Washington Is Nuts

Want to hear a real laugher? Despite the current disharmony in politics, there's one policy on which all of Washington agrees. Republicans and Democrats, House and Senate, president and Congress all agree that after last fall's financial crisis, the federal government has to more closely regulate the financial industry to protect our economy from risk of systemic financial collapse.

Here's the joke. As boom -- and bust-prone as high finance always has been and remains, the greatest systemic risk to our economy is not Wall Street. It's the growing federal debt (and weakening dollar) being enacted by those Washington politicians -- the ones who want to protect us from Wall Street.

It soon may be not a risk but a certainty of generations-long economic stagnation and hard times as a direct result of "unsustainable" and ever-growing national debt, driven by a federal budget almost half of which is to be paid for each year by borrowing money -- primarily from China -- and already weakening the dollar such that foreigners are trying to get rid of them any way they can.

Don't take my word for it. In June, the Congressional Budget Office published "The Long-Term Budget Outlook," its first paragraph reading in part: "... the federal budget is on an unsustainable path - meaning the federal debt will continue to grow much faster than the economy over the long run... rising costs for health care and the aging of the U.S. population will cause federal spending to increase rapidly. ..."

"... Large budget deficits would reduce national savings, leading to more borrowing from abroad and less domestic investments, which in turn would depress income growth... the accumulation of debt would seriously harm the economy. Alternatively, if spending grew as projected and taxes were raised in tandem, tax rates would have to reach levels never seen in the United States [highest marginal income tax rate so far -- 94 percent in 1944-45]. High tax rates would slow the growth of the economy, making the spending burden harder to bear."

And yet, the same Congress and president who want to stop the banks from taking too much risk cannot stop themselves from ever more deficits. Indeed, so intoxicated -- nay, hypnotized! -- by debt is the current government that it is not even proposing to try to cut back.

Last week saw, at the same time: 1) the world shuddering about the debt-driven, weakening dollar ("The biggest story in the world economy is the continuing fall of the U.S. dollar, or at least it is everywhere outside of Washington, D.C., the place most responsible for its declining value," Wall Street Journal) and, 2) Washington cheering Sen. Max Baucus' health bill spending levels ("Health Care Bill Gets Green Light in Cost Analysis," New York Times)

That's right. The federal government is "giving the green light" for the country to drive to the poorhouse. And drive there, I would argue, by way of the lunatic asylum. Are they nuts? Consider a few details.

Before the Baucus health bill is enacted, $9.3 trillion of newly created deficit already has been added to the national debt. The Baucus bill is considered a triumph of careful budgeting because it may cost just $829 billion -- and will not add to that unsustainable deficit because it is to be paid for by cutting Medicare and other programs about $400 billion and raising taxes primarily on health care insurance by about $400 billion.

Now, forget for the moment that even the CBO doesn't believe its own numbers. (Last week, CBO Director Douglas W. Elmendorf wrote to Mr. Baucus warning "... long-term budgetary impact could be quite different if those provisions were ultimately changed." That is, CBO must score the cuts called for by the bill. However, Congress invariably fails to actually implement the painful cuts, but it does keep or increase the benefits. That is why entitlement programs always cost much more than is predicted.)

But let's assume the numbers are real. This is still insane. Remember, until a few months ago, President Obama insisted on passing health care legislation this year (during the economic crisis we are still suffering) because it would lower overall costs -- a necessary step for a return to a healthy economy.

But neither he nor Congress could design a bill that saved money. So they are settling for not adding to the "unsustainable" current deficit.

Here's a thought: As shrinking the unsustainable deficit is a critical pre-requisite for a healthy economy, why not just enact the $400 billion of Medicare cuts and $400 billion of health insurance tax increases -- thereby reducing the 10-year deficit by about $1 trillion (when you count reduced interest payments) -- but don't provide the new entitlement benefits that were the purpose of the bill.

Helping the uninsured might be a nice notion some day, but the first priority now is to avoid permanently destroying our economic capacity -- as we are rapidly doing -- by the insanity of adding to entitlement programs while the dollar begins to fail and the CBO predicts we will never recover from the current debt and deficit level. So cut the 10-year deficit by that almost $1 trillion.

Then incrementally move the eligibility age for Medicare and Social Security to 70 by 2030. That would reduce their costs by about 3 percent of gross domestic product -- which is about what it will take to keep them functioning without bankrupting America. It's a start.

Stop the madness. Don't increase benefits; cut costs. Now. It's doable -- except for the fact that Washington is nuts.

Tony Blankley is the author of "American Grit: What It Will Take to Survive and Win in the 21st Century" and vice president of the Edelman public-relations firm in Washington.

This post originally appeared in the Washington Times.

 

 

Comments

[deepintheheartoftejas]

Eliminate 95% of the military. We can make a one-time payment to help exiting servicemen and women get a college education and transition to the civilian workforce. The national guard and coast guard are the only military this country needs. Without the massive troop levels, even if we elect another Republican, they won't have the ability to invade any defenseless countries.

Universal health care is a must. Put the private insurers out of business, and it'll help the economy by reducing the amount of the GDP we spend on ineffective health care.

Use the savings from both to reduce the deficit and the debt.

[serena1313]

[Part 2 of 2:]

America is the only country in the modern world that doesn't have free-healthcare.

We spend over twice as much for mediocre healthcare and prescription drugs; pay doctors 50% more; administrative costs 7 times more and 5 times per diagnostic procedure than other countries.

Currently US: healthcare is 15.8% of GDP ... cost per person: $7290

UK: 8.5% of GDP ... : $2885

Australia: 8.7% of GDP ... $3137

Ireland: 7.1% of GDP ... $3001

If as you assert, we cannot afford to spend a deficit-neutral $1 trillion ($100 billion a year) for healthcare reform (2010 - 2019) and since single-payer is off the table, let's consider revoking some of Bush's tax-cuts.

Because waiting another day is not an option.

[research]

But there is always money for more war.

The USA spends almost as much as the rest of the world COMBINED on war.

[serena1313]

Not almost as much, but that and more! Add in the supplementals and classified budgets and whatever other hidden monies appropriated to the different agencies, who really knows what the US spends, but add it all together and I bet it is probably much, much more than we imagine.

The day before 9/11 Rumsfeld announced $2.3 Trillion dollars were missing which for obvious reasons never got media attention.

[serena1313]

[Part 1 of 2]

Where were you when the $2.48 trillion deficit-financed Bush tax-cuts (2001- 2010) were enacted? Since that revenue loss was never replaced an additional $400 billion in interest rates to the national debt.

Bush's fiscal irresponsibility, simultaneously cutting taxes and executing 2 wars, is the largest contributing factor to the deficit:

40%: Bush's policies: deficit-financed tax cuts and 2 wars

12%: Bush's rescues

20%: economic crisis

16%: Obama new spending to prevent a 2nd Great Depression

Let's help the uninsured some day, but not now?

Who foots the bill for the uninsured when they get sick and go to the emergency room? Our insurance premiums, deductibles and out-of-pocket expenses have soared but insurance profits sky-rocketed 350% which are invested in the stock market. Bad investments are also hidden costs passed on to everyone.

Patient care, meds, diagnostic, hospital stays, etc... are very expensive. Insurers find ways not to pay even if one's life depended on it. Increasing bankruptcies, (75%) foreclosures and deaths are the result thereof.

[johnsopinion]

You've made some excellent points which to me directs
our attention to term limits. But what do I know? These
are all the people who sat by, rummaging around in our
pockets while creative accounting became the norm.
Fight anything that costs the government money -- except
war of course. Now there's a worthy fight! For scared people.
The rules change as needed, so just try to keep up with
the rules, and whoever the rule book has been passed
off to at the moment. It's a game.
Well, actually, it's more than that. It's the Greatest Show
On Earth!

I do like the title: "Washington Is Nuts."

And, as the British say, "Well, there you have it.'

[dwillisno1]

Where have you been Tony? The age for Social Security is being raised. Raising the age for medicare is just the opposite of what we should do. Leave the people between 65 and 70 without any coverage, or increase the number of people who can't retire because they need insurance coverage? All the 65-70's in the group plans would raise the experience cost and increase premiums for employers. I'm beginning to think that Republicans want to destroy the employer provided health care insurance system.I'm also beginning to understand why Republicans are the party of NO. NO actually makes more sense than any ideas they put forth.

[Rule Of Law]

Tony, Tony, Tony, you can quit drinkin' the kool aid now, man. Besides, with this hip new thing called the internet, we can get the truth.

[TRex86]

Blankley knows better. As the Moonies' editorialist of choice he's typical of the right wing's amnesia about the national debt. When Clinton left office Bush inherited a budget surplus and a plan to pay down the national debt. He gave away the surplus and much, much more to his base in tax cuts for the "haves and the have-mores," adding two trillion dollars to the federal debt. As a result of Bush's incompetence and adventurism he left office with a ten trillion dollar national debt and an economic collapse. Prattling about the current budget deficit is disingenuous at best. We need to spend more--a lot more--to get the economy rolling, which will create the opportunity ultimately to deal with this fiscal nightmare. A premature austerity program will seal our fate. It would be helpful if the Republicans and their apologists were honest about the calamitous results of eight years of their missrule. Instead, they pretend it never happened. They are willing to destroy this country if it might provide a small political advantage.

[Rule Of Law]

I guess Tony thought that running two wars off the books was a better way to do business.

[TJCole]

1.4 trillion is less than 10% of our GNP during World War II and deficit was 40% of our GNP and we created a nation economic boom after that and won a world war...

We need real Stimulus, lots more of it....

[GrahamInCanada]

I agree totally.

The US needs a real stimulus building real long term assets, such as high speed rail corridors, renewable power resources, upgraded education standards, community resources, public housing, etc., etc. etc.

It needs to fund the stimulus and the deficit by going after the supply of money; the wealthy, with higher income, estate and corporate taxes, none of which impact on the price of production or flow through to limit demand.

It needs to remove barriers to demand and even to subsidize demand and the middle classes to grow both in order to shrink the unequal distribution of wealth, thinning the ranks of both the rich and the poor.

It needs to abandon any effort at supply side economics as a complete and utter failure of an experiment that almost destroyed the United States, and still might, if it is not stopped soon.

[greyhound2]

Is the US going the way of Argentina? Heavy foreign borrowing to finance current operations, lack of a manufacturing base, high concentration of wealth at the top lead to collapse and the introduction of a facist dictator. Could happen here.

[GrahamInCanada]

The US is not going the way of Argentina.

The main difference is that the US is still privileged to issue debt in its own currency.

[research]

Thank you for a little sanity check.

The USA prints it's own money. Yeah, that can cause inflation if it exceeds the increases in productivity, but we don't pay reparations(yet) like post WW1 Germany, the comparison are specious.

[SEQUOIABISON]

Mr Blankley, I never heard you complain when W was telling the country we can have guns, butter and even a tax cut for the wealthy and not worry about paying for these things, deficits are not a problem?

The republicans robbed the treasury and borrowed from China to pay for the mugging of the American taxpayer. And now you would like to lay the blame for this fiasco at the feet of the Obama administration? That would be funny if it were not so painful for the millions who are unemployed as a result of W's policies; giving out tax breaks in the midst of a war and not willing to pay for them.

[VMA]

It would be funny if we were not only unemployed, but we are also underemployed, medically unisured and if we are medically insured we keep having to pay more each year without receiving any cost of living increases. It's just ludicrous!

[robbrian]

ThomH is spot on.

Tony just doesn't understand that we are now in the initial stages of deflation.

Like ThomH says we don't have to have an interest-debt based currency. We could have "greenbacks" or silver certificates or scrip all of which are non-interest bearing media of exchange--­-nay---leg­al tender.

To get to that point we need a very strong Executive in the White House. One who is not intimidated by the mumbo jumbo of Bernanke, Geithner and Summers, the Three heads of mendacity.

Pres. Obama should force Bernanke to go public with the monetization of our public debt; issue $20 trillion in new U.S. dollars not Federal Reserve notes; liquidate all Federal Reserve Notes, Treasury bonds, etc after they have been redeemed which eliminates the threat of inflation, and strip from the Fed it's control of our currency and restore same to the Congress and the people as per the Constitution. Any creditor who refuses to exchange the new U.S. dollar for his bonds or notes forfeits the claim against the U.S. Government. Holders of new U.S. Dollars can invest, hoard, spend them as they wish just like any other currency.

Deficit problem solved.

Solution courtesy of Dr. Ellen H. Brown.

Would someone in authority in the White House please contact Dr. Brown and hook her up to sit down with the President for a real discussion on monetary policy?

Tony B. please read Ellen H. Brown---"The Web of Debt".

[GrahamInCanada]

Your prescription would utterly and irrevocably destroy the United States.

Ellen Brown does not understand money, credit, debt, currency, banks, markets, or trade, lost in fascination of a mythical, unoriginal and false 300 year old Jewish gnome banking conspiracy to control the United States first proposed by the right wing during the Great Depression to try to sucker the poor into voting against their own interests.

[ThomH]

So why exactly do we borrow money at interesr that we allow banks to create out of thin air?

Why do we allocate a big chunk of our taxes to paying interest on the national debt?

Why do we have a national debt at all, when the deficit in recent years has about equalled the interest we are paying?

Why is this? Why not "End the Fed", as Ron Paul urges us to do?

Why not end the debt forever by paying it off with Treasury - issued Greenbacks, avoiding the inflation this would cause by increasing required bank reserves to 100%?

Who benefits from national debt?

[GrahamInCanada]

Banks do not create money out of thin air.

You pay interest on the national debt to prevent a total collapse of the economy.

You have a national debt because of Reagonomics.

Ending the fed would destroy the government, and would leave the United States as prey for private banking interests, like in the 1880's.

Nobody would accept treasury issued greenbacks instead of the US Dollar, the entire world would abandon American currency and laugh that indeed, the United States hung itself, no help required.

If bank reserves were 100%, what you have is a vault. If bank reserves are 100%, banks cannot lend any money at all.

The wealthy who avoided paying taxes benefit from national debt.

[Rog49Thomas]

The deficit is rooted in three things:
(1) Voodoo economics and imprudent and unnecessary tax cuts
(2) Military adventures abroad and a string of imperial bases
(3) Stimulus spending to get the country out of the economic crater dug by the previous Administration

It is interesting that your concern about the debt seems to be occasioned by #3.

Where were you when #1 and #2 were going on?

[TRex86]

Cut him a break. He's just doing his master's bidding. It's actually quite instructive to se how the right winger have blotted out he past eight years. Time began when Obama took office.

[northstar11]

tony ------all the bad ideas bankrupting the country have come from corporate america and wall street-----they lobby hard to get de-regulation -------and they have a friendly ear in the republican party.

they victimize the politicians , and they buy off resistance .

for you to blame the politicians is absurd.

[GrahamInCanada]

No matter what happens in the world, there is always a Blankley around saying that the root cause of all evil is government debt, government spending, government, government, government.

Just months after Wall Street crashed the world market, necessitating massive government assistance, and putting the US in the place where it is possible that it will take decades to pull out of the problem, here he is, going the problem is government debt.

Moreover, the problem with government debt can only be solved by reducing government spending. Never by increasing government revenues.

This time, if the government follows Blankley's recipe, reducing government spending, what it will mean is that the economy will shrink even more than it has shrunk due to Wall Street's hubris. To pull out of this mess, the government must increase spending.

If that means taxing Wall Street back into the last century, that is exactly what must be done.

Washington is not nuts, but people who heed Tony Blankley's advice are nuts; the advice is to shrink government until it can be strangled to death.

Or, in other words, destroy the United States.

[TRex86]

I appreciate your comments. Blankley is just doing his job, spreading lies for the benefit of the trans-national plutocracy, who don't care if the USA crashes. They treat the US as a colony suited oly for their exploitation.