Ignoring the National Debt Endangers Our Country

 

Here is the preliminary version of my campaign announcement, now scheduled for Wednesday, January 24, for the Nebraska Republican Primary for U.S. Senate:

“This may sound overly dramatic but if we ignore the debt much longer, it will endanger the future of our country.

This is exactly what the new tax law does, in spite of its otherwise good features, by increasing the debt by $1 trillion over the next decade.  And 51 Republican Senators voted for this new law, including Nebraska’s Deb Fischer who is running for reelection this year.  I am running for her seat to challenge her about our ballooning debt because she is doing nothing about it and has just voted to make it worse!

First of all, the chart below shows why our debt situation is so serious. It now sits at 77% of GDP (for the public part on which we pay interest), the highest since WWII, and is predicted by the Congressional Budget Office to keep getting steadily worse, hitting almost 100% of GDP by 2027.


Right now interest rates are so low, less than 2%, that our debt is almost “free” money.  But this cannot and will not last much longer.  Inflation has already started to increase and the Federal Reserve has started to raise interest rates.

Rising interest rates mean much higher interest payments on our debt. This will put an enormous strain on the federal budget, choking off spending for many of the things such as education, scientific and medical research, infrastructure and social programs which so enhance our quality of life.

And furthermore, these much higher interest payments on the debt will continue, and even grow worse, indefinitely into the future, placing a huge burden on future generations, our children and grandchildren.

The solution is to shrink our annual deficits ($668 billion in FY2017 and likely over $700 billion for 2018) down to a much more manageable level so that our debt will also shrink as a percentage of GDP.

I emphasize that this can be done in a sensible, non-disruptive way by simply curtailing spending increases in most government programs without actual budget cuts, and thereby reducing our huge annual deficits over a period of several years.

The Affordable Care Act expands access to healthcare (which is good!) but does nothing to control cost (which is bad!).  American healthcare needs major changes.  One way to do this is to abolish the employer mandate and migrate from employer provided health insurance to personal insurance with age-based, instead of income based, tax credits.  Medicaid can move to the same age-based (refundable) tax credit system. Also fix Medicare by making Medical Savings Accounts readily available for Medicare Advantage plans and then encouraging migration from regular Medicare to Medicare Advantage.

Such major changes as I have proposed above likely will be considered controversial.  However, which is better, to implement major changes in a rational, careful manner while there is time or rather to wait for a new fiscal crisis, much worse than the Financial Crisis of 2008, which will inevitably occur down the road if we continue to ignore the debt?

Summary. The U.S. has a horrendous debt problem which is getting worse all the time.  We badly need representatives in Congress who will stop ignoring our debt and make reducing it a very top priority.  This is why I am challenging Deb Fischer as she runs for reelection. “

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Why We Cannot Wait to Fix the Debt

 

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.


Consider:

  • 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.

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It Is Awfully Easy to Get Discouraged about Our Debt Problem

 

Six years ago I was a candidate for the Republican nomination for Nebraska’s Second District Congressional seat. I lost in the May 2012 Primary.  After the November 2012 national election I began writing this blog It Does Not Add Up focused on fiscal and economic issues, mainly our large and rapidly growing national debt. I have now been blogging on this issue for over five years and the debt problem is just getting worse and worse.  Here is where we are right now:

  • All 52 Republican Senators voted for the new tax law which, in spite of its beneficial tax reforms, adds $1 trillion to our debt over the next decade (after growth is taken into account).
  • The Congressional Budget Office projects our debt to grow by $11.5 over the next ten years. In FY2019, just one year from now, CBO projects the deficit will exceed  will exceed $1 trillion and equal 4.7% of GDP.  By 2047 federal debt will reach 150% of GDP, almost double the current 77%.

  • In our polarized Congress, Republicans insist on increasing defense spending, Democrats insist on increasing domestic spending and trying to put any limits on entitlement spending is very difficult. Republicans are willing to cut taxes but there is little enthusiasm for raising them.
  • The present stalemate will eventually lead to a new fiscal crisis, much worse than the Financial Crisis of 2008, without major changes in current policy. The thought of having to drastically cut many different spending programs in the middle of a huge fiscal crisis is horrifying.
  • Are there any alternatives? Calling a Constitutional Convention for balancing the budget, establishing term limits and/or limiting Congressional power (Convention of States), have created much interest but are long shots which may never happen.

Conclusion. Somehow or other we need to light a fire under enough members of Congress to persuade them to take our rapidly accumulating debt very seriously. Let me know (jackheidel@yahoo.com) if you are willing to work with me to do something along these lines!

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Why Am I So Fixated on Our Debt Problem?

 

In a few days I expect to announce my candidacy for the Republican nomination for the U.S. Senate seat now held by Deb Fischer. She is running for reelection and apparently is quite popular in Nebraska.  But she has one huge liability as far as I’m concerned.  First of all, she is a big spender.  But now as well she has just voted for the new tax law which will increase our debt by $1 trillion over the next decade. In other words she is flagrantly guilty of ignoring our very serious debt problem even as it continues to get worse.


People sometimes ask me why I am so fixated on the debt.  After all, there are plenty of other important issues that we should be concerned about. The answer is that uncontrolled debt affects almost everything else government does because as interest rates increase, eventually interest payments on the debt will skyrocket.

  • Defense spending, so critical to our role as the world’s major superpower, which maintains peace and stability in the world, will be threatened.
  • Run-away inflation is likely to result from the buildup of the debt bubble and this will erode the economic security which is so important to our way of life.
  • The international standing of the dollar, so critical to our leadership role in the financial world, will be weakened.
  • Spending for programs such as education, research and infrastructure, so important to our quality of life, will be threatened.
  • By focusing so strongly on the debt issue, hopefully I will be able to persuade large numbers of people that I am really serious about taking strong action to address it effectively.

Conclusion. There are lots of issues which will come up on the campaign trail in a Senate race. But my campaign will be focused on our gigantic debt problem.  If we can’t get our debt under control, then our entire way of life is threatened.  It is that simple.

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Why It Is Such a Bad Idea to Increase the Debt

 

As the readers of this blog know very well, I am so upset about our rapidly increasing national debt that I am preparing (in just a few days) to enter the 2018 Nebraska Republican Primary for U.S. Senate against the incumbent Deb Fischer because she just voted (with the new tax law) to increase our debt by $1 trillion over the next decade.  Of course, so did all of the other 52 Republican Senators as well but she is up for reelection this year and I live in her state.
The analyst Desmond Lachman from the American Enterprise Institute has a cogent summary of why increasing our debt at this time is such a bad idea:

  • With the public debt (on which we pay interest) at 77% the highest it has been since WWII, the U.S. already has a compromised debt position.
  • Basic principles of public finance suggest that when the economy is humming along (like now at 3% annual growth) and when unemployment is low (like now at 4.1%), one should try to reduce the public debt.
  • By having used up our fiscal space in good times, we run the risk of not having room to increase budget deficits in bad times.
  • The very low interest rates today (an artificial product of the Federal Reserve’s extraordinarily easy monetary policy over the past 8 years) are unlikely to last much longer and, in fact, the Fed has already started the process of raising interest rates, as inflation begins to heat up (see chart below).

  • Increased budget deficits make us increasingly reliant on foreign financing.
  • By our own sowing in joy with unfunded tax cuts, our children are likely to reap in sorrow the fruits of lower long-run economic growth.

Conclusion. By raising our debt by $1 trillion, the new Republican tax law is appallingly short-sited policy. I hope to make Senator Fischer pay a political price by her bad judgment in voting for it.

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After the New Tax Law: Debt Is an Even Bigger Problem

 

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!

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Donald Trump’s First Year as President

 

As I gear up to enter the 2018 Nebraska Republican Primary for U.S. Senate, see here  and here, I am focusing on what I consider to be the overwhelmingly most critical and urgent issue facing our country: our rapidly growing national debt, now 77% of GDP (for the public part on which we pay interest), and steadily getting much worse. Nevertheless, just over a year ago an unexpected political earthquake shook the country as Donald Trump was elected President.  As I become a candidate myself for national office, I need to make clear what I think about Mr. Trump.  I will start out by saying that I did not vote for him because of his sleazy behavior towards women.
I will try to be objective about his accomplishments in office, both positive and negative.
On the positive side:

  • He is standing tough on North Korea, working with the U.N., China and other Asian countries to impose strong sanctions on the North Korean economy. He is upgrading U.S. missile defense, as a smart precaution against a North Korean attack on the U.S.

  • He has worked with many other countries to eliminate the ISIS physical caliphate.
  • He has cajoled NATO members into contributing an additional $12 billion towards our collective security.
  • The economy is now growing at a 3% annual rate thanks (at least in part) to his efforts at regulatory reform.

However, on the negative side:

  • The new tax law, which he signed, is likely to kick off higher inflation with the trillion dollar artificial stimulus from increased debt. This will lead to much higher interest rates which will make our huge debt far more costly.
  • His noxious tweets undermine his presidency, by overshadowing his achievements. His personal popularity has dropped from 46% right after the election to 35% today.

Conclusion. The best way for a member of Congress (or candidate for same) to respond to President Trump’s erratic behavior is by being objective, agreeing with him if possible and not hesitating to call him out when necessary. This is what I will try to do.

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