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Why Nobody Cares About the Climate, er, Debt Crisis
I’ll be as upfront as I can: this is not going to be a sophisticated analysis of the budget deficit, the national debt, and its implications on the economy going forward. What it is going to be, is the perception of ordinary people who know full well that all that stuff is way over their heads, and only have what they see and how their lives are going to judge the state of things by.
But first, a divergence into the seemingly unrelated issue of climate change. Why are initiatives such as the Green New Deal failing to catch on outside the most politically connected circles on the coasts? Sure, in the case of the GND specifically, you could argue it’s poorly written with highly impractical and arguably counterproductive goals. But I’m speaking in the general sense. Why is the hysteria of impending climate doom not having a whole lot of impact with any but the most politically aware voters?
The answer to that is straightforward enough. It is because we have heard the same proclamations of doom all our lives. In my case, literally: the first Earth Day in 1970, with the grand declaration that the doom of humanity at the hands of the climate, was on the day I was due to emerge onto this planet, and I must have gotten wind of it somehow because I instead decided to stay in the womb another three weeks before finally being coaxed out.
The point being, when something has been a constant in our lives, and yet never actually seems to impact our lives in the way we’re told it will, it’s entirely natural that we eventually start to just tune it out. Even if it’s not a conscious effort, our brains just process it as noise and move on.
So what does all of that have to do with the debt crisis? Well, more than you might think. Consider everything I wrote in the above three paragraphs, and swap out climate change for the national debt. Sure, there is no holiday to promote awareness of the debt (unless you count April 15), but it remains a fact that we used to be the generation that was going to have to pay off the billions and trillions in debt. But somehow, that bill seems to have gotten lost in the mail.
My father said repeatedly that he never expected to see a dime from Social Security. And yet there the checks were waiting for him after he finally retired, and for my mother after he passed a few years later. Social Security was supposed to have gone bankrupt over and over in my lifetime, and yet somehow there it still is.
But doesn’t that sound familiar? We’re all supposed to have died over and over again from climate change, and yet somehow here we still are. Is it possible that the same noise filters that tune out climate change hysteria, also tune out fears about what disaster is awaiting the economy if we dare to raise the debt ceiling even one more time?
Ah, you say, but unlike with the climate change hysterics, the debt is a real, objectively measurable thing. We even have a big sign that accurately updates it to the second. And it’s certainly a big number, with a lot of digits.
But what … what does it actually mean?
I want to emphasize again that I am not asking this question on my own behalf but on that of the ordinary voter, living their ordinary life. That big, big number keeps getting bigger and bigger and yet … what does it mean? Why is $22 trillion so much worse than $2 trillion, which we were told at the time was already catastrophically huge? How are people’s lives worse because of that big big number, and how would they be better if it were to go away?
I’m sure there’s a perfectly good academic answer to those questions, but that’s missing the point, because those academic explanations are inevitably going to be far over the heads of the ordinary voters I’m speaking of.
It’s not even a case of “they value the goodies they get from the government too much” because even people who are self-sufficient and wouldn’t be directly impacted by the cuts needed to get the budget balanced, aren’t really being given a reason to want it that means anything to them.
The point is, continuing to shriek and point to what has been for many years a dizzyingly high number just doesn’t accomplish anything anymore. The economy is good, the people are prosperous, and these are things that were at least implied wouldn’t be possible until we did something about that big big number.
Can the average voter really be blamed for starting to think that the debt, like climate change, has proven to be much ado about nothing?
At any rate, I hope that’s enough for a starting point for a discussion we really need to have. Are we as guilty as the climate change alarmists in trying to unduly scare people over something that is not as out of control as we portray it? And if not, how do we differentiate it in a way that actually means something to an ordinary voter?
Published in Economics
Debt is different from climate change. It’s real. The fears that social security was going to go broke years ago were factual, but Reagan and Tip O’Neill got together and reforms were enacted in 1983 that staved off the crisis for 30-40 years. Now our fearless leaders need to do something more. 22 trillion is not a mirage, and if you include unfunded liabilities like SS, it’s hundreds of trillions.
It’s the same with Trumpism as it was with Reaganism. Maybe you’re too young to remember, but the world was supposed to end in nuclear holocaust. Instead, the American people prospered and the Soviet Union (later) collapsed.
Most voters have enough common sense to ignore the hysteria. Hopefully.
It means governments are not exactly subject to creditors as individuals are. Governments can play tricks like inflation to falsify their debts and issue IOUs until the cows come home.
And it means the government with the most influential economy and most powerful military in the world is unlikely to be called to account by anyone.
Our government’s debt is a measurement of ideal responsibilities, not enforceable bills.
I like the analogy. Well done. I’ve heard about, and been worried about, the long-term implications of increasing national debt since the 1980s but like climate change the time when it was supposed to be too late always gets pushed out.
The Democrats never really pretended to care about the debt, while the GOP pretended to care. Now, with Trump’s permission, no one in politics even pretends to care. Yet I’m still worried.
Social Security is a Ponzi scheme. There never was a balanced account; only IOUs and a line of income free of any fixed appropriations. Social Security will continue so long as politicians commit to producing money from the general treasury.
Like all government debts, it ends when the government either shirks its obligations or becomes sufficiently weak to be conquered by jilted creditors. Look at Italy and Greece. The alternative to war or rebellion is to be governed by a more credible outsider like Germany.
I can point out a couple of things that affect how one should look at this. When I was a child there was a single version of a Coca-Cola, otherwise known as Coke, and its retail price was a nickel, or six for a quarter. Inflation is one element that affects the national debt and its effects are not evenly distributed. Debtors tend to benefit more than savers. Many of the people you have referred to do indeed understand this but large numbers don’t. Those who haven’t worked and carried their own load may not get it. This might account for many young people today, even those with official education credentials. Other examples from my personal experience include a new car I bought in 1966, the year I was married, for about $2,000, and a house my wife and I bought in suburban Washington DC in 1968 for $23,000 that now goes for over half a million.
So inflation is one factor.
A second item is productivity improvements. Even now, you mention in your post about your father getting Social Security checks. I doubt that, since I spent a substantial part of my working life converting that process to Direct Deposit, thus eliminating the government issuance of checks and many government jobs.
Our university system over this time period has been burdened with an administrative load resulting in large increases in the costs of education for students without enjoying productivity improvements in the education being delivered. That approach is not helpful.
There are other financial impacts of an uncontrolled approach to spending and taxation and I’m sure others will weigh in here on those.
A good topic for discussion in your post.
It’s not about the debt. It’s about interest payments on the debt. So long as the interest rate is low, we can carry a lot of debt. But if interest rates climb, the debt service climbs. That means the interest we’re paying is eating away at our budget. Every dollar paid in interest is a dollar that can’t be spent on something else, such as defense or Social Insecurity. If interest rates double due to electing Democrats like Carter, budget cuts have to be made elsewhere.
If you make $50,000 per year and hold $520,000 in debt at 5% interest, you’re paying $26,000 per year. That’s more than half your income going to just maintain the debt, to pay the interest. Just ask some of these folks with student loans. If interest rates go up, you could be insolvent very rapidly. You might not be able to eat or pay for shelter if the interest comes first. Or, nationally, you might not be able to pay for defense or whatever program is important to you.
At least for awhile. Eventually, all debts are called. Eventually, all monetary games have their price in the economy.
I like the comparison. We have been complaining about the federal debt since the 80’s and yet, no catastrophes so far. It does feel like the boy who cried wolf, but it is a real issue.
Neither political party wants to address debt because it would mean spending cuts, and they all assume they will be out of office before things turn bad. The few who try to do something will end up just grandstanding for a few weeks until a huge spending bill passes anyway.
The debt won’t matter so long as it’s all just points which don’t matter. If I owe you fifty thousand monopoly dollars, I have a problem, you don’t have the cash to make me have a problem, and I can just handwave it away until you get the big brother over.
It is still a problem, its just not the problem occupying the public attention. Someday, someday will be today.
That’s the problem with Prudence, the most hated of the virtues, not everybody who smokes gets cancer. Someday interest rates will go up, and we will have to cut social security checks. When that day gets here, who knows.
I wish you folks would stop writing about Social Security checks, there just are not that many.
Social Security payments. Satisfied?
yes
It ends when people stop lending the government money. That is when it ends. The American Debt problem has not materialized because we have always been able to get more money to pay off the current debts. Much like a person who is able to get new credit cards and loans to pay off old loans and bills. But once you can’t get any new money the party stops. And then you are faced with really hard choices and some one will lose big. In the case of SS the only people that can loose will be the current recipients, who when the system becomes insolvent will see benefits cut. I think also if it comes to it the US Military will also take massive cuts to help prop up SS and Medicare, as it is the largest piece of discretionary spending. US bond holders will probably also take a real hit as the US defaults on loans.
I probably exhibit unexpected sensitivity because I can still remember the truckloads of checks being delivered from the Federal Reserve Banks and piling up on the Treasury Department loading docks and reconciliation backlogs accumulating and creating problems for those claiming non-receipt of their monthly checks. Understand that checks must travel out and back, and an account reconciliation then must occur, whereas an electronic direct deposit is not only more efficient for eliminating paper, it is a one-way transaction. The difference is: bigly or yuge. There was an interim step that helped, we called it Check Truncation, where the Fed captured the MICR encoding on the check to magnetic tape and sent that to Treasury instead of the checks, history that most don’t know, or care, about.
I’m not really sensitive, I just like to convey a little about how these improvements that we all take for granted, actually happened.
I think interest payments are the way to make the case, without a doubt. Everyone understands that having high interest payments is bad news.
One element perhaps in the back of some minds is social cohesion and the amount of wealth transfer required to maintain it. Squeeze spending too much and you get riots. At least, it seems that way. The War on Poverty was some sort of vig payment. It’s a powerful and bi-partisan motive to maintain the status quo. So debt cannot be attacked on the spending side.
There are ways to reduce Social Security expenditures if current recipients and those close to that point are not seriously affected. This is how the overly generous federal civil service retirement system was revamped. I don’t have the actual numbers but I expect there were reduced federal expenditures. It’s also possible to accomplish spending reductions if the benefit is based on need.
This is correct. And when the debt expansion ends, it can end suddenly. We must keep in mind that we are required to honor all debts by the Constitution. That means that Congress *must* raise taxes or cut spending to service any debt. Note, inflating is no really an option, since debt rotates frequently and some is inflation protected.
I used to worry about the national debt a lot, then I suddenly had to choose between “ignore the debt” and “ignore the rise of socialism” and the debt is the lesser of those evils. The Dems are using the Lethal Weapon ploy: spend like mad or we are crazy enough to destroy everything.
Other angle is that Americans learned from the Great Depression to be debt-averse. That culture stayed with us for a lifetime (70 years). Perhaps the housing crisis and college debt levels will once again make the country debt-averse for 70 years.
Lastly, if Climate Crisis is going to kill us all in 12 years, the debt is someone else’s problem. We have taught kids for 30 years that they will all die from Climate nonsense, so we should not be surprised that Gen-Y is currently not worried about the national debt.
I agree Social Security is much easier to fix than Medicare and Medicaid.
Your conclusion is
Your conclusion is correct.
Your logical argument, from which you draw your conclusion is this.
Your argument is fallacious.
To understand this, consider this thought experiment.
Your conclusion is correct.
Your logical argument is this.
Your argument would be fallacious.
Your pattern of thinking isn’t a reliable one. It only works some of the time, by chance.
Can we have the argument that supports the correct conclusion?
Experience is the school of mankind, and they will learn at no other. – Edmund Burke
The people will have to experience the consequences of the debt crisis before they believe it’s a problem.
You solve interest payments the same way you solve everything else: MMT.
That’s cute. Just like Congress is allowed to coin money (not print it)?
In the next year or two, debt service plus entitlements will consume 100% of federal revenue. The remaining 33% of the yearly budget — the military, roads, FDA, food inspections, everything else the feds do — will be debt financed. Five to ten years from now, entitlement spending will outstrip the various revenue streams that are supposed to pay for it, further increasing yearly deficits.
Oh, and 15-20 years from now, the income based repayment student loan crisis will hit. Students will have paid 10% of their income for 20 years and will want their balances forgiven, as part of the IBR program.
We only have four options: a) increase revenue by raising taxes. Political suicide for Republican politicians, as their supporters don’t seem to understand that the Laffer curve has a left side.
B) increase revenue by adding taxpayers. A political non starter today. The Democrats only want impoverished illegals sucking on the government’s teats, and the behavior of Democrats in general and ingrates like Omar are prompting a “shut down the border” impulse among Republicans. And as raising children appears to be a job Americans won’t do anymore, we can’t count on home grown taxpayers to bail us out.
C) Cut nominal benefits. Political suicide for all politicians. Democrats want everyone on the dole because it makes cuts impossible, and even nominal fiscal conservatives put their hands out and demand “their” money. Considering the Supreme Court case that said the government can cut entitlement benefits at any time for any reason is almost 60 years old, and that the Greenspan Commission that announced that our entitlement programs would go bankrupt due to the Baby Boomers screwing up something else is over 35 years old, I really wonder where all these Rip van Winkles have been.
D) Cut real benefits. Massive inflation is the only option that doesn’t have entrenched opposition, so you better believe that’s the option they’ll go with.
Yes. Thank you for pointing this out.
The national debt number seems meaningless because it has much less meaning than other metrics. For instance, it’s meaningless if you don’t compare it to the size of the economy. But even that misses the point. It’s the interest on the debt that really matters. This number is getting larger, but it is still “only” about 15% of revenue, even now.
Theoretically, there’s a time when the debt would have trouble being sold, and interest rates would rise, but rates haven’t been this low for over 100 years, which implies we’re nowhere close to that point.
It does seem like something, eventually, has to break, but it’s probably not going to be triggered by anything obvious. And it will probably take longer than people predict.
And anyway, there’s persistently low inflation, so the Fed may need to buy and essentially cancel a lot of that debt just to keep monetary policy neutral going forward.