By Stan Gudmundson
Peterson, MN
About deficit spending, an economics advisor to Richard Nixon once said that if something can’t go on forever, it won’t go on forever. Ayn Rand said,
‘We can ignore reality, but cannot ignore the consequences of ignoring reality.”’ Obviously.
Why then, do we put up with government’s deficit spending if it can’t go on forever? Making matters worse, deficit spending creates inflation.
According to the Congressional Budget Office (CBO) our country’s 2023 deficit was 124% of our gross domestic product (GDP). At the beginning of the Great Depression, it was 20%. After World War II, the deficit was 121% of GDP. In 1980 it had been reduced to 31% but increased to 58% in 1999. In 2012, we reached 100% of GDP.
What does the future hold besides an increasingly unsustainable inflation rate? The CBO forecasts 129% of the current rate by 2033 and 192% by 2053.
What is unnerving however, is a forecast by the University of Pennsylvania’s Wharton School of Business. They conclude that a federal deficit of 200% of GDP “sets off a catastrophic, irreversible chain of events… “the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt.” Undoubtedly, we are already way behind the power curve.
Absent a legal constraint such as a balanced budget requirement, do democracies contain within them, the seeds of their own economic destruction? Besides getting reelected, do any representatives have the ability, or even the desire, to pass a balanced budget? Even if it means, and it does, the future of our country’s economy?
When Richard Nixon was running for re-election, he, with help of course, fixed prices. His economics advisors told him that it wouldn’t work. Of course he said, he knew that. But his economics’ advisors weren’t running for re-election. He was.
Is this the mindset of all our elected representatives? Given history, one could make that case.
Balancing the federal budget is surely an urgent bi-partisan cause is it not? But is it even possible? Or are we headed towards an inevitable disaster?
If the economy were to greatly expand, thus reducing the percentage of deficit spending, that would be really helpful. But it would also be just kicking the can down the road.
Government’s economic “experts” tell us that today’s annual inflation rate is “only” 3.5% or so. It may be “technically” accurate and may be useful for political talking points, but what are they measuring and what is it supposed to mean to us?
Given the rising prices of what most of us need, use, and consume, and what we pay for, that official inflation rate is a mystery. And a total fantasy. Other than providing a false sense of security, it tells us absolutely nothing. By the way, the cost for paying for our national debt now exceeds the national defense budget. And also, Medicare.
During Biden’s presidency, transportation costs increased 33.85% and energy 42.49%. But, local diesel prices increased from near $2.00 a gallon to $3.64+ today. That’s an 82% increase paid by transportation industries that they must pass on to us. Costs to travel to/from work +63.4%.
Food costs were up 23.4%. Eggs alone 95.4%. Housing up 21.5%, home prices 47.1%, uncategorized stuff +19.62% fun and games +13.04, medical care +7.73%, clothing +6.4%, and education +9.07% (school lunch programs increased +254.1%).
Who are we to believe? An official government inflation rate of 3.5% or our lying eyes telling us that it takes more than $121 today for what we used $100 to pay for four years ago? We are being told one thing but are paying for another. Given what is happening daily to our economy, it is likely that all of these figures are understated.
Not including the tip, it recently cost me $13-plus for a sandwich and root beer float. Some restaurants don’t even list their prices. They can’t keep up with the price increases they have to pay for the food they serve and for the wages they must pay.
The cartoon character POGO once said, “We have met the enemy, and he is us.” He got that right.
ben bisbach says
Thank you Greg for saving me a lot of time with that rebuttal. Right wingers who rail against debt and spending but ignore the impact of their own policies are a special pet peeve of mine. Maybe someday we will see a conservative who is as willing to raise taxes on the rich as they are willing to cut services for the poor and middle class, then we will know they are really serious about reducing our debt. I actually think in the long run, debt really is a problem we will have to deal with. To the right though, its mostly just a rhetorical cudgel to whack democrats with.
Cody says
Stan, why bother to explain the state of the economy to liberals or anyone else. All one has to do is grocery shop, pay real estate tax, fill up your car or try to buy a home to see your money is far less valuable under biden. This so called president is a disaster and a liar. That’s right, he had to drop out of the presidential run years ago when he was caught again lying. The kid sniffer just doesn’t cut the mustard.
Greg Rendahl says
Stan, let’s look a bit closer at our nation’s debt history. As you point out, our debt today is about the same as it was after WW2 as measured by GDP and remember that Eisenhower gave us the largest infrastructure project in the history of America: the interstate highway system. So, how did we rather easily wipe out most of our debt after WW2? The income tax rate topped out at 91% for the wealthy. Then the wealthy truly helped our nation. So, what has changed? Reagan, GW Bush, and Trump all cut taxes on the wealthy and added loopholes. Now some wealthy people and corporations pay little and even no income tax. In modern times Reagan raised our debt the most, followed by GW Bush, and Trump when figured as amount of debt increase by year. Obama was 4th worst, but he had to contend with the financial catastrophe that occurred in the final year of the Bush Presidency, and that meant spending money to avoid a second Great Depression. Now Biden has our nation working on huge numbers of infrastructure projects that have been neglected for decades. Biden is keeping America great, while Trump was found guilty of tax fraud. Trump always puts himself first and our nation 2nd or worse. Stan, your mention of $2 diesel is disingenuous since that only occurred during the early pandemic shock. The good news involving inflation is that the average wage earner has seen wage increases that fully cover inflation costs.