I have been writing this blog, It Does Not Add Up, for eight years. I describe myself as a non-ideological fiscal conservative and social moderate. Democratic countries are often confronted with serious problems. The solution to big problems usually is not obvious and, furthermore, it takes time for the democratic process to work its will.
Consider where we are at the present time:
- We are emerging from a rare, 100 year, pandemic. It broke out of China very suddenly 16 months ago and spread quickly around the world. The U.S. has responded very successfully to this major threat. First of all, our decentralized political system, with the states in charge, quickly and efficiently implemented social distancing and mask mandate policies. The drug companies Pfizer, Moderna, and Johnson-Johnson quickly developed effective vaccines which have now been widely distributed around the country. In fact, we have by now achieved the herd immunity needed to greatly slow down the future spread of the Covid-19 virus.
- Our unique democratic form of government is highly functional. Yes, Congress is polarized between the two political parties but so are the states, and the people. A contentious national election was held last year, in the middle of the pandemic, with only a few relatively minor instances of voting irregularities.
- Our economy is very strong and rapidly recovering from the pandemic.
- The American dream is alive and well. Income inequality is greatly exaggerated when taxes and government transfers are taken into account. Likewise, social and economic mobility between generations is far more robust than generally acknowledged.
- Race relations are getting better all the time, in spite of George Floyd’s death, and minorities are rapidly moving up the economic ladder.
- Global warming is serious but solvable. The key to real progress is getting China on board because its carbon emissions are much greater than any other country’s. Also, technological developments like carbon capture and storage have much potential to help.
- The national debt. Ouch!!! It is awful and getting worse. Furthermore, there is a high risk of a big increase in inflation in the very near future. Major inflation, when it does occur, will force the Federal Reserve to raise interest rates which will, in turn, dramatically increase interest payments on our rapidly accumulating debt. This, in turn, will lead inevitably to a new, and much worse, financial crisis than the last one we had in 2008. We simply must greatly reduce the size of our annual deficits in order to fix the debt problem (much more later!).
Conclusion. As you can see from the above, I consider most of our current major problems to be eminently solvable. Our rapidly exploding debt is the only exception. It may take another, and much worse, fiscal crisis to force our national leaders to act. A surge in inflation will be the straw that breaks the camel’s back, so to speak. Right now such a surge is quite possible, even if not yet likely. But whenever inflation does inevitably reappear in the future, hold on to your hats because the outcome will not be pretty.