I am a young voter, that was not of age during the presidential election, so I am doing my research to make sure I help make a wise voting decision for our state. I understand that your main focus is the debt, and I have read up on your other issues as well, but I wanted to ask you what makes you stand out from the other candidates. I have concluded that democratic candidate Ms. Jane Raybould and you have very similar stances on issues. So, I guess my question would be what can you do for our state that other candidates haven’t brought up. I am looking forward to hearing back from you.
Here is my answer to a young, open-minded, first-time voter:
I am an unconventional candidate because I am a fiscal conservative and a social moderate, specifically:
The national debt, now 78% of GDP (for the public part on which we pay interest), is the highest since right after WWII, and is predicted by the Congressional Budget Office to keep getting steadily worse without major changes in current policy such as curtailing the growth of entitlement spending. This is by far the greatest long term problem facing our country. If we don’t address it, we will inevitably have a new and very severe fiscal crisis in the near future, as soon as interest rates return to normal (and higher) historical levels. Basically, we are in a deep hole, nonchalantly digging it deeper and deeper, when we need to devote all of our efforts to climbing out.
Social issues such as abortion policy, gun rights and immigration reform are highly contentious but do not fundamentally threaten our prosperous and stable way of life. I am confident that the political process will eventually achieve an acceptable resolution of these social issues. I am far less confident that normal politics will get us out of our debt bind.
Conclusion. What distinguishes me from all of the other candidates in this race, Democratic, Libertarian or Republican, is my strong insistence that we must focus on solving our out-of-control debt problem. Otherwise the future of our country is at great risk. Millennials will suffer most from inaction.
I am a candidate in the May 15 Nebraska Republican Primary for U.S. Senate. The incumbent Deb Fischer is running for reelection. She is a nice lady and represents Nebraska well in many respects. For example she is on the Senate Agricultural Committee which is important to the Nebraska economy.
But there is one major way in which Fischer is falling down on the job. She is ignoring our enormous and out-of-control national debt. In fact she has voted twice recently to make the debt even worse than it already is. The new tax law increases debt by $1 trillion over the next ten years even after new growth is taken into account. The new budget deal could add an additional $2 trillion to the debt over the next decade. Fischer voted for both of these items. I want to emphasize as strongly as possible that this is why I am challenging her in the Republican Primary.
Of course, I have positions on other issues. For example, I have recently endorsed a ban on assault weapons. But for me there is a huge difference between fiscal and social issues:
Our national debt, now 77% of GDP (for the public part on which we pay interest) is projected to reach 109% of GDP in just 10 years and to keep increasing way beyond that. As interest rates rise to more normal historical levels, interest payments on the debt will increase by hundreds of billions of dollars per year. This will almost surely lead to a severe fiscal crisis in the relatively near future, causing huge damage to our economy, unless we make major changes in current policy.
Social issues are much different. They will eventually get resolved through the normal political process. Mass shootings in the U.S., for example, are intolerable to an overwhelming majority of Americans. If the NRA continues to oppose sensible changes in gun regulations, then many of its Republican supporters will eventually be replaced by Democrats who will enact the needed changes.
Conclusion. Our rapidly growing national debt will lead fairly soon to an existential crisis if left unattended to. The problem of mass shootings (as an example of a festering social problem) will be resolved by normal political processes.
A Letter from Birmingham Jail Why we cannot wait Martin Luther King, Jr., April 16, 1963
Yesterday was Martin Luther King Day and every year at this time we are reminded of his eloquent letter from the Birmingham Jail, “Why we cannot wait,” written to some of his hesitant supporters in the Spring of 1963.
African-Americans were tired of waiting so long for equal rights in their own country. On my own personal scale, I am so frustrated by the inability of our political system to address our massive debt problem, that I am getting organized to enter the 2018 Nebraska Republican Senate Primary against the incumbent Deb Fischer who has just voted (with the new tax law) to increase our debt by $1 trillion over the next decade.
Basically I am saying that our debt is so large and growing so fast that it will soon be out of control if we don’t take action to start reducing it very soon.
The public debt (on which we pay interest) is now 77% of GDP, the highest since WWII, and projected by the Congressional Budget Office to keep getting steadily worse. It will grow by $11.5 trillion in just 10 years to almost 100% of GDP and will reach 150% of GDP, double the current level, by 2047, without major changes in current policy.
A fiscal crisis, much worse than the Financial Crisis of 2008, will occur long before 2047 if nothing is done to greatly shrink our annual deficits which are again rapidly approaching the trillion dollar per year level.
The new tax law increases deficits by an average of $100 billion per year, and therefore makes it that much harder to shrink them down substantially. It is imperative for the two parties, Democrats and Republicans, to work together to figure out how to do this.
Conclusion. Our national debt is so large and growing so fast that it is virtually out of control. We need prompt and fairly strong action to turn the situation around. I have often discussed one major way to do this.
The Republicans in Washington are exuberant because passing the new tax law means that they finally have gotten something done. And the new law will have at least one highly beneficial effect:
The new 21% corporate tax rate will increase profits for domestic corporations and encourage multinational corporations to bring their foreign profits back home. Even if these profits are used to buy back company stock or are paid out in larger dividends, the new money will be put to use in the U.S. economy one way or another. This will give the economy a boost and create new and better paying jobs. This is how private enterprise works and it is the best economic system ever invented.
But at the same time the new law has two huge deficiencies which make it a net minus on the whole:
It adds $1 trillion to our debt over the next ten years, as scored by the joint Committee for Taxation, the official scorekeeper. And this is after the positive economic effect is taken into account. Our debt is already 77% of GDP (for the public part on which we pay interest), the highest it has been since right after WWII, and will continue to get worse without major changes in public policy. As interest rates rise and return to normal historical levels, interest payments on the debt will increase quickly, creating a huge drain on the federal budget.
The trillion dollar artificial stimulus created by the new tax law, i.e. the trillion dollars in new debt, is likely to overheat the economy, which is now already growing at a 3% annual clip. This means that inflation is likely to gain increased momentum, thereby causing the Federal Reserve to raise interest rates faster than it otherwise would. This means that interest payments on the debt will be pushed up even faster than otherwise. Without fiscal retrenchment, a new fiscal crisis is virtually inevitable in the relatively near future.
Conclusion. Fiscal restraint in Congress is now more urgently needed than ever, and it is going to be even harder to accomplish than before the new tax law was passed. I am an eternal optimist but it sure would be easy to get discouraged!
The Republican tax bill has now come out of conference and will soon be voted on by both the House and the Senate. It is expected to easily pass both chambers and be signed by the President. As I have discussed extensively on this blog, I have no argument with the individual features of this bill. They will definitely increase economic growth which is highly desirable.
The problem is that the tax bill will also add $1 trillion to the debt over ten years (as scored by the JCT). It is simply outrageous for the GOP to consciously add $1 trillion to our already $15 trillion debt (the public part on which we pay interest), which at 77% and climbing, is the highest it has been since right after WWII.
But the damage will be even worse than this. The trillion dollar artificial stimulus is likely to overheat an already briskly growing economy. As the Economist reports in its latest issue:
Second quarter growth of 3.1% and third quarter growth of 3.3% are very strong.
Median household income grew 5.2% in 2015 and 3.2% in 2016.
The average net worth of households in the middle income quintile grew by 34% between 2013 and 2015.
The wages and salaries of production workers grew at a 3.8% pace in the third quarter of 2017.
The unemployment rate at the end of 2018 is likely to be between 3.4% and 3.8%.
Economic growth is good because it raises living standards across the board. But faster growth also means higher inflation which means higher interest rates as the Federal Reserve responds. Higher interest rates mean higher interest payments on our massive debt. Every time the Federal Reserve raises interest rates by ¼ %, the interest payments on our debt will increase by about $38 billion per year. A 2% increase in interest rates, likely within two years, means a $300 billion increase in annual interest (on top of the $266 billion paid in FY 2017). Our massive debt will soon become a huge burden for the federal budget.
Conclusion. Adding $1 trillion to the debt on top of the existing debt is a terrible idea. Such artificial stimulus at a time when GDP growth is already picking up will drive up interest rates all the faster and greatly speed up the day of reckoning for extreme fiscal irresponsibility.
Congressional Republicans have agreed on a compromise tax bill, details to be released soon. After scoring by the Joint Committee on Taxation, it will be voted on separately by the House and Senate, sometime next week. It is likely to reach the President, and be signed into law, before Christmas.
As I have previously discussed at great length, this is a very bad bill for the following reasons:
Lowering the corporate tax rate to 21% is actually a good idea because it will encourage U.S. multinational companies to bring their foreign profits back home for reinvestment as well as encouraging foreign companies to set up shop in the U.S.
Adding $1 trillion to the debtover ten years, as previously scored by JCT and likely on rescoring, is what is so awful about the tax plan. It is also sad because this could be avoided. Our debt (the public part on which we pay interest) is already, at 77% of GDP, the highest it has been since right after WWII, and is predicted by the Congressional Budget Office to keep getting worse without major changes in current policy.
As interest rates rise, interest payments on the debt will grow dramatically (right now our debt is almost “free” money). Eventually this will lead to a new financial crisis, much worse than in 2008.
Overheating the economy, now growing at 3% per year for the last two quarters, makes the tax bill even worse. The last thing our economy needs right now is a trillion dollars of artificial stimulation. This will force the Federal Reserve to raise interest rates faster than it would otherwise.
Nebraska Senator Deb Fischer, who is up for reelection in 2018, voted for the Senate version of the tax plan. She should reconsider for the final combined bill and vote no.
Conclusion. If Senator Fischer votes for the final version of this bill, and if it passes and is signed into law by the President, then she is personally responsible for the devastation it will wreak on our economy. What can I as an individual Nebraskan do about this? It should not be hard to figure out. Stay tuned!
As I frequently remind my readers I am a fiscal conservative and a social moderate. I usually write about particular economic and fiscal problems facing our country. But every now and then I like to step back and view our overall situation at one time. The last time I did this was here.
Let’s take another look:
The economy is puttering along at 2% annual growth with a relatively low unemployment rate of 4.3% and a good indication that faster growth, up to 2.5% annually, is right around the corner, see here and here. The economy, at least, is headed in the right direction.
Foreign policy. Long term our biggest problem is China, which has four times as many people as we do and is growing economically three times as fast. China will soon surpass us in both economic and military strength. Our best insurance for this inevitable day is to have lots of democratic friends around the world.
Global warming is real and getting worse. Our best strategy for dealing with it is a revenue neutral carbon tax, rather than depending on ad hoc regulations like the Clean Power Plan and ever increasing auto emission standards. If the U.S. demonstrates its seriousness with a carbon tax, it is likely that the U.S. and China (which is highly polluted) could work together to establish world-wide carbon emission standards.
National debt, currently 77% of GDP (for the public debt on which we pay interest), is predicted by the CBO to keep getting steadily worse (see chart) without major changes in current policy. Right now our approximately $14.3 trillion public debt is almost “free” money because interest rates are so low. But sooner or later interest rates will return to more normal levels and, when this happens, interest payments on the debt will rise by hundreds of billions of dollars per year. This will inevitably lead to a severe fiscal crisis, far worse than the Financial Crisis of 2008.
Conclusion. I am relatively optimistic that we can maintain good relations with China and will have the good sense to better control carbon emissions. But our debt problem is politically very difficult to address because it will require spending curtailments. How do we successfully address such a huge problem?