Tag: Debt

Entitlement Reform and the GOP: Goodbye to All That?

 

shutterstock_215312209_SocialSecurityNot much talk about the national debt during this GOP primary season. Oh, there’s the obligatory — passing — reference to it during speeches and debates, but little more. Indeed, GOP tax plans would make the debt much worse by trillions over the next decade and beyond.

Now maybe one reason there’s less debt talk is that budget deficits are way down, and the long-term fiscal outlook improved. On the latter front, the WSJ’s Grep Ip highlights a new study — co-authored by former CBO boss Doug Elmendorf — that forecasts the US debt-GDP ratio won’t hit 100 percent until 2032 vs. the CBO’s 2009 forecast of 2023. (Thank low interest rates and slower healthcare inflation for that.)

But maybe another reason Republicans aren’t talking about the debt is that it’s hard to do so without also talking about deep Medicare and Social Security reform. And while entitlement reform was a pretty hot topic early in the Obama presidency, passion on the right has waned. Reforming entitlements is out, defending them is in. As Donald Trump has put it: “Every Republican wants to do a big number on Social Security, they want to do it on Medicare, they want to do it on Medicaid. And we can’t do that. And it’s not fair to the people that have been paying in for years and now all of the sudden they want [it] to be cut.” Here’s WSJ columnist Holman Jenkins:

The US Debt Situation Is as Good as It’s Going to Get

 

011916CBO1This may be as good as it gets regarding the US debt situation. This from the CBO:

In 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009, according to the Congressional Budget Office’s estimates. If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years, CBO projects. Debt held by the public would also grow significantly from its already high level.

011916CBO2

Flying into an Economic Coffin Corner

 

US_Air_Force_U-2_(2139646280)

When a U-2 spy plane flies very high, the air gets very thin. This causes the the amount of air going over the wing to fall, so the wing thinks it is flying slower and therefore will stall (lose all lift) and fall out of the sky at much higher real speeds. The U-2 has another limit, its critical Mach number. This is the highest speed before the airplane will begin to tuck under and lose control due to transonic effects on the wing and tail.

Normally, there is a huge gap between the stall speed of the airplane and its critical Mach number. But as you climb higher, these numbers begin to converge. At the U-2’s highest operational altitude, the difference between the stall speed and the critical Mach number can be as little as five knots. This is known to U-2 pilots as the “coffin corner.” In the coffin corner, if you fly any faster, you lose control. Fly any slower … and you lose control. It’s extremely dangerous, and normally the plane would only be flown on autopilot in this region.

Want to Prevent a Debt Crisis? Here’s What Real-World, Center-Right Reform Looks Like.

 

011416debt_2Democrats have big spending plans. Republicans have big tax cut plans. Debt and deficits? No one much talks about those things any more, apparently. But they should. Sure, as Wall Street Journal reporter Nick Timiraos notes, the “U.S. budget deficit ended last year at its lowest level since 2007, marking the sixth straight annual drop.” The federal budget gap deficit ended 2015 at $478 billion, or around 2.6% of GDP. Timiraos explains why we no longer have the trillion dollar deficits of the Great Recession years:

After the financial crisis, the U.S. government in 2009 ran deficits not seen since World War II as revenues fell sharply and stimulus flowed. Deficits began to recede in 2010 as the stimulus faded and revenues stabilized. Congress cut spending further after Republicans took control of the House in 2011. Government spending started to rise two years ago, but deficits continued falling because of strong receipts to the Treasury, in part from tax increases that took effect in 2013. Outlays last year rose 5%, roughly the same pace as the year before. Revenues were up 6%, versus a 10% gain in 2014.

The US has still added nearly $8 trillion in debt since 2007, more than doubling the debt-GDP ratio to around 73%. And the current deficit numbers may mark the bottom:

Member Post

 

How safe are your investments? Experts say the market is due for huge correction at any moment. The warning signs are everywhere: an unprecedented 18 trillion dollars in debt, loose-as-a-goose fiscal policy. And thanks to solar subsidies, politicians are now charging us for the sun. Preview Open

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Get your first month free.

Giving Thanks For Congress

 

Screen Shot 2015-06-12 at 12.56.48 PMEvery Thanksgiving I sympathize with lobbyists: can you imagine sharing their obligation to feel grateful for Congress? Amidst the vast, un-American growth of the administrative state, the world’s greatest deliberative body continues to do what it does best: taxing our children and passing the savings onto us.

The distinction progressives make between public and private is a false one. Many Americans know what it’s like to struggle beneath the weight of debt: not a day that goes by when my mailbox isn’t stuffed with offers from Visa or MasterCard informing me that I have been pre-declined.

Recall the heyday of the Tea Party, which relentlessly pointed out that every penny of the stimulus would have to be paid for by our children and grandchildren. Frankly, that’s the only thing I like about it. Even the New Deal wasn’t able to extend the Great Depression beyond a decade. Today, nearly one decade after the orgy of spending instituted during the George W. Bush administration, crony capitalists can say it was worth it. With each passing year, it seems government assumes more and more responsibility for our lives. Take solar subsidies — please! As Republicans and Democrats debate how much taxpayers should fund solar energy, let’s take a step back and realize that politicians have figured out a way to charge us for the sun.

Kids Are too Expensive, Here and in China

 

shutterstock_223628806Consider two data points. The first is from China, which recently “relaxed” its One Child Only policy. For years, the official government position on families was, the smaller the better. This led to a large and ugly number of infanticides, mostly of infant girls. But relaxing the policy doesn’t mean there’s a baby boom on the way. In China, kids are expensive. From Shanghai Daily:

THE changes to China’s family planning regulations are unlikely to result in a baby boom in Shanghai, a local expert said yesterday. Zhang Zhen, a professor at Fudan University who specializes in demographics, said that based on his research, “most couples simply haven’t thought about having a second child.” As well as the financial implications, they worry about the broader social issues associated with expanding their families, he said.

“Many people are also concerned about the state of the social security system,” he said, adding that if the policy change “is not effective (in boosting the birth rate), the government must consider introducing measures to alleviate those concerns.”

Has Congress Gone Deaf on Deficits?

 

bl18deficit_JPG_552642fIn Applied Economics, one of his many great books, economist Dr. Thomas Sowell explains the incentives politicians face when making decisions:

Elected officials’ top priority is usually getting re-elected, and their time horizon seldom extends beyond the next election. Laws and policies that will produce politically beneficial effects before the next election are usually preferred to policies that will produce even better results some time after the next election.

There is no better model for this than government spending. Politicians love to spend lots of money because it’s the easiest way to make it look like you’re trying to solve real problems. Politicians especially love to spend borrowed money because they can stick future taxpayers, and not current voters, with the bill. When Congress returns from this year’s August recess, it appears we’ll be seeing this irresponsible behavior on full display.

Member Post

 

Seven years from the crisis, we now live in a world that is swimming in debt. Central banks globally have taken a page from the Federal Reserve and have printed trillions. China has borrowed from itself and built entire ghost towns full of high rise condos and office buildings that are 99% empty. To slow their stock […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Get your first month free.

Member Post

 

In all the discussion of the Greek debt fiasco – which has now escalated to an IMF default – the claim has repeatedly been made (and repudiated by the political Right) that the fault lies with the lenders for failing to lend more; but as always when the Left makes huge mistakes, the individual politicians […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Get your first month free.

Random Thoughts on a Greek Default

 

shutterstock_254353558It seems the IMF has thrown up its hands and terminated debt recovery talks with the Greeks. They’ve even pulled their team out of Brussels, where the talks were being held (according to an earlier iteration of the article at the link). What happens, then, if the Greeks default? A default will take some months to unroll under IMF rules. In many respects, that’s something of a quibble. Fast forward to an actual default. (Shameless plug: I’ve written about this on my blog to some extent, beginning with this.)

The default likely would lead directly to a Greek departure from the eurozone and probably (though not certainly) from the EU. This, contrary to what a lot of naysayers have been bleating, would not lead to a breakup of the eurozone or the EU. For one thing, the rest of the PIIGS are on much sounder footing these days.

The EU stock markets would be in turmoil for several days, perhaps a few weeks. (That’s a buying opportunity, though—Rothschild’s blood in the streets—for those with the bucks to play.) Then folks would look around and see that nobody’s economy in the EU or the eurozone had folded, or even been hurt overmuch. The Greek debt held by the rest of the sovereigns is really small potatoes compared to those nations’ GDPs. There would be, certainly, a number of private investors who would be burned by the default, some even bankrupted, but they’re all big boys; they knew, or should have known, the risks they’d run.

Member Post

 

It is no secret that under President Obama, the federal debt has grown to levels not seen since the aftermath of WWII. Debt (held by the public, as a percentage of GDP, which is the measure used throughout this post) has changed as follows since President Reagan left office in 1988: 39.8% 1988 (Reagan) Preview […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Get your first month free.

Member Post

 

At the Nashville meetup, Addicted Mind polled her guests on Friday for their views on the national debt (which arguably includes state and local debts by extension). Is the debt a problem? Is it a dire threat? Might correction be in the wind? What changes to national and international circumstances could significantly escalate or diminish […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Get your first month free.

Big Government Is Bankrupt Government

 

The year 2007 marked the height of the housing bubble. Residential real estate prices were through the roof, especially in Arizona, Nevada, and California where speculators had swamped the market. This overvalued sector resulted in exceptionally high revenues for the Sun Belt cities that based most of their budgets on steadily growing property taxes.

Several cities, understanding the ups and downs of business cycles, maintained their level of spending or increased it by a modest amount. But other municipalities acted as if the good times would never end. Glendale, Ariz. borrowed to build a gargantuan pro football stadium and hockey arena nearly 20 miles from the city center. Stockton, Calif. borrowed $300 million to build their own arena, shopping centers, theaters, and a palatial waterfront complex.

The Libertarian Podcast: Greece, Germany, and the European Union

 

In this week’s installment of The Libertarian podcast from the Hoover Institution, I talk with Professor Epstein about the ongoing debt crisis in Greece. How did they get there? Are Germany and other creditors running the risk of going too easy on Athens—or too hard? Is the collapse of Europe’s currency union only a matter of time? Those are among the questions we’re discussing. Listen in below or take us on your mobile device by subscribing with iTunes or your favorite podcasting app.

Member Post

 

I recently watched The Lego Movie with my kids (yes, I’m playing catch up). I admire Lego. A mere decade ago, almost bankrupt and on the precipice of ruin, Lego came back to rule the global toy market, all while promoting kids independence and imagination. The movies’ message of ‘thinking for yourself’ is right in line with […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Get your first month free.

Member Post

 

Two or more years ago I stumbled upon the Numberphile channel on YouTube. While catching up on their videos, I discovered an interesting one on “How big is a billion?”. It got me to thinking about how Obama could use this to appear to be reducing the debt. The summary of the video is that there […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Get your first month free.