Mission And Purpose
Two Roads Diverged...
I continue to believe we need to have a conversation as Republicans on what it means to be a Republican, and a larger national debate on why spending and debt, institutions – and civility and humility should still matter in politics. This is something none of us can do alone, but collectively in talking to friends and neighbors alike we can begin to spark this needed conversation.
Change Needed
You can’t fix a problem you don’t perceive, and today’s political climate seems to be defined not by a robust debate of ideas, but by devolving levels of charge and counter charge, reaction and counter reaction. You can’t solve problems this way, and America has some problems that are desperately in need of solving. We need a robust debate on debt and spending, given the degree to which it’s not being talked about by either party. Concurrently we need to focus on the importance of Republicans re-embracing conservatism. In this instance this means not throwing out 200 years of tradition with institutions that have been vital in balancing power key to a conservatives belief in liberty. It also means being conservative in avoiding an embrace of new social norms that shatter what so many of us have tried to teach our children on measure in interacting with others. In short, the “new normal” we have seen in political waters in the way we treat others is not sustainable. As Republicans shouldn’t we talk about it?
No matter what happens in the next election cycle, if each one of us does our part in pointing to political true north, in time good things will come from it.
Again, as I see it this comes down to three things:
It’s been said they never care how much you know until they know how much you care. I believe conservative solutions are common sense and represent sound solutions to many of the problems confronting America, but in presenting them, style matters. Former President Trump’s approach was confrontational and exhausting. It invited reaction and the current cycle of “he said she said” undermines our chance for real debate on issues that affect all of us.
People against him, or his ideas, were “losers.” Aside from sounding like the 5th grade bully, this approach made it very difficult to expand an audience for conservative solutions. Many of his policy ideas were actually reasonable, but to continue on a path that does not include more civility and humility means people will tune out good ideas and the possibility of real debate.
This approach leads to many battles, but few wins on change vital to sustaining the American dream.
On the page below, you will find a few charts and additional details on why our debt, deficits, and spending should matter to you and those you love. But let me give you a little overview in reinforcing why this issue that's gotten so little attention should matter so much to our lives.
History says that debt and spending should matter because its pages show how consistently civilizations have extinguished themselves financially. There is no country in the history of man that has been able to outrun financial reality. It can certainly be done for a season, but over time math matters for the budgets of individuals, businesses, and even civilizations.
Social equity says that the debt and spending issues is the issue of our day, given the intergenerational wealth transfer that's taking place as our national debt mounts. Our country was founded on the notion of no taxation without representation, but given that deficits are nothing more than deferred taxes, young people today should be outraged at deficits accumulating at more than a trillion dollars a year. In this same vein, I find it amazing that we will spend more on interest next year than on all federal programs for children. These numbers will prove disastrous for young Americans.
Our nation's defense says debt and spending issues should matter because we will spend more on interest in 3 years than we do on the entirety of our national defense budget. Paul Kennedy wrote a great book years ago entitled ‘The Rise and Fall of Great Powers’ and showed how inextricably military supremacy was tied to economic supremacy.
Debt Matters
The needs addressed by other government programs also highlight how this issue should matter. Interest costs compete with every other investment that our federal government might make, in improving lives and making our nation more competitive. In just 5 years, interest will be a greater expense than the entirety of what Congress debates every year on spending.
Your retirement account or savings account say it should matter...
Because the buildup of debt inflates prices – and that which goes up can come down. There are a host of indicators that show that we are now living in an asset bubble based on the buildup of debt. When that bubble pops, so will the worth of our savings accounts, our retirement accounts.
Your job says that the debt and spending issue should matter because 2/3rds of our economy is driven by consumer spending. If the asset bubble pops, not only do our savings accounts go down, but so too do our job prospects, given the way that jobs have been tied to wealth and asset creation in our country. I could go down a list of other reasons that this issue should be the issue of our times, but for now, let me take this as a starting point and ask that you dig into the details below.
Laurence Kotlikoff 210T / 60T / 40S
While many people believe that our current debt levels are well below the post WWII highs, in fact if you compare apples to apples we are frighteningly close to where we were at the time that we were fighting for our survival against the Germans and the Japanese. We didn’t have the same level of social-safety net commitments then that we do today. If you include these societal promises to the needy, the retired, and those in time to be retired [the light blue in the graph above] we are remarkably close to those post World War II debt highs. We in fact now have the highest level of debt that we have ever had in peacetime, and people like Laurence Kotlikoff at the University of Boston believe that the total of today’s existing political promises to be about 200 trillion dollars. The former Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, described our debt as the greatest threat to American security.
Individual income tax 2017/2025 = 1.2 Sequester 150B/2020 = 2.1
The exponential growth of debt is vivid in this chart. It took us about 200 years to accumulate $5 trillion in national debt. It doubled under President George W. Bush as it went from $5 to $10 trillion. It doubled again under President Obama from $10 to $20 trillion. I believe it’s well on its way to doubling once again under the eight years that would have marked a two term Trump presidency, and in fact spending has continued to grow exponentially under Biden. The Congressional Budget Office assumes a lower rate of growth in debt, to about 36 trillion, but their assumptions are optimistic given their generous forecasts on economic growth and future interest rates. Even if one accepted their projections, what the Congressional Budget Office has to assume in forming their budget is wildly optimistic based on the imagined politics that are built into existing law. For instance, existing law assumes that the individual income tax rate cuts passed in 2017 will just disappear in 2025 because that’s what’s in current law. It’s in no way politically realistic to think that the corporate tax change, which was permanent, will stay in place while individuals see their tax rates go markedly up. Similarly, it assumes that all the new spending that Republicans and Democrats just added over the last few years to the budget will disappear over the next few years. In fact it was current law that the sequester would snap back into place a few years ago, but it is in no way a realistic look at what happened. It was instead ended as Republicans and Democrats alike had distaste for the sequester. In short the growth of spending and debt has been prevailing over financial prudence.
Projected $1.2T average deficits over the next 10 years. Well above historic average of 2.9% GDP at 4.4%
We now face the largest deficits our country has ever faced in peacetime. We’ve never even been remotely close to the string of $1 trillion plus deficits we are projected to see over the next 10 years. The numbers will prove much worse because deficits are projected to rise from a little over $1 trillion dollars today to over $2.3 trillion over the next 10 years. The Committee for a Responsible Federal Budget believes we could be looking at deficits above $2 trillion a year over essentially the entire time period if interest rates go up, trade tensions escalate, or the economy soften. Groups like this also point out how unrealistic many of the projections are in the budget, and yet these forecasts lead to the Congressional Budget Office’s more modest and unrealistic deficit projections.
Chinese, $1.3T, 20% Suez 1956
The Chinese now own $1.3 trillion, almost a quarter of our national debt held by foreigners. This is up markedly over the last 20 years as foreign governments have substantially increased their ownership of American debt. This is yet another limitation on our ability to react to a financial storm. The Congressional Budget Office has also said this degree of foreign ownership could work against our ability to project force around the world and our ability to ensure our security at home. America has gone from being the largest creditor nation in the world at the time of WWII, to now being the largest debtor nation in the world.