Sunday, June 5, 2022

In The Red

This article sorely deserves to be read in its entirety. It describes the level of financial peril in the US as succinctly and as nonpartisan as is possible. Of course there are aspects of partisanship because we are a two party country -- we need to deal with the problems in that context as marital problems need to be dealt with in a two party solution. Unless the union is to be dissolved.

The first step in avoiding a truly calamitous, debt-ridden future is to understand how we got ourselves into this predicament to begin with. It is not national defense or even the New Deal but rather the Great Society that is bankrupting us.

Sadly, the excellent charts that make our peril painfully clear are not in the digital version linked, so I was forced to go screen capture PDF route, but I think you can get the picture. 

One of the quick responses from the left will be that our problem is that we are undertaxed, not overspent. More government MUST be better! 

A fundamental preliminary question is whether our government taxes too little or spends too much. The answer is easy to determine. In 2021, the federal government collected more than three-and-a-half times as much money, in real dollars per capita—that is, above and beyond inflation and population growth—as it did at the start of the postwar period. But it spent nearly seven times as much. From 1947 (the first postwar fiscal year, as FY 1946 began in July of 1945) through 2021, the population of the United States rose 2.3-fold, while prices rose nearly 13-fold. Combining these two factors, the federal government could have collected and spent 29 times as much in nominal dollars in 2021 as it did in 1947 without collecting or spending any more in real (inflation-adjusted) dollars per capita. Instead, the federal government taxed more than 100 times as much in 2021 as in 1947 and spent almost 200 times as much. By any reasonable standard, our government isn’t afflicted by a shortage of tax revenues but by an almost endless appetite for spending.

Means are always limited, desires are not.  

As the charts show, it matters which party controls the executive and legislative branches. 

Despite this subsequent debt explosion, the Clinton-Gingrich era was a successful one in terms of fiscal responsibility. Indeed, over the past 40 years, deficits have been lowest when a Democrat has been in the White House and Republicans have controlled both houses of Congress. The second-best scenario has been a Republican president with either party controlling both houses of Congress. Next-best has been a Democratic president paired with a mixed Congress (with each party controlling one house), followed by a Republican president paired with a mixed Congress. The worst scenario has been Democratic control of the whole government. Over the past four decades, Democratic control (average deficit of $1.1 trillion in constant 2012 dollars) has been more than twice as costly as Republican control ($490 billion).

It would appear that unless there is massive vote fraud, we may go from the worst to the best case in finances in 2023-2024, however the hole is very deep at this point. Thomas Jefferson described the likely outcome of our financial incontinence. 

Thomas Jefferson described fiscal profligacy as a precursor to inevitable misery and suffering, the first in a stampede of apocalyptic horsemen. “[T]he fore horse of this frightful team is public debt,” he wrote. “Taxation follows that, and in its train wretchedness and oppression.” This wretchedness will only be more keenly felt as interest rates rise. Too much debt puts power in the hands of our enemies and renders the average American poorer every year.
How do we fix it? Pain ... a lot like how anyone "fixes" other cancers if they can fix it at all. In our case, we basically have to return to representative Constitutional  government -- rather than the Administrative/Deep State we are governed by now ... especially since Obama. 
It has become fashionable to think of constitutional amendments as relics from the past. But then, so are fiscal responsibility and—increasingly—representative government. The founders made the Constitution amendable for a reason, and we should take our cues from them. In the late 1990s, we showed—briefly—that it’s possible to take action to reverse our course and help save our country from the tragic fate that Jefferson described. But the first step is to recognize that the $30 trillion elephant in the room isn’t going away. It’s just growing bigger.

I'm thinking our odds are not very good.  

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