As the Debt Hits $19 Trillion, Has the US Reached a Tipping Point?
Emily Flake/The Fiscal Times
By Rob Garver and Eric Pianin
April 15, 2016
For several years, the growing federal debt was ignored as the economic recovery chipped away at once massive spending shortfalls of $1 trillion or more. Now, there’s an uneasy feeling among many policy makers and experts that we are beginning to slip back into risky fiscal terrain.
The last time the budget was in balance was in 2001, at the tail end of Democratic President Bill Clinton’s second term. While the government has been awash in red ink ever since, President Obama and congressional GOP leaders have rightfully crowed about a series of bipartisan deals that helped bring down the annual deficit from an astounding $1.4 trillion in 2009 – at the very worst point in the recession – to $438.4 billion just last year.
Related: Big Deficits Loom as Candidates Pile on Spending and Tax Cuts
But times are changing again, and the non-partisan Congressional Budget Office (CBO) has issued several distress calls in recent months that the deficit is headed north again. We will return to another era of big deficits, CBO warns, unless Congress and the White House step in with some meaningful spending reforms. And that, of course, means figuring out how to provide Medicare, Medicaid and Social Security to a growing army of retiring baby boomers without breaking the bank.
Six years ago, The White House and Congress had a real chance of reaching a “grand bargain” of tax and spending reforms that would have put the government on a true, long-term course to another balanced budget. But as is often the case, a lack of political nerve and political foresight prevented that from happening.
Today, we are mostly treated to political doublespeak and hypocrisy about the budget and the need to address a national debt that has reached an historic $19.2 trillion. And that hypocrisy – being played out on Capitol Hill and on the presidential campaign trail – is driving budget and economic experts and average Americans to distraction.
Related: CBO Warns Congressional Spending Is Driving Up the Deficit
It is hard to miss the fact that Congress is once again so politically hamstrung that House and Senate GOP leaders this week threw up their hands and abandoned efforts to pass a budget for the coming fiscal year. There will still be spending bills – have no fear. But the thought of fashioning a comprehensive blue print with a coherent and feasible plan for addressing the long-term debt is out of the question.
Things are no better on the presidential campaign trail where Republicans Donald Trump and Ted Cruz are promoting huge tax cuts that would add trillions of dollars to the national debt. Democrat Bernie Sanders is pushing an $18 trillion “Great Society” style spending agenda that will add many trillions more to the national debt, while Clinton’s adds $1 trillion in additional spending and could reduce tax revenue.
Time Magazine this week published a special issue about the federal debt, turning its cover into a collection notice claiming, “Every American man, woman and child would need to pay” $42,998.12 in order to eliminate the national debt.
The cover story by economist James Grant, of Grant’s Interest Rate Observer, is part diatribe about government spending and the role of the Federal Reserve and part paean to the gold standard. It concludes with a half-hearted endorsement of a flat tax plus a call for the end of employers withholding taxes from employees’ paychecks.
Related: Sanders’ Single-Payer Plan Would Add Up to $14 Trillion to the Debt
Grant makes the indisputable point that the federal debt has exploded in recent years, particularly as the government used monetary stimulus to keep the nation’s economy from sliding into a depression.
But in his telling of the story, the Federal Reserve comes across as the villain -- “the government’s Monopoly-money machine” -- that has enabled a profligate Congress to spend the country into a crisis. “The Fed once fought inflation,” he laments. “Now it actually sets out to cause it–about 2 percent a year is the target. Striving to inflate, it presses down interest rates and rustles up new dollars.”
That’s not a story that most of Grant’s fellow economists are likely to agree with. While virtually all would likely say that the federal debt is higher than it ought to be, substantially fewer would trade current levels of debt for a Fed that passively accepted deflation in the wake of the financial crisis. Fewer still would agree that sticking to a principle that says federal debt must remain low would have been worth risking another Great Depression.
Related: Paul Ryan Faces Fiscal Failure as the House Blows the Budget Deadline
Grant’s article includes a coy discussion of a return to the Gold Standard. Virtually no mainstream economist would endorse returning to a world in which each dollar is tied to a specific amount of gold. And Grant doesn’t either, exactly. He just points out that things sure were better back then.
“Sound money coincided with balanced budgets,” he writes.
However, “I don’t ask that we return to some long-lost fiscal and monetary Eden. None has ever existed, even in America. Crises and business cycles are always with us. I merely observe that sound money and a balanced budget were two sides of the coin of American prosperity.”
For reference, back in November, when Republican presidential candidate Ted Cruz advocated a return to the gold standard during a televised debate, David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, said, “It’s basically seen as nuts, and I think even most conservative economists would say that. We learned the hard way that the gold standard does not bring financial stability. We learned that it’s really bad to have a money supply that’s restricted to the amount of gold you can mine.”
Grant’s article is long on criticism, but relatively short on solutions. After citing statistics about tax avoidance and the amount of effort Americans put into tax preparation, he offers a backhanded endorsement of a flat tax: “Are we quite sure we want no part of the flat-tax idea? An identical low rate on most incomes. No deductions, no H&R Block. Impractical? So is the debt.”
Related: The GOP Budget Is on Life Support, and Paul Ryan Knows It
He also invokes 1950s-era anti-tax activist Vivien Kellems, and urges the country to adopt a program for which she argued. Under Kellems’ plan, employers would no longer withhold taxes. Workers would be given the entirety of their gross pay, and be required to personally hand over the share the government takes.”
Although it would be wildly inefficient, the plan would have the merit of making Americans highly cognizant of the amount of money the government extracts from them in taxes, assessments, and other levies. It also has about as much chance of being implemented as...well...a return to the gold standard.
Americans would be better served if our politicians paid more attention to fiscal responsibility and to the long-term damage excessive debt can do to the country. But these are hard and complex problems that won’t be easily solved.
http://www.thefiscaltimes.com/2016/04/15/Debt-Hits-19-Trillion-Has-US-Reached-Tipping-Point?utm_campaign=548f5168cb03a93709042da0&utm_source=boomtrain&utm_medium=email&bt_alias=eyJ1c2VySWQiOiI5ZDZhYWZiMy00MTE0LTFjMjYtNjA3OC00ZWIzZTc5ZDA3NGMifQ%3D%3D
Emily Flake/The Fiscal Times
By Rob Garver and Eric Pianin
April 15, 2016
For several years, the growing federal debt was ignored as the economic recovery chipped away at once massive spending shortfalls of $1 trillion or more. Now, there’s an uneasy feeling among many policy makers and experts that we are beginning to slip back into risky fiscal terrain.
The last time the budget was in balance was in 2001, at the tail end of Democratic President Bill Clinton’s second term. While the government has been awash in red ink ever since, President Obama and congressional GOP leaders have rightfully crowed about a series of bipartisan deals that helped bring down the annual deficit from an astounding $1.4 trillion in 2009 – at the very worst point in the recession – to $438.4 billion just last year.
Related: Big Deficits Loom as Candidates Pile on Spending and Tax Cuts
But times are changing again, and the non-partisan Congressional Budget Office (CBO) has issued several distress calls in recent months that the deficit is headed north again. We will return to another era of big deficits, CBO warns, unless Congress and the White House step in with some meaningful spending reforms. And that, of course, means figuring out how to provide Medicare, Medicaid and Social Security to a growing army of retiring baby boomers without breaking the bank.
Six years ago, The White House and Congress had a real chance of reaching a “grand bargain” of tax and spending reforms that would have put the government on a true, long-term course to another balanced budget. But as is often the case, a lack of political nerve and political foresight prevented that from happening.
Today, we are mostly treated to political doublespeak and hypocrisy about the budget and the need to address a national debt that has reached an historic $19.2 trillion. And that hypocrisy – being played out on Capitol Hill and on the presidential campaign trail – is driving budget and economic experts and average Americans to distraction.
Related: CBO Warns Congressional Spending Is Driving Up the Deficit
It is hard to miss the fact that Congress is once again so politically hamstrung that House and Senate GOP leaders this week threw up their hands and abandoned efforts to pass a budget for the coming fiscal year. There will still be spending bills – have no fear. But the thought of fashioning a comprehensive blue print with a coherent and feasible plan for addressing the long-term debt is out of the question.
Things are no better on the presidential campaign trail where Republicans Donald Trump and Ted Cruz are promoting huge tax cuts that would add trillions of dollars to the national debt. Democrat Bernie Sanders is pushing an $18 trillion “Great Society” style spending agenda that will add many trillions more to the national debt, while Clinton’s adds $1 trillion in additional spending and could reduce tax revenue.
Time Magazine this week published a special issue about the federal debt, turning its cover into a collection notice claiming, “Every American man, woman and child would need to pay” $42,998.12 in order to eliminate the national debt.
The cover story by economist James Grant, of Grant’s Interest Rate Observer, is part diatribe about government spending and the role of the Federal Reserve and part paean to the gold standard. It concludes with a half-hearted endorsement of a flat tax plus a call for the end of employers withholding taxes from employees’ paychecks.
Related: Sanders’ Single-Payer Plan Would Add Up to $14 Trillion to the Debt
Grant makes the indisputable point that the federal debt has exploded in recent years, particularly as the government used monetary stimulus to keep the nation’s economy from sliding into a depression.
But in his telling of the story, the Federal Reserve comes across as the villain -- “the government’s Monopoly-money machine” -- that has enabled a profligate Congress to spend the country into a crisis. “The Fed once fought inflation,” he laments. “Now it actually sets out to cause it–about 2 percent a year is the target. Striving to inflate, it presses down interest rates and rustles up new dollars.”
That’s not a story that most of Grant’s fellow economists are likely to agree with. While virtually all would likely say that the federal debt is higher than it ought to be, substantially fewer would trade current levels of debt for a Fed that passively accepted deflation in the wake of the financial crisis. Fewer still would agree that sticking to a principle that says federal debt must remain low would have been worth risking another Great Depression.
Related: Paul Ryan Faces Fiscal Failure as the House Blows the Budget Deadline
Grant’s article includes a coy discussion of a return to the Gold Standard. Virtually no mainstream economist would endorse returning to a world in which each dollar is tied to a specific amount of gold. And Grant doesn’t either, exactly. He just points out that things sure were better back then.
“Sound money coincided with balanced budgets,” he writes.
However, “I don’t ask that we return to some long-lost fiscal and monetary Eden. None has ever existed, even in America. Crises and business cycles are always with us. I merely observe that sound money and a balanced budget were two sides of the coin of American prosperity.”
For reference, back in November, when Republican presidential candidate Ted Cruz advocated a return to the gold standard during a televised debate, David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, said, “It’s basically seen as nuts, and I think even most conservative economists would say that. We learned the hard way that the gold standard does not bring financial stability. We learned that it’s really bad to have a money supply that’s restricted to the amount of gold you can mine.”
Grant’s article is long on criticism, but relatively short on solutions. After citing statistics about tax avoidance and the amount of effort Americans put into tax preparation, he offers a backhanded endorsement of a flat tax: “Are we quite sure we want no part of the flat-tax idea? An identical low rate on most incomes. No deductions, no H&R Block. Impractical? So is the debt.”
Related: The GOP Budget Is on Life Support, and Paul Ryan Knows It
He also invokes 1950s-era anti-tax activist Vivien Kellems, and urges the country to adopt a program for which she argued. Under Kellems’ plan, employers would no longer withhold taxes. Workers would be given the entirety of their gross pay, and be required to personally hand over the share the government takes.”
Although it would be wildly inefficient, the plan would have the merit of making Americans highly cognizant of the amount of money the government extracts from them in taxes, assessments, and other levies. It also has about as much chance of being implemented as...well...a return to the gold standard.
Americans would be better served if our politicians paid more attention to fiscal responsibility and to the long-term damage excessive debt can do to the country. But these are hard and complex problems that won’t be easily solved.
http://www.thefiscaltimes.com/2016/04/15/Debt-Hits-19-Trillion-Has-US-Reached-Tipping-Point?utm_campaign=548f5168cb03a93709042da0&utm_source=boomtrain&utm_medium=email&bt_alias=eyJ1c2VySWQiOiI5ZDZhYWZiMy00MTE0LTFjMjYtNjA3OC00ZWIzZTc5ZDA3NGMifQ%3D%3D
Yesterday at 3:32 pm by Rocky
» The Minister of Oil sponsors the signing of an agreement to develop the Tuba oil field project with
Yesterday at 3:26 pm by Rocky
» In numbers... Basra Oil explains the importance of the Tuba field after signing a contract to develo
Yesterday at 3:25 pm by Rocky
» Electricity: The government provides energy at subsidized prices for (4) categories
Yesterday at 3:24 pm by Rocky
» The electricity produced in Iraq covers 65% of demand... and 15 thousand megawatts is a “deficit”
Yesterday at 3:22 pm by Rocky
» Parliamentary services: Government interest in Baghdad will make it one of the most beautiful capita
Yesterday at 3:21 pm by Rocky
» Basra Council emphasizes work to qualify young people and place them in the labor market
Yesterday at 3:19 pm by Rocky
» Politician: Al-Kadhimi was recommending that Plasschaert write “negative” reports about Iraq
Yesterday at 3:17 pm by Rocky
» Trade launches operations to lift the ban on the ration card next to Rusafa
Yesterday at 3:16 pm by Rocky
» utube 5/12/24 Iraqi Dinar | Citi Bank Announced New Rate Of The Iraqi Dinar | Dinar News Today 202
Yesterday at 7:00 am by Rocky
» utube 5/9/24 MM&C 0:02 / 46:46 PM - Al-Sudani - Golden Opportunity - Private Sector - Contra
Yesterday at 6:57 am by Rocky
» utube MM&C 5/11/24 Iraqi Dinar - IQD Update - International - IraqTiming - 2024 Budget Schedule - Sp
Yesterday at 6:55 am by Rocky
» Bahr Al-Ulum calls for legislating the renewable energy law and localizing the solar panel industry
Yesterday at 6:49 am by Rocky
» In numbers: the rise in internal debt in Iraq
Yesterday at 6:49 am by Rocky
» Jordan demands that Iraq continue to export oil for another three months
Yesterday at 6:46 am by Rocky
» Iraq is the largest producer.. OPEC+ is pumping higher than scheduled and in anticipation of the Jun
Yesterday at 6:44 am by Rocky
» Close to the coordination framework: There is no intention to change the internal regulations of Par
Yesterday at 6:43 am by Rocky
» Central Bank sales exceed $274 million today
Yesterday at 6:41 am by Rocky
» But the representative of the exchange companies is pessimistic... Why did the dollar fall?... The C
Yesterday at 6:38 am by Rocky
» Jordan addresses Iraq to extend a memorandum of understanding to purchase oil
Yesterday at 6:36 am by Rocky
» Bribes increased from 3,000 to 50,000 dollars.. What is the condition of alcohol in Iraq after the p
Yesterday at 6:34 am by Rocky
» Presence movement: Sunnis and Kurds while the Americans remain in Iraq
Yesterday at 5:31 am by Rocky
» A deputy reveals the contents of the first water strategy in Iraq
Yesterday at 5:29 am by Rocky
» Soon...the second reading of the proposed red card law
Yesterday at 5:28 am by Rocky
» The discovery of 10 new oil and gas fields in the Anbar desert
Yesterday at 5:27 am by Rocky
» A bloc announces to “Al-Ma’louma” the date of the parliamentary speaker’s election session
Yesterday at 5:26 am by Rocky
» Parliamentary Finance explains the mechanism for amending the retirement law
Yesterday at 5:24 am by Rocky
» Sovereignty accuses Al-Halbousi of obstructing the election of a Speaker of Parliament
Yesterday at 5:23 am by Rocky
» Parliamentary Agriculture accuses Kurdistan of harming the farmers of the center and south
Yesterday at 5:22 am by Rocky
» Al-Sudani confirms Iraq's readiness to host the Arab Network conference
Yesterday at 5:21 am by Rocky
» Nechirvan Barzani calls on the Iraqi government to allocate a budget to confront climate change
Yesterday at 5:20 am by Rocky
» “Iraq is in danger.” Political warnings against ending the work of the UN mission
Yesterday at 5:19 am by Rocky
» The Iraqi Interior Minister announces the signing of a security cooperation memorandum with Syria
Yesterday at 5:17 am by Rocky
» The Minister of Oil told “Al-Iqtisad News”: The 5th and 6th rounds will add 3 Mqmq of gas to Iraq’s
Yesterday at 5:16 am by Rocky
» Economist: Tax revenues from the private sector should be 4 trillion dinars annually
Yesterday at 5:14 am by Rocky
» The Real Estate Bank calls on the Iraqi Central Bank to determine a plan to allocate a new initiativ
Yesterday at 5:13 am by Rocky
» More than one billion and 400 million dollars...CBI sales within a week
Yesterday at 5:12 am by Rocky
» Oil: Iraq achieved self-sufficiency in liquid gas and began exporting the surplus
Yesterday at 5:10 am by Rocky
» Iraq begins exporting liquid gas
Yesterday at 5:09 am by Rocky
» The Cabinet Secretariat sets to Al-Iqtisad News the completion date for the Chinese agreement school
Yesterday at 5:09 am by Rocky
» Securities: The most recent law of the Authority in the Arab and regional countries
Yesterday at 5:07 am by Rocky
» A European desire to strengthen security and economic cooperation with Baghdad
Yesterday at 5:06 am by Rocky
» The close selection of a person for the position of Speaker of Parliament
Yesterday at 5:05 am by Rocky
» Parliamentary law excludes the exchange of penalties for cash amounts
Yesterday at 5:04 am by Rocky
» An agreement with Italy to finance industrial projects
Yesterday at 5:02 am by Rocky
» The Najaf Chamber of Commerce signs a “memorandum of understanding” with its Thai counterpart
Yesterday at 5:01 am by Rocky
» Baghdad, Arab Forum
Yesterday at 5:00 am by Rocky
» Specialists: Economic integration and job opportunities await development
Yesterday at 4:59 am by Rocky
» The President of the Republic, Nechirvan and Barzani stress the necessity of coordinating efforts be
Yesterday at 4:57 am by Rocky
» The Judicial Institute announces the names of those accepted for the 48th and 49th sessions
Yesterday at 4:56 am by Rocky
» Today's newspapers are interested in launching the fifth licensing supplement rounds and the sixth l
Yesterday at 4:55 am by Rocky
» Al-Sudani receives the Secretary-General of the Arab Network for National Human Rights Institutions
Yesterday at 4:53 am by Rocky
» Trade participates in the meetings of the Economic and Social Council at the level of senior officia
Yesterday at 4:52 am by Rocky
» The Minister of Transport discusses with the Tunisian Minister of Foreign Affairs and Immigration wa
Yesterday at 4:50 am by Rocky
» Iraq recorded an increase in its oil exports to the United States last week
Yesterday at 4:49 am by Rocky
» It is governed by three dimensions.. Parliament talks about a strategic priority for Iraqi national
Yesterday at 4:48 am by Rocky
» To what extent do Arab countries influence politically Iraq? It has become more independent
Yesterday at 4:46 am by Rocky
» The Iranian ambassador in Baghdad: Iraq has paid its debts, and the security agreement includes thre
Yesterday at 4:45 am by Rocky
» Dollar exchange rates decline slightly on the Baghdad Stock Exchange
Yesterday at 4:44 am by Rocky
» China has 18% of the fields in the two new rounds, and 11 countries share the remainder
Yesterday at 4:43 am by Rocky
» On the table...a proposal for the Kurdistan oil crisis and an effort to conclude a similar agreement
Yesterday at 4:42 am by Rocky
» Al-Awadi: A government decision to provide sovereign guarantees and guarantees to encourage the inve
Yesterday at 4:40 am by Rocky
» 6 Chinese companies are among the winners of developing Iraqi oil and gas fields
Yesterday at 4:38 am by Rocky
» Baghdad gives UNAMI the end of 2025 to leave the country after fiery briefings
Yesterday at 4:37 am by Rocky
» Dhi Qar clarifies: The quarry burying radioactive materials is regular and does not pose a danger
Yesterday at 4:36 am by Rocky
» Al-Sudani: There are 64 lagging projects in Babylon
Yesterday at 4:34 am by Rocky
» The housing crisis is expanding and planning confirms: Iraq needs 3 million housing units to solve i
Yesterday at 4:34 am by Rocky
» 90 billion dinars were recovered from social protection violators
Yesterday at 4:32 am by Rocky
» Iraq seeks to increase its oil reserves to more than 160 billion barrels
Yesterday at 4:31 am by Rocky
» After keeping the numbers secret... Did the rain increase Iraq's water reserves by 120%?
Yesterday at 4:30 am by Rocky
» In the first quarter of 2024.. Iran will displace Iraq and become the second largest producer in OPE
Yesterday at 4:28 am by Rocky
» Iraqi oil exports to Jordan stopped 20 days ago
Yesterday at 4:27 am by Rocky
» Iraq and Syria sign a memorandum of security cooperation in several fields
Yesterday at 4:25 am by Rocky
» Parliament recommends stopping electronic schools in Iraq
Yesterday at 4:24 am by Rocky
» Parliamentary law rules out passing a law replacing penalties with sums of money
Yesterday at 4:22 am by Rocky
» After a rare meeting... sources talk about Al-Sadr's future in political life in Iraq
Yesterday at 4:21 am by Rocky
» The President of the Republic warns of climate change and its threat to food security and future gen
Yesterday at 4:20 am by Rocky
» The Iranian ambassador to Iraq talks about negotiations for the withdrawal of American forces and Tu
Yesterday at 4:19 am by Rocky
» Deputy: Iraq represents an important factor in the stability of the global oil market
Yesterday at 4:16 am by Rocky
» Transportation: The Iraqi-Turkish technical committees continue to fulfill the requirements for impl
Yesterday at 4:15 am by Rocky
» Economic: Raising the interest rate will reduce real estate prices
Sat 11 May 2024, 7:20 am by Rocky
» Did Barzani agree in Tehran to end the presence of Iranian groups in Kurdistan? - urgent
Sat 11 May 2024, 7:16 am by Rocky
» Al-Sudani: We are establishing a new situation for the global energy market through the Development
Sat 11 May 2024, 7:14 am by Rocky
» Al-Sudani: The government program devoted a wide scope to the government’s vision for oil and gas in
Sat 11 May 2024, 7:11 am by Rocky
» Al-Awadi: Ending the work of the UNAMI mission is consistent with the government’s vision in this fi
Sat 11 May 2024, 7:10 am by Rocky
» MM&C Floating the dinar" returns to the forefront.. Will the Central Bank of Iraq resort to it and w
Sat 11 May 2024, 5:24 am by Rocky
» The Secretary of the Ministry of Defense meets with the Commander of the NATO mission
Sat 11 May 2024, 5:17 am by Rocky
» Expert: The stability of the economy is linked to the political situation
Sat 11 May 2024, 5:13 am by Rocky
» A parliamentary request to lift the injustice against 20,000 Iraqi employees
Sat 11 May 2024, 5:09 am by Rocky
» Parliamentary Finance criticizes the government's failure to send the budget schedules
Sat 11 May 2024, 5:08 am by Rocky
» Minister of Oil: The 5th and 6th licensing rounds will take place within the framework of exploratio
Sat 11 May 2024, 5:07 am by Rocky
» Al-Sudani: Iraq is a difficult number in the global market in the field of energy
Sat 11 May 2024, 5:06 am by Rocky
» Al-Khanjar rejects Al-Halbousi’s request to head Parliament
Sat 11 May 2024, 5:05 am by Rocky
» Revealing the date of the arrival of the 2024 budget schedules
Sat 11 May 2024, 5:04 am by Rocky
» Al-Halbousi nominates Talal Al-Zubaie for presidency of the House of Representatives
Sat 11 May 2024, 5:03 am by Rocky
» "A coup in Iraqi universities"... Replacement of presidents and deans under the new education law
Sat 11 May 2024, 5:01 am by Rocky
» Al-Sudani: Iraq is a difficult number in the equation of energy and oil wealth in the region and the
Sat 11 May 2024, 5:00 am by Rocky
» Minister of Oil: We hope to announce an increase in Iraq’s oil reserves to 160 billion barrels
Sat 11 May 2024, 4:58 am by Rocky
» Iraq's mass graves...stories that did not end with the burial of their owners, and the "legacy of IS
Sat 11 May 2024, 4:57 am by Rocky