How National Debt Is Contributing to Public Disenchantment with Government

America's $9.3-trillion-and-growing national debt rightly has been blamed for many economic ills that lurk on our nation's horizon, but it also had the stealth effect of further eroding Americans' waning belief in the benefits, efficacy, and trustworthiness of government. Many other, oft-mentioned factors -- Vietnam, Watergate, anti-government rhetoric, and a 24/7 cycle of Washington scandals and blunders -- have played a huge role in turning post-World War II pride in our government to present-day disdain for it. At a time when roughly a quarter of Americans think that Washington is doing a good job, it is hard to remember that, during the days of Franklin Roosevelt to John Kennedy, the feds were leaders and public servants admired by the vast majority of the population.

Yet, a side-effect of warp-speed debt growth, not mentioned in any warning label appended to the querulous tomes known as the U.S. budget, has been to push public esteem for government into ever-faster free-fall. How has it done this?

Opinion research by Public Agenda and others has found the public to be livid about Washington leaders so unaccountable and irresponsible that, for most of the last generation, have been unable to balance its income and expenses, as any household is expected to do, or even to have on-time, straightforward, and honest budgets (or financial statements), as any self-respecting business is expected to do. Watching Washington cut taxes and increase spending, when our finances are already deep in the red, while leaders claim with a straight face the mantle of fiscal probity is enough to make anyone blanch. This macro-level political dishonesty is compounded by the myriad sleights-of-hand performed by the budgeters of Capitol Hill and the White House. These include the tried-and-true practice of filching from the Social Security Trust Fund to pay for other government expenditures and conceal the true size of annual budget deficits. They also include the accounting legerdemain of perennially pushing present expenditures into future years and "off budget." And what would any list of Washington's fiscal honesty be without including the ever-popular subject of tens of thousands of "bridge to nowhere"-style pork-barrel projects slipped stealthily into broader spending bills?

Financial mismanagement and lying, indeed, go a long way toward diminishing public esteem for political leaders. But that is only part of the story.

The major drivers of growing national debt, aside from arguably too low taxes on some, are the voracious appetite of entitlement programs and interest on the debt itself. Medicare, Social Security, Medicaid, and smaller entitlement programs, plus interest payments account for about 63 percent of federal spending, up from 33 percent 40 years ago. In a Newtonian budgetary world of equal and opposite actions, as such mandatory spending has soared since the 1960s, discretionary spending -- what Congress and the president actually have control over
-- comparatively has wilted like an unwatered plant.

But there's the rub. With so many broadly supported government services, and ever new and unpredictable public needs, the noose-like budgetary squeeze due to insufficient funds in the U.S. Treasury has meant that Americans increasingly feel that they are getting less and less of tangible value for their tax dollars. With most taxpayer -- and borrowed -- money going into the vortex of mandatory spending, unbeknownst to most citizens, Americans feel like they are paying a lot on April 15, only to see highways clogged and deteriorating, workers' livelihoods not being protected, global warming going unaddressed, schools failing, and sundry other failing public services. The hidden culprit is this straitjacket on such "good" spending caused by the debt-producing effects of uncontrolled mandatory spending and insufficient revenues. Thus, Americans can justly accuse their leaders of taxing them too much and providing them with too little in visible, desired services.

Thus, as a "tsunami" of debt threatens to sink our economy and government, that same tsunami is also feeding a rising sea tide of cynicism and mistrust of America's central democratic institutions. If leaders and government are to be respected again, a big part of the solution lies with fiscal reform and debt reduction.

Comments

[swift goat pet for truth]

The major drivers of growing national debt, aside from arguably too low taxes on some, are the voracious appetite of entitlement programs and interest on the debt itself. Medicare, Social Security, Medicaid, and smaller entitlement programs, plus interest payments account for about 63 percent of federal spending, up from 33 percent 40 years ago.

HUH?
Hold on a sec. SS, Medicare and Medicaid are major drivers of our national debt??
How do you figure THAT?
SS is in surplus. How does that contribute to our debt? Maybe you just want to collect the SS taxes and not pay the distributions? And Medicare and Medicaid are at least nearly self-sufficient as far as taxes and payouts go.

And SOMEHOW you neglected to mention our Military Budget. The SECOND largest item on our Fed Budget. US Defense spending is greater than the rest of the World's defense spending combined.
US Defense spending, the greatest source of government waste and fraud.
US Defense budget, that does not include Iraq and Afghan budgets.

Gee, wonder why the "non-partisan" forgot to mention THAT.

[swift goat pet for truth]

"The major drivers of growing national debt, aside from arguably too low taxes on some, are the voracious appetite of entitlement programs and interest on the debt itself. Medicare, Social Security, Medicaid, and smaller entitlement programs, plus interest payments account for about 63 percent of federal spending, up from 33 percent 40 years ago."

Wait a minute. SS, Medicare and Medicaid are drivers of the National Debt? How do you figure THAT?
SS is in surplus, MCare and MCaid are at least close to being paid for by current payroll taxes. So how do they contribute to the DEBT?

Additionally, somehow left out in your list was Defense Spending, the SECOND largest item on our Fed Budget.
US Defense Spending, greater than the rest of the world's defense spending combinined.
US Defense Spending, where MOST of the government waste and fraud reside.
Gee, how did that happen?

[dadw5boys]

IS THIS ONE REASON????

Amount of National Debt in 2007 ---- $9,229,172,659,218.31

Interest paid on the national debt in 2007-- $429,977,998,108.20

Take $9,229,172,659,218.31 and divide it by $429,977,998,108.20 equals = 21. 46 %

21.46 % INTEREST PAID TO THE FEDERAL RESERVE BY THE AMERICAN PEOPLE EACH YEAR ON THE NATIONAL DEBT.

Why is the interest rate so high?

So that’s how they can bail out investment bankers with our money!!!!!!!!

[joebhed]

dad, isn't it the inverse?

paying $10 interest on $100.

divide 10 by 100 = .1 = 10 percent.

divide the $430 LARGE by the $9,229 LARGE and you get

4.66 percent.

10 percent of the $9229 would be 923.

So, it seems about right.

no CPA here. : )




I think that's right.

[joebhed]

Come to think of it, dad, you still might be right.
There's this thing about interest.
Its high time that we start using a proper definition of what the national debt really is.
If I "lend" you $1,000 and then tell you that you have to pay me back $3,000, how much is your debt? Way I see it, your debt is $3,000.

The way the bankers like the fact that we call the national debt the amount we borrowed, which is the $9,229,172,659,218.31
$NINE-POINT-THREE TRILLION.

That's what we borrowed. But, that's NOT what we have to pay back.
I never added it up.
My guess is that its clost to $TWENTY-FIVE or THIRTY TRILLION.
I admit that's just a guess.

$$T$$R$$I$$L$$L$$I$$O$$N.$$.

That's how you should spell TRILLION.
Prognosticators will correct me by sayinng that is the total Debt-Service-Costs of the National Debt, and not the ACTUAL National Debt, which, by the way, today is an amount much greater than the 2007 figure you cited.
Thirty years of your interest figure is like $13 TRILLION, so maybe more like $25 TRILLION.
So, really, the National Debt, subject to check, is the amount you have to pay back to the holders of that debt, which is $TWENTY-FIVE TRILLION DOLLARS !!
Right now, again, subject to check, we, the American taxpayers, owe some $25 TRILLION dollars, to someone.
Maybe we shouldn't keep borrowing our way into prosperity.

[pigsatthetrough]

In debt up to the ying yang and 75% of Americans turned off by the existing government, whether in the Presidents office or Congress. The only candidate trying to become President, and willing to change Washington, is being sold down the river by MSM, the GOP and a leading Democratic candidate, Hillary. Yet the public listens to the garbage and falls in line, allowing Hillary or McCain and others to even be in the race. It must be true, the electorate gets the government they deserve. All talk and no action this electorate!

[Aaror]

Lets just repudiate our debt...
If we say we won't pay it, we will never be able to borrow again. The dollar will go in the toilet, which will make imports too expensive and our exports cheap enough to revitalize our industrial base. There will be a significant loss in standard of living, as measured in cheap chinese imports and wasteful gas guzzling, but in the long run it will be good for us.

[ProudLiberalDemocrat]

Spending 'beyond our means' is too often an American way-of-life. Congress is no better. But unlike a worker unable to get a raise in pay, Congress can increase tax revenue to come closer to a balanced budget by either raising taxes or simply having tax receipts increase by organic methods (i.e., a growing economy). Our Federal Reserve is doing their best to foster economic growth.

In the process of stimulating growth, the Fed is willing to allow excess inflation. The Fed will allow this because 1). they believe inflation could/might be mitigated by recessionary pressures; and 2). because inflation will save housing and our economy. Yep. inflation is what we need to get hosuing prices back in-line with what millions of honest, hard-wroking people have invested in recently purchased homes.

Prices will be higher. Wages will go higher. Hard commodity asset prices (real estate included) will go higher. Therefore, Congress would be able to pay down the debt when tax receipts go higher too. So the Fed keeps printing money.......inflation, it's on purpose this time.

[egal]

Well, it's a bit more inane and unforgivable for a leader to misspend the money received due to subordinates' work, while increasing hs or her own salary...hmmm, sounds like our government has completely turned into a corporation now, one poorly run and more decrepit and corrupt than ENRON was, once upon a time.

The problem is that, while a corporation can sell out or fire everybody, the government is stuck with those debts and the needs to meet its budget. Unfortunately, like those most inexcusable of corporations, the government and those hundred and some near the top are content to abuse the funds earned by the public, give themselves benefits of which they deprive the rest of us, and legalize their worst actions so that we have no recourse against their evils.

That's the problem with letting the people in charge make the rules, letting money buy people into top positions, letting nepotism run rampant...and a lot of other disgusting habits that are perpetuated by any system that lets those at the top control their own rewards and live above--or even getting fat off of--the consequences of their worst choices.

[outnow]

I agree.

The U.S. current account deficits and dollar impairment are the root causes of runaway domestic credit systemic problems that these days comprise the global credit crisis. Excessive liquidity continues to flow into Asia and the Middle East.

What could upset the apple cart? A war, a spike in the interest rate, a run from U.S. Treasuries, a disorderly drop in the dollar, a bout of derivative and credit market implosion, and a combination of many other factors of fear or greed.

There must be an adjustment of the bubble. Like the success of the "surge" the postponement of dealing with the "bubble" is just another fact of contemporary life in America. The "beauty" is in the eye of the beholder. Global warming, food shortages, lack of water, rampant pollution are just a few Horsemen of the Apocalypse. Listen to the Cassandras - they have much to say. I wonder if any will.

[drkazmd65]

Add in the effects of the 'Off Budget' items like the Occupation of Iraq (at a cool couple hundred billion $s & rising) as well as the decrease in tax recipts from the rich, decreases in the estate taxes, and decreases in the tax rate on capital gains on (especially short term) investment income and it explains a lot of the recent inbalance in the budget.

I wouldn't actually mind paying my taxes (net after refunds I paid over $13K federal income taxes in 2007) IF I thought the idiots collecting it were doing something useful with it.

Unfortunately - the idiots collecting it, as Mr. Yarrow so distinctly points out, can't be trusted with 'my' money or my government.

[rwe2late]

The Federal military budget is closer to one trillion dollars!

The Pentagon Strangles Our Economy: Why the U.S. Has Gone Broke
http://globalresearch.ca/index.php?context=va&aid=8813

And our state and local governments are also going bankrupt.
http://finance.yahoo.com/real-estate/article/104940/Rising-Property-Taxes-Fill-Gaps,-Pin
ch-Homeowners

We are in an awful mess that is steadily getting worse (except for the elite few who now control more of the nation's wealth than the robber barons of the Gilded Age.)

[drkazmd65]

True enough rew2late - but I was only pointing out the couple hundred billion of the military expendatures in Iraq that have been kept off the books by GW and the complicit congress.

At least the rest of the bloated military budget is accounted for in the accounting defecit.

[joebhed]

Ok, folks, now calm down.
Especially you, dad. :)
Now, here's the rub.
Republican or Democrat.
Tax and Spend or Cut and Spend.
It matters not.
The problem is the private banking system in this country that is running us into the ground, doing so for one good reason - because they CAN! (excuse me, there, dad)
Are we a sovereign country?
As such,we can have any kind of money system that we the people decide.
There have been many battles over the years.

"The issueing power of money should be taken from the banks and restored to Congress and the people to whom it belongs. I sincerely believe the banking institutions having the issueing power of money are more dangerous to liberty than standing armies." - Thomas Jefferson

If we want to solve the very real and painfully obvious problems that Andrew Yarrow correctly points out, then we need a new monetary system in this country.
One wher the government of, by and for the people does NOT borrow money fromt the private money-creating powers of these bankers.
Its all in here:
http://www.neweconomics.org/gen/uploads/CreatingNewMoney.pdf

We need to repeal the FED and disolve Bretton Woods.
We need a sovereign Central Bank of the US,
And we need to begin to issue debt-free money in proper balance to fiscal soundness decided by our Joint Congressionsl Committee on Currency and Monetary Policy.
And, we need to get started NOW.

[WIpatriot]

OK, joe, I finally finished reading the whole thing, and the primary question comes to mind: "How could this be implemented in this country? How?"

That's all.

[ruleoflaw66]

Calling social safety net programs like SS, entitlements is wrong. We pay for that. This is neo-con prose meant to undermine the public's perception of the last vestiges of the New Deal.

Also, his numbers on govt spending, according to 3 or 4 sites, only one of which i'll post so as not to run afoul of the censors at HP and their new found vigilance re other sites:

http://www.warresisters.org/pages/piechart.htm

Though I agree that the debt is one of our worst enemies, when I read between the lines here, I am more than a little suspicious of the writer's intent.

[joebhed]

How?
Jeezum?
Let me get back to you on that. ; )

I am impressed.
Too few bloggers will take the time, at their own peril by the way, to try to understand the most funamental political/economic reality out there.
If they did, the bizpage would be more a hummin'.

How?
My dad used to tell me, there's only two things in life that matter, besides love, of course. They are money and votes.
I doubt that there are more than half-a-dozen hedge-fund billionaires out there that would want bankroll an effort for a sovereign, people-controlled, government-run honest money system in this country.
On the other hand, those who control today's private "wealth amid poverty" money system have complete control of the power-wielding coffers of not only both political parties, but the campaign finances of almost all the individual political candidates.
So, where does that leave us?
Almost all. So, my guess for a tiny opening to move the dialogue forward would be a few intelligent, populist and independent political thinkers.
So, I am thinking of Bernie Sanders of Vermont and Jon Tester of Montana, and maybe Ron Paul and Barney Frank. (maybe they don’t talk to each other.)
There IS an existing movement at www.monetary.org that espouses the same political/financial basis of the New Economics Foundation, but without direct resort to NEF's method for creating money.
Back soon.
How?....., how?, how.? ....

[hchriste]

The National Debt is a greater threat to the security of the nation than all of the terriorists and anti-U.S. governments in the world combined. The discussion about the national debt, Thanks to Bill Clinton, turns to the budget. The budget is a smoking mirror and doesn't reflect the actual spending of the government that includes the intrest on the national debt whuich is larger than the budget by itself. Our debt is owned largely by foreign governments which effects our foriegn policy and lets countries like China influence our foreign policy. As the fed's keep lowering the intrest rate, less and less bonds will be sold and these countries will be selling off their bonds. As one of the riches Americans recently said, if the country continues its policies with out addressing the national debt in 10 years the government will only have enough money to pay the intrest on the national debt and maybe social Security. We will be able to pay for nothing else, no military, no schools, nada, better wake up America.

[joebhed]

You are so right.

With special thanks, quotes from Eric de Mare's paper on "Labour or Liberty":

"The issue which has swept down the centuries, and which will have to be fought sooner or later, is the People versus the Banks." - Lord Acton in 1875

"As the situation stands at present, the banker is in a unique position. He is probably the only known instance of the possibility of lending something wihout parting with anything; and making a profit on the transaction, obtaining in the first instance his commodity free". - C. H. Douglas in a speech in Newcastle in 1923

"Banking was conceived in iniquity and born in sin.
Bankers own the earth; take it away from them but leave them with the power to create credit, and, with a flick of the pen, they will create enough money to buy it all back again........
But if you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit." - Lord Stamp, a Director of the Bank of England, in a speech in 1940

Of the Versailles Peace Conference after the First World War:
"The international bankers swept statesmen, journalists, and jurists all on one side and issued their orders with the imperiousness of absolute monarchs." - Lloyd George

How do you think it went at Bretton Woods?

[Rule Of Law]

I think that most folks here don't even know what Bretton Woods was, or the impact it still has...

[DavidJames]

Andrew,

Republican adminstrations have been responsible for the vast majority of the national debt accumulated in the last 30 years.

You should have mentioned that the Clinton administration balanced the budget for 3 to 4 of it's 8 years. Several of these years had significant surpluses. As a result the national debt barely increased during the Clinton administration.

In comparison the Reagan/Bush administration and the Bush(W) administrations did not have and have not had a single year of balanced budgets. Both of these Republican administrations have each doubled the national debt. As a result of more than two decades of Republican voodoo economics, laffer curves and tax breaks to the wealthy, we have taken on significant unnecessary public debt.

There is no need for a lot of wailing and hand wringing about this build up in debt. The solution isn't complicated. A tax of $100 per ton of carbon dioxide emission, this is about $1 per gallon of gas would do it nicely. The carbon dioxide tax would apply to all fossil fuels and would bring in about $600 billion a year of additional revenue, balance the budget and provide a small surplus.

If the Iraqi occupation could be finished, there could even be a nice progressive carbon dioxide tax rebate.

Regards,

[therealredstateblues]

Another way to help right the financial ship is impose tariffs on imported goods. This income can not only be used to increase the safety nets of education and unemployment insurance and health care for those losing their jobs to unfair trade, but can also be used for increased inspection of unsafe imported goods and increased border and port security.

These tariffs in additon to the direct benefits stated above, would then also haave the indirect benefits of getting US based manufacturing back on its feet and mobilise its great middle class wealth generating capabilities, thus increasing the tax base.

[Thermodynamics]

After the Great Depression Keynes explained that tariff barriers were one of its causes, because tariffs kept industries from growing by reducing reciprocal markets in trade-partner countries. This became one of the pillars of "liberal economics".

I read Keynes' book and explained it to my relatives who had been in business in the 20s and 30s. They laughed. Their explanation was about a situation similar to today.

They said that the "trusts", formed by mergers and acquisitions, had sucked all the money up through the system. The big city centers such as New York did grow richer but this left rural farmers and the middle class strapped, unable to buy more goods and services. It was like colonialism within the US, they said. Our public was unable to buy anything and the system ground to a halt.

They also pointed out that deficit spending, "pump priming" was regarded as a temporary fix, a necessary evil, not something to be continued.

In retrospect it seems that Keynes was intentionally stating his case in a form that would be acceptable to Wall Street.

[dadw5boys]

IF YOU CUT BACK ON THE MONEY YOU TAKE IN -- TAXES!

THEN INCREASE THE MONEY YOU SPEND -- NO BID CONTRACTS !!!

WHAT IS GOING TO HAPPEN?? -- DEBT!!!!!!!!

THE FEDERAL RESERVE CAN BAILOUT 9.6 TILLION FROM INVESTMENT BANK!!!!!!!

THE FEDERAL RESERVE CAN PAY BACK TO THE SOCIAL SECURITY FUND ALL THE MONEY THE U.S. GOVERNMENT BORROW AT 19 % INTEREST!
THE SAME INTEREST RATE THEY CHARGE THE U.S. GOVERNMENT FOR THE NATIONAL DEBT!!!!!!!