Why Millennials Should Support Me for U.S. Senate II. Our Appallingly Bad Fiscal Outlook

 

I am a candidate in the Nebraska Republican Primary for U.S. Senate against the incumbent Deb Fischer because she is ignoring out enormous and out-of-control national debt. In fact she has voted twice recently to make the debt much worse than it is already.
In my last post I made the case that debt is by far the biggest long term problem facing our country and that it will be a huge burden on future generations, starting with the millennials.
A new report from the Congressional Budget Office shows just how bad the problem really is:

  • To just stabilize our debt at the current level of 78% of GDP (for the public part on which we pay interest) will take a savings of at least $5.4 trillion over the next ten years. To achieve even this modest goal would require reducing annual deficits by roughly 50%.

  • To balance the budget by 2028 (allowing ten years to accomplish this) would take a savings of least $7 trillion over the next decade.  This would mean reducing annual deficits by $700 billion per year on average, an extremely difficult task.

Such numbers as these show how frightfully serious our fiscal situation is.   Our national leaders should be working hard to focus the country’s attention on this awful problem and how we are going to address it. Instead they won’t even come together to negotiate sensible annual budgets.

Conclusion. How will our debt problem be resolved? Will it take a new crisis to wake up the country to our extremely dire fiscal situation?  I prefer to be optimistic and hope for sensible action to head off a new crisis.  But there is absolutely no guarantee that common sense will prevail.

Why Millennials Should Be Interested in my Candidacy for U.S. Senate

 

From a reader of my campaign website:

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.

Fiscal Issues vs Social Issues

 

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.

Nebraska Senator Deb Fischer Is a Big Spender

 

Senator Fischer is up for re-election in 2018 and she starts out a recent fund raising letter (see below) as follows: “My goals are clear: stronger national defense, safer roads and bridges, healthcare that is accessible and affordable, protection of our fundamental liberties, less government, and a fairer, simpler tax code.” Here’s the breakdown:

  • First, and most important: national security.
  • Second, our roads and bridges must be repaired and rebuilt.
  • Third, Obamacare must be repealed and replaced.
  • Fourth, our fundamental liberties must be protected.
  • Fifth, government must shrink and the tax code must be simpler and fairer.

I don’t disagree with the specifics of any of these five goals but rather where the emphasis is placed. Her first two goals are to greatly increase spending for both the military and for infrastructure projects.  Her last goal is to shrink the federal government which is a good idea but very hard to accomplish in practice.

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Here is the basic problem our national debt (the public part on which we pay interest) is now at 77% of GDP, the highest it has been since right after WWII, and steadily getting worse.  Right now this approximately $14 trillion debt is essentially “free” money because interest rates are so low.  But when interest rates inevitably rise to more normal levels, interest payments on the debt will soar by hundreds of billions of dollars per year and eat much more deeply into tax revenue.
It should be a very high priority for Congress to establish a plan to bring government spending more closely in line with tax revenue.  I have previously described how this could be accomplished over a ten year period without cutting hardly anything but simply using restraint for spending increases.

Conclusion. If Senator Fisher feels that it is necessary to make big spending increases in areas such as national defense and infrastructure repair, then she should be equally adamant about the need to hold down the growth of government spending overall.

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The Just Approved 2016 Federal Budget II. A Long Term Disaster

 

I have been writing this blog, “It Does Not Add Up” for three years now.  It deals with fiscal and economic policy at the national level.  Of the many problems in this area, there is one which looms larger than all the others.  It is our out-of-control annual deficit spending which is in turn leading to a rapidly exploding national debt, now roughly $13 trillion or 74% of GDP.
Capture1My last post considers the details of the recently passed 2016 Federal Budget and how it will add $158 billion to the deficit in just 2016 alone.  The Committee for a Responsible Federal Budget estimates that the 10 year total in additional debt will be about $1.7 trillion.
As the above chart shows, such a huge additional debt in just ten years will lead to a total public debt in 2040 equal to 175% of GDP.  Such an enormous debt is obviously unsustainable and will almost surely lead to a new, and much worse, financial crisis long before the year 2040 arrives.
As the chart also shows, we need to be moving in exactly the opposite situation to keep our debt under any semblance of control.  Reducing deficit spending by $2 trillion over the next ten years would serve to “stabilize” the debt at 72% of GDP in 2025.
To actually end deficit spending, and therefore balance the budget, would require reducing the deficit by a total of $5 trillion over ten years.  This is exactly what the Republican Budget Resolution from Spring 2015 proposed to do.  Needless to say, this desirable goal has fallen by the wayside.
The Republicans are promising a fresh start and better process next year.  We can only hope that they are more successful in the new year.

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How to Avoid a New, and Much Worse, Financial Crisis

 

Is it possible for the U.S. to effectively address its enormous debt problem in today’s contentious political environment? Two weeks ago I discussed in “America’s Fourth Revolution” why the political scientist James Piereson thinks this is impossible. He is very persuasive but I think he is too pessimistic.
CaptureSince then I have discussed several different things we should do to turn around this perilous situation:

  • If spending for just Medicare and Medicaid (two very expensive entitlement programs) alone fell by 25% over ten years, as a percentage of GDP, and then stayed in line with GDP after that, the U.S. would actually have a budget surplus in 2040.
  • Just recognizing the magnitude of our debt problem would do wonders in public awareness.
  • If the Tea Party were able to grow beyond a protest movement and unite the country behind a majoritarian agenda of work, mobility and opportunity, it would be much more effective in achieving its fiscally conservative goals.
  • Another significant way to save money, and get better results at the same time, is to turn over more and more programs to the states. A good way to do this is with block grants to the states for federal programs in such areas as welfare, education and Medicaid. This would give the states more flexibility to get the job done in an efficient and cost saving manner.

What we need to do to turn our debt situation around is to greatly shrink our annual deficits below their current level of about $450 billion per year. If the debt is growing slower than the economy, then it will shrink as a proportion of the economy. This is what happened after WWII (see above chart) and it needs to happen again now!

Fixing the Debt: Creating a Greater Sense of Urgency II. An Example

 

My last post, ”Fixing the Debt: Creating a Greater Sense of Urgency,” expresses my dismay that our huge debt problem does not receive enough serious attention from the American people.  Yes, most Americans deplore the national debt and the deficit spending that leads to it, but it only too seldom affects how they vote for candidates for federal office, thus giving a pass to the big spenders in Congress.
CaptureHere is a good example of this refusal to take the debt seriously.  The advocacy group FAIR (Fairness and Accuracy in Reporting) ridicules NPR for addressing this problem, “Look a Deficit: How NPR Distracts You From Issues That Will Actually Affect Your Life.”  Here is what FAIR is saying:

  • Interest on the national debt is projected to be only 2% of GDP in 2016 and 3% of GDP in 2024, which is tiny. (But this is because the interest rate for the debt is now abnormally low, approximately 1.7%).
  • If the Fed keeps interest rates low, then interest on the debt will continue to stay low indefinitely and so the debt will continue to be a trivial problem. And the President appoints 7 of the 12 voting members of the Fed Open Market Committee which sets interest rates.
  • The reason the Fed raises interest rates is to slow the economy and keep people from getting jobs.  (Actually the real reason is not to keep people from getting jobs but to keep inflation under control. Once inflation takes off, it is very difficult to bring it back down as we painfully discovered in the late 70s and early 80s).
  • Anyhow, if the Fed raises interest rates to keep the labor market from tightening, as it did in the late 1990s, this would effectively be depriving workers of the 1.0 – 1.5 percentage points in real wage growth they could expect if they were getting their share of productivity growth. (A rise in interest rates need not choke off economic growth which is primarily affected by supply and demand. Fiscal policy (tax rates and spending), established by Congress, has a far greater effect on the rate of economic growth than does monetary policy).

 

If our debt is not soon placed on a sustainable downward path, we will soon have another financial crisis, much worse than the Great Recession of 2008.  This will affect everyone’s life in a substantial and very unpleasant way.