“If the national debt rises for 60 years at the rate it has risen during the previous 30, it will then exceed $1.5 quadrillion. (A quadrillion is a thousand trillions).” — George Will (2023)
The debate over raising the national debt limit has also sparked a longtime issue: Is the national debt at $31.5 trillion getting out of hand?
Once again, intelligent people like George Will are sounding the alarm about the growth of the national debt and out-of-control spending coming out of Washington. Unfortunately, President Joe Biden and Congress aren’t listening — but soon, they will be forced to.
We are definitely headed for a “debt crisis,” but the questions are, when and how bad will it be?
The sharp rise in interest rates raises the specter that finally our leaders will have to address this serious danger to the world’s superpower.
The fact is that Washington can’t just grow out of the problem by growing the economy, as the supply-siders always promise. The government will have to downsize, and that includes entitlement spending for Social Security, Medicare and welfare programs. Pain is on the way.
Do we have the will to do it? Leaders of foreign countries have solved fiscal crises — witness Sweden in 1992, and Canada in 1995. Sweden even solved its Social Security problem through privatization. Why can’t the United States get its act together?
The chart below shows how the Federal debt is growing hyperbolically.
You can watch the federal debt grow every second by clicking here. It is mesmerizing.
‘What, me worry?’
In response to the debt issue, let me first refer to economist American “Austrian” economist Murray Rothbard, who wrote the following in his mammoth work, “Man, Economy and State”: “Many opponents of public borrowing have greatly exaggerated the dangers of the public debt and have raised persistent alarms about imminent ‘bankruptcy.'”
He wrote that in 1962!
For the past 70-plus years, people have worried about the growth of the national debt. I have several books in the “doom and gloom” section of my library that raise the specter of disasters, such as Harry Browne’s book, “The Economic Time Bomb,” written in 1989.
A few years later, Harry Figgie sounded the alarm in his book, “Bankruptcy 1995,” which was a New York Times #1 bestseller.
This time, Washington listened. It caused President Bill Clinton to work with House Speaker Newt Gingrich and the Republicans on Capitol Hill to reduce the deficit and even start to run surpluses between the years of 1998-2001.
This episode demonstrates that the United States can solve its fiscal problems if it has the will to do so.
‘Democracy in Deficit’
In many ways, the growing national debt crisis is the legacy of Keynesian economics. The title of James Buchanan’s book sums it up:
Buchanan won the Nobel Prize in 1986 for his work in “public choice” economics. He noted that there is a natural tendency to run deficits since pet spending projects are popular but asking taxpayers to pay for them isn’t.
Deficit spending became acceptable, and even encouraged, when John Maynard Keynes took the economics profession by storm right after WW2, which “proved” that deficit spending during the war was a boon to the economy. Paul Samuelson’s textbook made the case for deficit spending and the case against savings and balanced budgets during recessions and times of unemployment. His textbook was even used at Brigham Young University when I was a student!
Of course, in theory, Keynes and Samuelson taught that during times of full employment (which was a “special case” under their “general” theory), the government should balance the budget and maybe even run a surplus, but as you can see from this chart below, the balance wheel is out of balance.
Meeting Newt Gingrich in 2000
As you can see, there was only one time in recent history when we had a couple of surplus years under Clinton — and that ended quickly under Bush in the early 2000s. I still remember spending time with Newt Gingrich in the year 2000, how he was giddy with excitement that the budget surpluses were so large that we could eliminate the national debt in 10 years. “What shall we do with the money,” he asked, “give it back to the taxpayers or spend it on new programs?”
The answer came soon enough with 9/11… and the 2008 financial crisis… and the 2020 lockdown… What’s next?
The question is “what is the tipping point of no return when we hit a fiscal/monetary crisis?”
Postponing the Inevitable
Washington has been postponing the inevitable for decades because:
Unfortunately, supply-side economists have also been complacent about deficits, arguing that economic growth will naturally reduce the deficit. But, until you have budget discipline, more taxes will only result in more spending. A balanced budget amendment is necessary.
The House Republicans should put their feet to the fire, but I don’t think any fundamental changes will take place in the federal budget until there’s a crisis.
Good investing, AEIOU,
You Blew It!
Reason Foundation Blacklisted by the ‘Disinformation’ Police
The “disinformation” police are at it again in a never-ending attack on free speech. Recently, the Global Disinformation Index (GDI), a British organization subsidized by the U.S. State Department, released a list of news outlets “suspected of disinformation” and urged advertisers to stop advertising with them.
The Reason Foundation, the great libertarian organization that publishes Reason magazine and ReasonTV, and is a regular sponsor of FreedomFest, is listed among GDI’s 10 allegedly absolute “riskiest online news outlets,” alongside the New York Post, Real Clear Politics, The Daily Wire, The Blaze, One America News Network, The Federalist, Newsmax, The American Spectator and The American Conservative. Give me a break!
The National Endowment for Democracy — a nonprofit that has received $330 million in taxpayer dollars from the State Department — contributed hundreds of thousands of dollars to GDI’s budget, according to an investigation by The Washington Examiner‘s Gabe Kaminsky.
When is this nonsense going to stop?
Newsmax dropped from DirecTV
Also, DirecTV, owned by AT&T, recently dropped Newsmax from its cable TV programming. Rob Thun, chief content officer for DirecTV, said, “Last I checked it’s a free market. Our decision is based on economics, not political ideology.”
And yet the company went on to report, “Newsmax is using its own newsroom platforms to obscure facts with misleading information — including dozens of daily blog posts, a daily stream of social from corporate media platforms and two-plus hours of on-air programming daily all in pursuit of its own business interests.”
I do wish networks like Newsmax would be more willing to present both sides of the issue. I see the new network “News Nation” is doing that by having Chris Cuomo and Bill O’Reilly appearing together and debating the issues. We need more of that.