This column is going to go radical in what seems to me to be a rather modest way.
The United States is drowning in debt. And, the Congress and White House are adding to the debt at the rate of around $1 trillion dollars a year. Let me begin with the year-to-year scandal.
Government shutdowns, real and threatened, are the weapons. We all know the saga—well clothed persons who have taken their oath on the bible (mainly) engage in fanciful attempts at compromise. It has become tiresome; indeed it suggests we are not up to an effectual democracy. We are also aware that each drama involves spending much more than projected federal revenues. The compromises never balance spending and cash flow.
If I were an economist, I would feel obligated to give you a lot of detail. The overarching particulars are that our national debt is $22.6 trillion and our annual deficits are about 1 trillion. Perversely, these numbers are thrown around; the throw weight is so immense even the most athletic advocate is lame. How do we understand trillions of dollars projected into the future?˜
Most also know that the annual deficits would be much higher if interest rates were not so low. And there is nothing in human history that can give us confidence that interest rates will remain low. Indeed the one thing we can count on is higher rates.
Everybody else, including most national governments, cannot get away with this state of affairs. They must, we must, balance what comes in and goes out within a reasonable timeframe. Debt can be renewed, but ultimately it must be paid with something other than paper flowing through a printing press. Economic strength underwrites the value of the dollar; fiscal incontinence undermines that strength.
We also know that both political parties are at best indifferent to debt.
The Republican Party for decades made fiscal probity an essential principle and then Arthur Laffer, an economist, convinced the Party leaders that taxes could be lowered with the tax revenue generated by a boost in economic growth off-setting the lower tax rate. The theory, which can be true when taxes are quite high has been put to the test: “Under the direction of conservative economist Douglas Holtz-Eakin, the Congressional Budget Office conducted a 2005 study on the fiscal effects of a 10% cut in federal income tax rates, finding that it resulted in a significant net revenue loss.” Wikipedia
Democrats mouth support for a balanced budget much like their GOP collaborators, but find too many new and urgent needs to more than account for any new tax revenue that might be raised.
So, games have been invented to make it appear that officeholders care about debt. Reality shows these claims and maneuvers to cohabit with what you find in a pasture full of cattle.
Now to my modest suggestion. Recently candidates on the Left have recommended a wealth tax. There is some support on the Right for a value added tax (VAT). The first would tax wealth above some dollar threshold and the latter would operate much like a sales tax.
I could support candidates on either or both taxes as long as the proceeds are earmarked for debt reduction. It is simply time to protect our children and grandchildren from our profligacy. Older generations have been borrowing from their children; it is time to start repaying that debt. And, it is time to force politicians to live up to their various pledges of fiscal probity. The key is earmarking. When our balance sheet is in better shape new expenditures might make sense. In the meantime the Congress should try setting priorities.
Organizations have been created to publicize debt accumulation and develop government spending policies. The record shows they have failed, in the ultimate sense.
Citizen efforts should be directed to politics. What about a balance budget caucus with bi-partisan leaders drawn from current officeholders? Previous caucus attempts have failed because the number of caucus members was relatively low and populated almost exclusively by more centrist Members.
Organizations with fiscal integrity missions should collaborate on a simple pledge and each candidate for Congress should be asked to sign the pledge. The pledge must include a willingness to shape bipartisan legislative initiatives. If the abject failure of bi-partisanship on fiscal integrity continues America will ultimately fail. As painful as it might be the Left and the Right need to find a patriotic way forward.