“Debts and lies are generally mixed together,” Francois Rabaleis said.
It was true when he said it 500 years ago, and it has never been more true than now. People hide their debts because they reveal a great deal of stupidity, profligacy, and miscalculation. Certainly, that’s true in personal finance.
It’s even more true in government finance.
For that reason, it would be completely understandable and justified if you’ve tuned out the debt ceiling debate currently burning up every energy in Washington. We all understand the terms. The goal of the Democrats is to get Congress to authorize more out-of-control spending. The goal of the Republicans is to authorize an increase in the debt while pretending to have forced a more frugal compromise.
The rest is nothing but spin. All proposed and realized “cuts” aren’t really cuts but rather downshifts in the predetermined rate of increase. All savings are forecasted so far in advance (“back-loaded”) that they’re easily reversed once the time arrives. And even those are demagogued by the Democrats as cruel and unnecessary. Then, the Republicans get scared and protest that they aren’t really cutting anything, which is generally true.
They all pretend to be doing math and budgeting, on 10-year time frames, throwing around numbers that no normal person can come close to comprehending while accusing each other of irresponsibility and heartlessness.
This goes on until a deal is made. If a deal isn’t made, the government shuts down but not really. They still enforce the regs, pay the bureaucrats, and collect the taxes. What gets shut down are the only things you actually care about: the national parks, the Smithsonian, the passport office, and air-traffic control. Another great trick is to go to minimum staffing for the Transportation Safety Authority so that lines at the airport stretch out the door and around the block, thus causing people to miss flights.
What actually never happens is a Republican team that submits a balanced budget. This would actually be possible if they cared. They could eliminate whole agencies one after another, enact gigantic budget cuts, and sell some of the vast landholdings of the federal government.
The point is that there are ways to balance the budget and do it now. Eliminating half or more of the federal agencies would be a great start. But, of course, absolutely no one is talking this way in Washington because doing so is not in anyone’s political interest.
“The current GOP plan gives the notion of ‘shell game’ a worse name than it already has. The heart of the plan is $3.2 trillion of 10-year savings to be achieved by cutting discretionary appropriations for FY 2024 by 9.2 percent from current year levels, and then capping future growth at 1 percent per annum.
“To be sure, while talking out of both sides of his mouth, Speaker [Kevin] McCarthy told bubble vision this AM that there is no sweat with respect to the GOP’s discretionary spending cuts and caps. The 9.2 percent reduction only rolls back appropriations to the FY 2022 level—in effect erasing the spending bonanza that was embedded in the Omnibus Appropriations boondoggle last winter.
“Alas, out of the other side of his mouth he is telling the GOP caucus not to get excited about the Dems waving the bloody shirt with respect to Veterans and national defense. ... The ballyhooed 9.2 percent cut/rollback from FY 2023 levels ($1.651 trillion) amounts to a $152 billion reduction in defense and non-defense appropriations. Alas, current year spending for the above enumerated GOP sacred cows includes $891 billion for national defense, $135 billion for Veterans health care and services and $25 billion for border security.
“That totals $1.051 trillion, meaning that the entire remainder of the discretionary budget is $600 billion during the current year. So a $152 billion cut would amount to 25 percent from the non-sacred cows. ... And that’s not the half of it. The way the 10-year budget game works is that a cap of 1 percent growth per year when the underlying inflation is 3–5 percent means that in the more distant out-years the implied severity of the cuts from current operating levels become ever greater as the ‘cut’ wedge becomes larger and larger.”
The goal, in Stockman’s view, is to paper over the problem this year and take it up next year, counting on the national habit of forgetting everything that happened in the past and focusing only on the current drama of the moment. Our national amnesia serves both parties very well.
Stockman also reminded us that just two years ago, another budget deal was made that has been entirely forgotten.
“In return for the debt ceiling increase, appropriated defense and nondefense spending was to be limited to $8.45 trillion over the next 10 years,“ he said. ”The actual level, as it turned out, was $10.60 trillion. That is to say, these fakers missed their targets by $2.15 trillion or 25 percent over the period!”
And this way, over time, the debt-to-GDP ratio will head inexorably toward 150 percent. We only crossed the 100 percent mark 10 years ago, while 50 years ago, the level was only 30 percent. And interest on the debt alone is headed to $1 trillion per year, which is what happens when you leave zero-interest rate utopia for reality. That was the entire federal budget as Ronald Reagan started his second term.
At the very least, Republicans ought to be demanding a return to 2020 budget levels, just before spending madness swept Washington and the entire country decided to destroy the Bill of Rights. The budget has grown by 33 percent since then, but the gross domestic product has only grown by 21.6 percent.
![(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)](/_next/image?url=https%3A%2F%2Fimg.theepochtimes.com%2Fassets%2Fuploads%2F2023%2F05%2F19%2Fid5278337-2-JAT-2023.05.19-1200x864.png&w=1200&q=75)
So Rabelais was right: Debt and lies go together. This is especially true in public finance. The only really sensible point happens to have been uttered by Donald Trump during the CNN town hall that turned out to be completely humiliating for the network. Trump said the debt should just be repudiated.
He might not have understood what he was saying, but I’m still glad he said it.
Wouldn’t that be a disaster for the U.S. credit rating? It would, but that might be a good thing. It would absolutely force the federal government to live within its means. In any case, something needs to change.
Much more fundamentally than this bogus budget debate, what we really need is a complete change in the nation’s culture concerning the relationship between society and government. I conclude with a profound thought from Albert Jay Nock from 1925:
“Nothing can be done about the liquor problem, the farm problem, problems of public ownership, and the other social problems that afflict us. I say, nothing can be done; that is, nothing except the one thing that will never be acknowledged as necessary, the self-imposed discipline of a whole people in acquiring a brand-new ethos. We have hopefully been trying to live by mechanics alone, the mechanics of pedagogy, of politics, of industry and commerce; and when we find it cannot be done and that we are making a mess of it, instead of experiencing a change of heart, we bend our wits to devise a change in mechanics, and then another change, and then another. ... [The] clear insistent testimony that a nation’s life consisteth not in the abundance of the things that it possesseth; that it is the spirit and manners of a people, and not the bewildering multiplicity of its social mechanisms, that determines the quality of its civilization.”
A whole people acquiring a brand-new ethos—that’s the ticket. Unless that happens, the rest is just theater and a slow-motion slide into a debt-laden stagnation.
