stewards. It will be akin to the Greek people not liking the EU or responsible Greek leaders when they said Greece was in debt trouble.

What frustrates me is the GOP Freedom Caucus who got elected on debt reduction is the biggest bunch of hypocrites. They screamed bloody murder when the debt was $8 trillion, then $13 trillion, but are passing debt increases misleading the public that the tax reduction would pay for itself – no tax bill has ever done that and this one did not. But, Dems are not without fault. What should scare us all, we should be reducing the deficit with a pretty good economy, yet the deficit is growing and will exceed $1 trillion next FYE. What happens when the economic growth softens even more than it has over the past year.

So, my plea to all is dust off the Simpson-Bowles Deficit Reduction Plan and do even more. I am trying to tell folks what they need to hear, not what they want to hear. If I was a young person, I would be screaming bloody murder at inaction on climate change, guns and debt. Debt is not as frightening as guns and climate change, but it is a huge problem.

Boom, boom, boom, boom – the US deficit and debt continue to explode

In honor of John Lee Hooker’s famous lyric, which is played at the beginning of “NCIS – New Orleans” and in the movie “Blues Brothers,” a good wake-up call for our US deficit and debt is “boom, boom, boom, boom.” Please note, this is not the trade deficit, which is overblown as a problem as we are more of a consumer nation. This is due to our government spending far more than they take in revenue.

Per the following introduction in a Bloomberg News article, “U.S. Budget Gap Balloons to $739 Billion Despite Tariff Revenue,” we have an escalating problem.

“The U.S. budget deficit widened to $738.6 billion in the first eight months of the fiscal year, a $206 billion increase from a year earlier, despite a revenue boost from President Donald Trump’s tariffs on imported merchandise.

The shortfall was 38.8% more than the same period a year ago, the Treasury Department said in its monthly budget review released on Wednesday. So far in the fiscal year that began Oct. 1, a revenue increase of 2.3% hasn’t kept pace with a 9.3% rise in spending.”

Right now, our US debt tallies more than $22 trillion and was expected to increase by $10 trillion over the next ten years, before the tax cuts in December, 2017. Our fiscal year runs October through September, so this is the first fiscal year with full benefit of the tax cuts. The Congressional Budget Office forewarned the tax cuts would increase the debt by $1.5 trillion over the next ten years over the already projected $10 trillion. That will put us closer to $34 trillion at that time.

Yet, Americans were told by the president and favorable politicians that the CBO was wrong and growth would accelerate enough to pay for the debt using the assertion “the tax cuts will pay for themselves.” Per the Committee for a Responsible Federal Budget, tax cuts do not pay for themselves, with the best historical result being in the neighborhood of 30%, but usually much less. That leaves 70% of the revenue reduction adding to the deficit in the best of times.

The reasons for the increase in deficit are increases in military, healthcare and interest cost spending, which have overshadowed the revenue increases due to the longest running economic growth period in the US. Even the worst budgeter amongst us knows, we should be paying down debt when times are good, not increasing it. Sadly, the economy has begun to slow some, so the tax cutter’s rosy projections of 4% and above growth have not materialized (except in an isloated quarter) and economists are expected  lower growth rates than the current 3% per annum the rest of the year.

Per The Concord Coalition, the above Committee for a Responsible Federal Budget and the Simpson-Bowles Deficit Reduction plan from December, 2010, we must solve our deficit and debt problem through spending cuts and revenue increases (tax increases) both. The math will not otherwise work. If any politician, no matter how smugly, tells you otherwise, they are not be honest with you or are misinformed themselves.

To be brutally frank, I said so then, but the tax cuts passed in December, 2017 were malfeasance in my mind. We borrowed from our future to make a pretty good economy a little better. It was also hypocritical. Former Freedom Caucus members got elected saying the previous $5 trillion, then $8 trillion, then $13 trillion debts were abhorrent. Now, when it is just below $22 trillion, they pass a bill that increases it even more.

When I raised this with a Freedom Caucus staff member, he curtly told me the CBO is often wrong and they are wrong on this. My push back was simple. These folks do their homework to try and get it right. And, what I have found in my 40 years of adult life, is politicians hail the CBO when their number agree with their decision and call them on the carpet, when they don’t. Yes, it is a projection, but these folks try to be apolitical.

Folks, we have a problem that is not getting talked about enough. We must cut spending and raise revenue. My GOP friends have ceded their fiscal stewardship mantra – that is highly unfortunate. My Democrat friends need to question every candidate on how they plan to pay for their ideas and what they plan to do about the debt. We cannot have Medicare for all if we cannot pay for it.

So, let’s get real and ask politicians some pointed questions. If we don’t, John Lee Hooker will sing even more loudly. “Boom, boom, boom, boom.”

 

That nagging math problem

Dwarfed by other news yesterday, the Congressional Budget Office (CBO) updated their budget projections reflecting the new tax law and spending plan. Over the next ten years, the just over $21 trillion debt is expected to increase by $11.7 trillion bringing it to about $33 trillion. Before these two changes, it was expected to increase to about $31 trillion.

The CBO also said the deficit should rise to $804 billion by 2018 fiscal year end. Last year it was $665 billion. Further, the annual deficit should pass $1 trillion by 2020 and stay there.

There are many in Congress today who have screamed bloody murder in the past over rising debt and got elected under the banner of the Tea Party. I have seen footage of members who called this a crisis when it was only $8 trillion and then $13 trillion. They were right then, but now debt and deficit don’t seem to matter as many voted for a law to increase it.

I have seen some recent discussion about the need for a balanced budget amendment. To be frank, that won’t do. We need more revenue than expenses. The tax law passed in December is projected to increase the debt by $1.5 trillion, but Congress knew that then and still passed it, even many of these Tea Partiers.

I said this before, but I believe the tax law passing is extremely poor stewardship, even malfeasance. We are borrowing from our future to try to make an economy, that was in a 103 consecutive month growth period with seven consecutive years of 2 million plus job growth, even better.

To be frank, we cannot cut our way out of this problem. The math will not work. We must also have more revenue than we had before the tax cut. At some point, a future Congress and President will get all the flak for abruptly addressing this problem. Yet, they will be the better stewards, far better than the current President, Congress and their predecessors have been.

Bill Clinton takes a lot of heat for his womanizing, rightfully so, but he handed a surplus budget and smaller debt to George W. Bush. Bush went against the advice of his Treasury Secretary and passed a tax cut and then we invaded two countries draining our budget. And, my biggest criticism of Barack Obama is he shelved the Simpson-Bowles Deficit Reduction Committee report failing to use it as very good starting point for change.

Folks, like climate change, this math problem is not going away. We must address our debt now or it will be much more severe later. And, if people think it does not matter, that country we are imposing tariffs on owns a lot of our treasury bonds, bills and notes. They have floated the idea of stop buying them even before the tariff war. That also makes it a security risk as well.

Tick, tick, tick – young folks please raise some holy hell on this

Tick, tick tick…the US debt of $20.7 trillion is expected to increase by $10 trillion by 2027 even before the December Tax Bill and last night’s Budget Bill were passed.

Tick, tick, tick…per the nonpartisan Congressional Budget Office and Committee for a Responsible Federal Budget, the Tax Bill is projected to increase the US debt by $1.5 trillion or so by 2027.

Tick, tick, tick…last night’s Budget Bill which has now been signed into law is expected to increase the debt by $400 billion over the next two years.

Tick, tick, tick…unless something is done about it, the debt will be close to $33 trillion in 2027. The scarier thought is that might be low.

Tick, tick, tick…the added dilemma we are facing is the interest rates are increasing, since we may have overheated a good economy. That will add further to the annual interest cost on the debt.

If I were in my twenties, I would be raising holy hell about this. I just called several members of the Freedom Caucus, telling them I am an Independent and former Republican voter. While they were right to raise issue with the $400 billion, I said it was hypocritical to vote for a Tax Bill that increases the debt by $1.5 trillion.

Invariably when I called I spoke with a nice young staffer in their twenties, because I asked them if they were. During our conversations I asked them “you do realize we are leaving this problem for you?”

In December, 2010, the US debt was over $13 trillion. The reason this date is important is the bipartisan Simpson-Bowles Deficit Reduction Committee presented their findings and recommendations in that month. In essence, they recommended a series of changes that followed a ratio of $2 of spending cuts to every $1 of revenue increases. Since Democrats did not like the former and Republicans the latter, the Committee’s good work was shelved.

Fast forward to today and not only have we not done much about it, we have made the problem worse with these two bills. In Congress, it is both parties’ fault. It is President Obama’s fault for shelving the Simpson-Bowles study and it is President Trump’s fault for not making this an issue and promoting tax cuts. It is President Bush’s fault for passing tax cuts against the advice of his Secretary of the Treasury after being handed the baton on a balanced budget.

Our deficit was $666 billion in the last fiscal year. It will be over $1 trillion at the end of this one. This is not good. Please let your Congressional representatives, Senators and the President know we need to do something about this. We need revenue increases and spending cuts. The math will not work otherwise. Please check out the websites for the nonpartisan Committee for a Responsible Federal Budget, Fix the Debt and The Concord Coalition for more information.