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Our nation’s founders were keenly aware of the habits of mind necessary to self-governance. Public thrift was considered essential to prosperity and stability. They knew from reading history that financial insolvency was a primary destroyer of great civilizations.
George Washington among others warned against “ungenerously throwing upon posterity the burden which we ourselves are to bear.”
They would see everything they feared most unfolding now in 21st-century America, capped by the financial disaster we have created out of a viral pandemic. We have so far added over $4 trillion in Covid spending, all of it paid for by our fantasy credit card.
Our $27.5 trillion total debt exceeds our GDP, a traditional red flag. Yet Americans remain curiously unconcerned about this menace to our future.
When Covid hit, many pronounced it unprecedented, the worst crisis in our history, justifying the expenditure of gigantic sums. But our hysterical reaction is not based in reality.
1919 was the year after World War I killed 20 million and the Spanish flu (political correctness alert) took 50 million victims worldwide. In 1968, RFK and MLK were assassinated, cities burned and the Hong Kong flu killed 1 million. The Civil War, WWII, and the Great Depression were financial as well as humanitarian disasters.
Yet in the face of conditions at least as dire as ours, Americans accepted the sacrifices, did their jobs, and got through it, without aggrandizing themselves as heroes. It probably didn’t occur to them to start writing checks to each other, even those who have not suffered financially, with the intention of passing the bill to future taxpayers.
The original CARES Act was a $3.2 trillion attempt to mitigate the fallout from the disastrous, ineffective lockdown strategy, possibly the worst policy failure of all time. Before the money was even spent, politicians and interest groups were clamoring for more. The House authorized another $3.4 trillion in May and Nancy Pelosi ever since has been pressuring Republicans to go along.
Meanwhile, economic growth is resuming in spite of continuing lockdowns. Employment is rising, financial markets are healthy, and household spending has actually increased in seven of the last eight months.
Yet rather than pursue targeted relief and re-opening the economy, spineless Republicans agreed that more “rescuing” was necessary, just not as much as Queen Nancy had demanded. With the purported crisis as an excuse, another congressional feeding frenzy ensued with $2.3 trillion spent total in the name of coronavirus aid and “keeping the government open“. Broadway, teachers unions, racehorses, brewers, and many others found champions to help them over the line.
The reaction of Democrats and President Trump was: not enough. “This action in the lame-duck session is just beginning” Joe Biden proclaimed. “I’m going to ask for more.” Democrats made no bones about their intention to spend more trillions on Medicare for all, the Green New Deal, student loan forgiveness, and other goodies.
The truth is that Americans love their myth that we can spend more than we have indefinitely without consequences. Our elected leaders speak and behave exactly as they would if we were flush with cash and are politically rewarded for doing so.
If they bother to provide any justification, they conveniently ascribe to the New Monetary Theory, which is that money-printing governments can never run out of money. That’s economic sophistication on the level with believing that you’re always OK if there are checks in the checkbook.
So far, we’ve survived our recklessness because interest rates have been artificially depressed by the Fed and investors are still willing to lend money to the US at extremely low rates. But at some point another crisis will require supplemental funding – war, another pandemic, political collapse, whatever.
Bond investors will then see a nation that is already financing debt payments with more debt, that most likely will be running $2 trillion to $3 trillion deficits and still facing unreformed Social Security and healthcare mandates. Sharply higher interest rates will increase the deficit, which will cause interest rates to rise further, creating a classic Doom Loop, all because our political culture couldn’t resist overspending.
Our 2020 spending was unjustified and immoral intergenerational theft. George would not be amused.Published in