Playing chicken with the debt – letter to the editor

While we need to deal with our debt in a holistic fashion, playing chicken with the debt ceiling gives the illusion of good governance, but is rushed. For example, one of provisions of the Republican bill on the debt ceiling would increase the debt by $120 billion. From an article called “GOP’s cut to IRS funding in debt limit plan would backfire” by Brian Faler of Politico:

“Republicans’ proposal to rescind $71 billion in IRS funding pushed through by Democrats last year would cut projected tax receipts by $191 billion over the next decade, the nonpartisan Congressional Budget Office estimates. The result: The government would find itself an additional $120 billion in the hole.”

This provision is designed to help aggressive taxpayers who benefit greatly from their efforts to mask income. So, it runs counter to the goal of reducing the debt while helping the wealthy.

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A nonpartisan and knowledgeable voice on US debt and deficit concerns

From the desk of Maya MacGuineas of the nonpartisan Committee for a Responsible Federal Budget. I will offer no additional comment as it speaks for itself.

“Today, the Treasury Department announced that it has begun engaging in a set of accounting tools known as “extraordinary measures” to avoid breaching the nation’s $31.38 trillion statutory debt limit. Those measures are expected to delay that breach until at least early June and possibly later.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

Without qualification, the debt limit must be increased or suspended, and it should be done so as quickly as possible. Ideally, we would return to the practice of lifting the debt ceiling without relying on extraordinary measures – which have become all too ordinary – and refrain from making the increase anything close to a last-minute showdown.

The debt ceiling is too important to turn into a game of chicken, and default should never be suggested by those with a fiduciary responsibility to govern the nation. Politicians who are rightly worried about the nation’s unsustainable borrowing path should take a hard stance against new borrowing and oppose legislation that would add to the debt while offering specific solutions to control the debt already on the books, rather than threatening not to pay the bills on borrowing that has already been incurred.

The debt ceiling does offer the opportunity for all lawmakers to pause, assess the fiscal situation of the nation, and take action as necessary. And it is necessary. The debt as a share of GDP is at near record levels. We are on track to begin adding $2 trillion per year to the debt by the end of the decade. Interest payments are the fastest growing part of the budget and are projected to start costing $1 trillion annually in only a few years. The Social Security and Medicare Hospital Insurance trust funds are headed toward insolvency. And last year alone, Congress and the President passed bipartisan legislation that added nearly $2 trillion to the projected national debt. This is an urgent problem that is not getting the attention it needs.

An ideal solution would be for Congress to lift the debt ceiling as soon as possible and at the same time put in place measures to improve our fiscal trajectory. This could include specific policies or processes such as a fiscal commission.

Attaching fiscal reforms to the debt limit was common practice in the past when both policies and processes to improve fiscal responsibility were included as part of a deal. More recently, in a jaw-dropping act of fiscal irresponsibility, politicians in both parties pivoted to support debt ceiling increases along with legislation that made the debt worse. Under President Trump, the debt ceiling was lifted three times with bipartisan support and included legislation that added in total a stunning $2.1 trillion in new borrowing to the debt.

Congress should return to the past model of a debt ceiling increase, legislation to improve the fiscal situation, and a broad based understanding that the debt ceiling must be increased in a calm and timely manner. We must not threaten default. The cost is simply too high.“

Views from an independent, former Republican and Democrat voter

For what they are worth, the following are the views of an old fart who can sing the lyrics with truth behind them to Paul McCartney’s song about age; “will you still need me, will you still feed me, when I’m sixty-four.” I have been a Republican for over 20 years and Democrat for less than five. Around the 2007-08 timeframe, I left the GOP to become an Independent voter.

I would add I am more conservative, especially in financial matters, and more progressive in other issues. I believe in helping people climb a ladder when needed, but we need to be able to pay for it. I am also a big believer in Teddy Roosevelt’s mantra of a Square Deal, meaning giving everyone equal opportunity and I am also a believer in Franklin Roosevelt’s Fair Deal, which helped people who were disenfranchised and broken.

Politics seems to be less about policy and more about designed, fabricated and embellished wedge issues. To be frank, the Republican party public relation spin doctors do not want their candidates to speak about real issues, unless it is blame someone that they really have little control over. Democrats embellish and even lie as well, but it is not a normal distribution being heavily tilted to the right.

Let me set aside the obvious concerns this election and speak to a few policy concerns.

-the Republican Party has no platform, as they did not vote on one in the 2020 GOP presidential convention in Charlotte. Senator Rick Scott, who is heading the Senate campaign, came up with one, but it did not reach consensus. This is a one reason Republicans will not tell you what they will do to solve the problems as they don’t know. The PR people said don’t put a stake in the ground and no one can fault you for it. So, ask them “what do you plan to do about it?”

-Democrats are not perfect, but they are at least addressing or attempting to address issues. A gun governance law was passed (although watered down to garner votes by Republicans), laws impacting infrastructure funding, climate change funding, renewable energy measures, and health care premium and drug costs stabilization were passed and subsidies were passed to help people during the pandemic, building off the ones passed under Trump’s tenure. We also returned to the Paris Climate Change Accord. While an abatement is being provided on federal student loans, I personally would have rather seen something deal with healthcare debt, which is the number one reason for personal bankruptcy.

-Outside of the pandemic help, the key thrusts of the Trump administration were to repeal and replace the ACA (which thankfully failed), give a huge tax break to the wealthy and corporations, masking that the middle class may not come out ahead with limitations on state tax deductions and place tariffs on our trading partners which upset markets causing supply chain issues which were worsened by the pandemic. We also harmed our relationships by focusing more on the transactional and we pulled out of three major accords that went on without us – the Paris Climate Change Accord, the Trans-Pacific Partnership to better compete with China and the Iran Nuclear Deal.

-We should be talking more about what should matter most to people – helping them feed their families, pay for healthcare and keep a roof over their heads. We must deal more with environmental issues as a steward of this country and planet – on top of climate change, we have a global water crisis, that is being exacerbated even worse by climate change and lack of decision-making. If that were not enough, we have a lead pipe issue for distributing the diminished water supply. And, we must protect all people’s rights, not just those who look or worship a certain way. Finally, we have too many in a country this successful going to bed hungry. That is a damn shame.

-What we don’t need to be talking about is contrived issues that really don’t matter a whole lot. I won’t even mention them now as that would give them more cover than they deserve. If I did not mention it above, with the exceptions below, then maybe it is not that big of an issue.

The exceptions are two. We have a debt and deficit problem in our country that has been made worse with the last two administrations. Neither party does well with this issue. Neither. The GOP likes to beat on their chest about it, but made the debt worse under the previous president. The current administration did something about, but that is after making it worse with pandemic subsidies. Obama did something about, but only because both parties put in this sequestration fall back position that made cuts if no deal was reached. No deal was reached.

We have immigration concerns, but the problem is nowhere near as bad as portrayed and was not that bad in 2016 either, even though it was played up. I would ask Republicans if you want to deal with immigration, why did Speaker John Boehner not bring to a vote a bipartisan immigration bill which passed the Senate, which had enough votes to pass the House? Why did the former president renege on his number one campaign issue when a bipartisan deal was reached to give $25 billion for his border wall for making DACA a law? The reason is PR people told the GOP not resolving immigration issues was a more winning issue than solving them – not my words, by the way, but I agree.

Setting aside all of the above, as an independent, I feel my old Republican party is adrift an untethered to the truth. Michael Gerson, a conservative pundit, said the “party is in decay.” When the truth tellers are vilified and the liars aggrandized, it is does not lead to gravitas and veritas. If you tout a Big Lie, then it greases the skids to lie about more things. I believe our voters need to send a strong message to any Republican who touts the former president’s bogus election fraud story and to any Republican who has rationalized his deceitful and illicit behavior. They are perpetuating a fraud on the American people and many know they are so doing, which is even worse.

I encourage people to research how candidates stand on issues. If they support the Big Lie, then dig even deeper. And, know there is one party bent on restricting dissenting votes leveraging the Big Lie. My advice is know the rules and vote. And, remember who wants you not to as you do, as your voice does matter.

The biggest lie – “I created this economy”

The incumbent president likes to take credit for all things good and blame others for all things bad. This is true regardless of the extent of his role in the outcome. He boasts that he created this great economy before the pandemic and will help us get back to it. Although the economy continued to do well, to say he created it is not truthful. Given his loud chest beating on this one issue, it qualifies as his biggest lie, although other lies are further afield from the truth.

When he took the oath to his office in January, 2017, the US was on its third longest economic growth period in its history at 91 consecutive months of GDP growth. That translates into just longer than 7 1/2 years. It should also be noted for the six previous years, we had 2 million plus in annual job growth and the stock market more than doubled under his predecessor. To Donald Trump’s credit, the economy continued to grow for 36 more months, the stock market continued to climb and job growth continued until it fell with the pandemic. The recession officially started in February of this year.

Now, I wrote during Barack Obama’s presidency that presidents get too much credit and too much blame for the economy. They can provide headwinds and tailwinds, but that is about it. The “headwinds and tailwinds” remark is courtesy of conservative pundit David Brooks. The same goes with the current president. But, if people want to lay wreaths at Trump’s feet for the economy before the pandemic, they must also do the same for Obama. Obama actually inherited an economy in recession due to the housing crisis in late 2007 through mid 2009. He was sworn in January, 2009.

The incumbent president has provided some headwinds and tailwinds to help keep it going, sometimes at the same time. Here is a look at a few of these wind currents:

Tailwinds

The economy got a temporary boost from the December, 2017 tax cut that increased the debt by $1.5 trillion over the next ten years. At a time when we should have been decreasing the deficit, we increased it. So, in essence, we borrowed from our future to make our economy a little better for a little while. One economist referred to it as a sugar rush. Before the pandemic, we fell back to growth at the same level as before the election. Overall, this growth period has been the longest, but the rate of growth under both presidents has lagged other periods. It has been a slow and steady climb, again before the recession caused by the pandemic.

Cutting through some regulations also provided some stimulus for businesses, but as noted below, these will cause future headwinds. People often mix bureaucracy with regulations. We need to constantly review regulations to see if they are working and how they can be improved or rescinded, if need be. So, regulations are not necessarily bad. Bloating bureaucracy is what we must guard against. I recall a story of Erskine Bowles, who eventually became Bill Clinton’s Chief of Staff. When Bowles headed the Small Business Administration, he reduced the application from 42 pages to one.

Headwinds

We must guard against debt. Dipping into debt to stimulate the economy dragging from COVID-19 is one thing, but the 2017 tax cut needed not be so severe that it increased debt. Note, many said this before it was passed, not just now. By the end of this decade, we should be beyond $40 trillion in debt on an annual revenue budget (during 10/18 – 9/19 FY) that is currently just less than $3.5 trillion, with expenses around $4.5 trillion. With the pandemic stimulus, the annual 2019-20 deficit will be around $3.7 trillion. Eventually, interest cost will rival the biggest budget items if we do not remedy this growing problem. Some poor president and congress will have to make some hard decisions as revenue is too low and costs are too high.

Letting polluting industries skate on fewer regulations will come back to haunt us. Chemical spills, polluted water and nuclear waste causes major environment concerns to people, animals, carbon eating trees/ plants and food crops. Even the best of developers and manufacturers would like someone else to pay for their shortcuts. Industries go to great pains to hide their dirty laundry. The laundry is there, it just needs to be more cleaned up. Relying on a company’s altruism is not an effective means of controlling pollution.

Tariffs on all partners cause echo tariffs from our trading partners. And, no one wins a tariff war, regardless of what the president might say. As we have become harder to deal with, buyers and sellers find other markets. The increase in farmer bankruptcies has been significant since the tariff wars started, increasing dramatically over previous levels. One farmer said, other countries sought out other sources of farm goods, so we lost a future pipeline for sales. And, just today, I read in conservative George Will’s editorial that trust in America to do the right thing has fallen to 24% and preference to America as a trading partner has fallen.

One of the business lessons I learned over the years, is if you become difficult to work with, your customers and clients will be forced to find other providers of services and products. It does not get any plainer than that. One of the best things a president can do is create new markets – Reagan, Clinton, Nixon, and Obama all were good at creating new avenues for trade. It is not surprising that Clinton had the most jobs created on his watch, with Reagan having the most jobs as a Republican president. And, Nixon for all his corruption, should be remembered well for opening up relationships with China. Trump should get credit for renewing a refined NAFTA agreement, but he hindered his efforts to compete with China when he pulled the US out of the Trans Pacific Partnership which went on without us and backtracking on deals with Cuba, Iran and the Paris Climate Change Accord, has placed the US at odds with others.

Global trade builds revenue. A country cannot shrink to greatness. And, what we are seeing today is other countries not wanting the hassles of dealing with the US as much as before. And, this is before the mishandling of the pandemic that has left the world aghast.

And the band played on – letter to the editor

My local newspaper printed my letter to the editor based on the theme of a recent post. Please feel free to adapt and use it, if you agree with the concept.

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I feel like citing the song lyric “and the band played on” in reference to elected leaders ignoring problems which will only get worse. On climate change, environmental degradation, increasing US debt, aging infrastructure, and insufficient gun governance, we have ticking time bombs. The kids get what is needed on climate change, environment and guns. But, debt and infrastructure must also be dealt with. And, not addressing the former makes the latter harder.

These are the questions we must be asking our politicians. If they are evasive or give poor answers, do not vote for them. We don’t need a wall. We need safe bridges and railways.

 

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.”