Wednesday, February 27, 2013

The National Debt... and Us


I meant to post this a couple weeks ago.  I just discovered that I saved it instead of publishing it.  Oops.

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I can't ignore the debt issue any more.  I've tried but it just keeps coming back up, so here goes.

We can't even agree that the national debt, which I'll just refer to as "debt" here, is much of a problem.  I've long had the nagging feeling that it is a problem but I haven't cared enough to find out.  Until a couple weeks ago, that is, when I picked up Glenn Beck's 2010 book Broke.  It is an eye-opener - if he is to be believed, which I do - that goes into gruesome details about national debt and deficits from George Washington to Barack Obama.

But wait, I can hear you say.  Glenn Beck?!  Yes, I know, right wing kook and anathema to the left so we can all just ignore him, right?  Well, as we hear so often, not so much.

Not being an economist or otherwise intrigued, I had no pressing interest (no pun intended) in the national debt.  I didn't understand it and my life was going just fine, thank you, debt or no debt.  Or so I thought.

I won't try to summarize Beck's book here.  I can't do it justice.  It's a shocker, to the extent applied economics can shock us.  But I wasn't really alarmed until the last couple of days, when three things got my attention and suggested to me that things are bad and the country is in big trouble.  Really, really big trouble.

Thing #1:  The gummint announced that it is "borrowing" from federal pension funds in order to pay current debt.  No, really. 

From FedSmith, Jan. 13 last:
"Treasury Secretary Timothy Geitner said that the government has begun borrowing from the federal employee pension fund (the G fund) to keep operating without approaching the debt limit. ... The move will free up $156 billion in borrowing authority while the debt limit debates proceed in Congress."
Treasury Secretary Timothy Geithner said that the government has begun borrowing from the federal employee pension fund (the G fund) to keep operating without passing the approaching debt limit.
The move will free up $156 billion in borrowing authority while the debt limit debates proceed in Congress.
- See more at: http://www.fedsmith.com/2013/01/15/government-will-borrow-from-federal-employee-pension-fund-to-avoid-passing-debt-limit/#sthash.Kok76Xzt.dpuf

Treasury Secretary Timothy Geithner said that the government has begun borrowing from the federal employee pension fund (the G fund) to keep operating without passing the approaching debt limit.
The move will free up $156 billion in borrowing authority while the debt limit debates proceed in Congress.
- See more at: http://www.fedsmith.com/2013/01/15/government-will-borrow-from-federal-employee-pension-fund-to-avoid-passing-debt-limit/#sthash.Kok76Xzt.dpuf
What could go wrong, federal pensioners?  (Full disclosure:  I am one.)  And don't worry, he's promised to pay it all back.  Crossed his heart and everything.  Yes, he's the same guy who didn't declare four years of taxable income, but he's not lying this time.

Thing #2: On Jan. 17, Paul Krugman wrote a column titled "The Dwindling Deficit" in which he told us that the deficit (not quite interchangeable with the debt, which is accumulated deficits, but close enough for now) is no big deal.  What he actually said, inter alia, was this:
"The budget deficit isn’t our biggest problem, by a long shot. Furthermore, it’s a problem that is already, to a large degree, solved."
To further quote the article, "Huh?"

Thing #3:  The Senate is holding its confirmation hearings on the nomination of Jack Lew to SecTreas.  Who?  Lew.  Who knew?  That's enough of that.  

JackieL is the outgoing director of the budget.  We're supposed to have a budget, right?  Yep, as required by the Constitution.  Thing is, we haven't had a budget under Obama in the past five years.  So, lacking a budget, what has Lew been doing to justify all the money and prestige that his job entails?  Nothing, really.

Lew also failed, for the entire occupancy of his office, to respond to annual warnings of Medicare funding problems.  No big deal to you, maybe, but a response is required by law when we're, say, underfunded.  But Medicare isn't the issue here.  Lew is.

Lew also claimed that his one budget proposal would get the country to a point where "we're not adding to the debt anymore."   Except for one little thing:  He didn't include interest on the debt which, if included, would "contribute to a growing debt."  (Thank you, Fox News)  That's not just an "Oops, I forgot".  That's a lie.

According to the same Fox News story:   "I trust his judgment, I value his friendship. I know very few people with greater integrity," Obama said. The president stressed Lew's experience in both Washington and the private sector, and particularly his role presiding over "three budget surpluses in a row".  (My emphasis.)

What the Prez didn't say was while in the Clinton-era budget office.  Three out of eight plus zero out of four.  Have we completely lost the meaning of irony?  Of proportion?  Of shame?  Of qualifications?

-- Update from six minutes ago :  Jack Lew is in as TimmyG's replacement.  Did I mention that JackieL got $900K in bonuses as COO of Citigroup, shortly after Citi received $45Bil in TARP rescue funds and right after it lost $27.7Bil and 90% of its value?  Hope that doesn't happen to us, don't you?  

The best predictor of future performance is past performance. 

Oh yeah, there's a fourth thing.  Remember that last year some credit rating services lowered the US credit rating a notch and have threatened to do it again?  And last month those services urged Obama to shrink the deficit?  Makes sense, right:  "Here's what you have to do to maintain a good credit rating, Mr. President." 

Only, um, he completely ignored the advice and our debt continues to increase at $100B a month.  So add that to the list of good advice not taken, like that of the Simpson-Bowles Commission.  

You remember Simpson-Bowles, don't you? 
"The final plan, released on December 1, 2010 reduced the federal deficit by nearly $4 trillion, stabilizing the growth of debt held by the public by 2014, reduce debt 60% by 2023 and 40% by 2035.  The deficit would be eliminated by 2035."  (Thank you, Wiki.)
 Simpson-Bowles never made it ouf committee for lack of a super-majority;  it was 11-7 in favor.  Despite having created the commission, the Prez never got behind it and hasn't implemented its recommendations.  An opportunity squandered.
  
Lots of good advice available, but none taken.  Administration lapdog PaulieK hated it.  (Hint:  That means it probably deserved to be heeded.)  Your voice and mine were never heard.  Poor us.

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"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."
Milton Friedman

plus ca change, plus c'est la meme chose

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