Many of our politicians and media are outraged that
anyone would suggest the federal government
should spend less or that every department shouldn’t
go on forever.
If the times are tough and the government is
breaking red ink records, they refuse to do what
many of their constituents have routinely done
during hard times: Spend less and balance the
budget.
But over the past few decades so many of our
historically illiterate leaders have ignored history.
They apparently believed that outrageous spending
couldn’t destroy us. But that happened in Spain, the
Hapsburg Empire, formerly rich nations that went
broke or ran up so much debt that their economies
were hurt.
The U.S., on the same road as bankrupt empires that
ended up in the ash heap of history, has been running
incredible red ink numbers for decades. Few
lawmakers seem to care, although some spending
sinners now say they’ve now gotten the religion of
economy. This is a claim about as believable as an
Elmer Gantry sermon. Many of our lawmakers either
have been incredibly ill-informed or lied about the
dangers of outrageous red ink.
The debate is over the so-called $36 trillion federal
debt today. I challenge official government figures
that often are arrived at using questionable
accounting standards. I prefer independent
observers. “Our current national debt clock amount
stands at $159 trillion,” Shelia Weinberg, a CPA and
the founder of Truth in Accounting, told me. “The
government is using Enron accounting standards.”
It’s an old story. Some 15 years ago, working for the
New York Post Sunday business section, I wrote a
story on the official government debt figures. I made
a point of talking to economists of all schools—from
Austrian to Keynesian and everything in between.
They all concurred: The government’s official debt
number was fraudulent.
One economist, Laurence Kotlikoff, who has made a
career of studying government spending, said that
the government was “functionally bankrupt.” By
that, he meant—I use an analogy with our fractional
reserve banking system—that if a significant number
of creditors wanted their money at the same time, the
government couldn’t pay it. This is the same as if
tomorrow a large number of depositors all wanted
their money back at the same time from banks with
minimal reserves. Many banks would fail. Another
way of looking at this. Let’s say there are 1,000
people who must leave a room all at once but there
is only one small exit. Some people will be trampled
to death trying to get out. In a panic, depositors and
dollar holders could be burned but our pols have
been reassuring us for decades that bad things can’t
happen as we accumulate more and more debt. It’s a
tougher and tougher sell as we go through
boom/bust cycles as described in the work of
Austrian School of Economics.
These egregious red ink numbers aren’t the result of
one administration or one set of overpromising pols
who didn’t want anyone to seriously consider how
they spent the billions of dollars that tens of millions
of Americans now and in the past have earned to pay
exploding tax bills. These bills include the most
relentless tax: inflation.
The debt scam numbers are a bi-partisan train wreck
that goes back for decades. Almost all Republican
and Democrat career pols are responsible for this
mess. The same goes for the spend everything Biden
administration officials who went on a spending
spree. They were alarmed that someone sneezed so
this justified relentless overspending. The Bidenites
insisted the government, despite several budget
busting bills, wasn’t spending enough even though
overspending has been going on for generations.
Some instances of spend now and think about it later
dates back to presidents’ generations ago. Consider
Lyndon Johnson’s pricey Great Society or Jack
Kennedy’s big military budget of the 1960s. The
latter was designed to close a non-existent missile
gap with the supposedly unbeatable Soviet Union,
which later imploded without war. Kennedy aide
Arthur Schlesinger, in his book “A Thousand Days,”
admits the missile gap was non-existent. Charles
Murray, in his book “Losing Ground,” proves most
of the Great Society spending was
counterproductive.
Excuses have been made for excessive spending
such as wars, new social welfare programs or bad
times in the business cycle, such as recessions and
near depressions brought on by career pols of both
parties. They often retired to Florida on government
pensions better than most of the people they served.
The career pol often justifies spending trillions as a
way to rejuvenate the economy. This ignores some
of the policies used during the little-known
depression of 1921-22. That’s when laissez-faire
methods were used by one of the greatest and little-
known Treasury Secretaries Andrew Mellon. He
dramatically cut marginal tax rates, reduced
government spending and didn’t prop up
malinvestments: Result. The economy boomed for
the rest of the decade until President Herbert
Hoover, never a fan of Mellon, later installed the
government countercyclical policies used in much
greater amounts by his successor, President
Roosevelt. One economist called Hoover “the father
of the New Deal.” Neither Hoover nor FDR ever
achieved the Mellon prosperity.
But it is amazing how much our political class has
come to rely on red ink, what they call “investment”
—the misuse of the word is a tribute to the
Newspeak of Orwell’s “1984,” much of the media,
don’t call it spending anymore—and how it rises in
good and bad times.
The Congressional Budget Office (CBO), in a recent
report, [Federal Debt: A Primer | Congressional
Budget Office (cbo.gov), blames both parties by
implication.
“Between 2012 and 2019, the debt rose, on average,
by nearly six percent annually (compared with
nominal GDP growth of about 4 percent). At the end
of 2019, federal debt held by the public was equal to
79.2 percent of GDP, higher than at any other time
since just after World War II, when it was around
100 percent. In 2019, the government’s interest costs
for that debt totaled $404 billion,” the CBO report
said.
Time to stop all “this investment.” More anon.
