It wasn’t so long ago that some experts said not to worry about government debt, that a country like the U.S. with debt in its own currency had little concern.
That was the Modern Monetary Theory (MMT) take, at least. An economic thesis for a reality that included social issues, politics, and the messy emotional baggage human interaction in all forms carries. Easy enough to ignore when interest rates were low to virtually non-existent.
That is no longer the case. Inflation has kicked in, which was a danger that MMT has recognized. But it expected politicians to act by increasing taxes to shrink the money supply — a decidedly fiscal action that the Federal Reserve cannot duplicate because it cannot directly take money away from those who have a surfeit. And now the country is in deep trouble that will take many years to straighten out. Years that we as a nation seem ever disinclined to invest.
Politicians aren’t regularly inclined to increase taxes, and even when they do, they focus on some boogie man like billionaires. Who, despite how much they get away with, are not an easy answer to appease a segment of voters, after which, elected officials can continue to ignore fundamental problems.
The issue isn’t debt as an amorphous blob. Although there are arguments one could make that during the pandemic a lot of financial help went to people and organizations that didn’t truly need it, the wide net was probably necessary to get passage of measures that were critical. The resulting financial crisis was short-lived and, frankly, overall people seem to have recovered faster and more completely than after the Great Recession (which seems to have been renamed the Global Financial Crisis as both an acknowledgment of an international problem and a way to push off the self-inflicted nature of the injury in the U.S.).
The problematic debt is the ongoing insistence on spending without revenues to cover the costs. It is the lack of fiscal discipline to put up surpluses when times are good to help offset the additional necessary expenses when times are bad. The willingness to keep increasing the defense budget far in excess of any other country in the world even though the U.S. is not technically in an active war anywhere. A refusal to negotiate and find a sustainable solution to healthcare costs for the entire nation, as we have either the first, second, or third highest (depending on which numbers you look at) healthcare expenses per capita with far from the first, second, or third best outcomes. One reason for which is because we focus on the desires of the wealthy to live as close to forever as humanly possible at any cost and ignore the many millions who can’t get competent care and proper treatment, which means the average results drop.
So, when people complain or are concerned about discretionary U.S. government spending and then point to something like foreign aid — between 1% and 2% of the national budget and a third of which is military equipment and training, which means money going into the pockets of defense contractors — they aren’t serious about controlling the deficit. Instead, the protestations are performative. Anyone seriously concerned about the national debt and annual deficits must ask about military spending. It currently by far the single largest category of discretionary spending.
That will end within a few years because interest on the national debt will take over and become the largest line item.
If someone is concerned about “entitlement spending,” including both Social Security and Medicare, then they again are not serious until they address fundamental problems like healthcare costs — a burden to everyone of every age — and the cutoff at which the wealthier no longer have to pay the tax that everyone else must, whether because of the upper limits on income for FICA.
The problems are systemic and solvable, except that few people are willing to make any sacrifice for others and coming generations.
Unless we take the smaller inconveniences, the large ones will drown us all.
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Forbes