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 Crushing debt is a threat to democracy

01.08.20. Australia’s budget deficit is forecast to deepen significantly to 85.8 billion in the financial year that just ended on June 30, this from a balanced fiscal position in the prior year, according to the treasurer and finance minister Mr Cormann. That shortfall is projected to widen even more to 184.5 billion in the new fiscal year and that would be the country’s biggest deficit since World War II. Australia’s exports to our largest market China is substantial with iron ore, coal, and natural gas. Agricultural products led by beef, barley, wool, fish, shrimps and lobsters, have fallen. For example, exporters have reported that wine sales to China were down by as much as 90 percent in the first two months of 2020. Export to other markets have not fallen as much, but we are not earning enough to pay our large debt. One take on this serious affair is given by Townhall’s Erica Rogers discussing the US, readers will see many similarities to what our government is doing—it’s scary.We live in a test tube of democracy right now where the age-old adage “deficits don’t matter” is being examined. Back in 2004, Vice President Dick Cheney was reported to have said that phrase to Bush Treasury Secretary Paul O’Neill when he worried that budget deficits posted a threat to the economy. Cheney shot back, according to a Chicago Tribune story from 2004, “You know, Paul, Reagan proved deficits don’t matter. We won the midterms [congressional elections]. This is our due.”
Debt has become a threat to democracy because elected politicians are spending us into a potential debt crisis.
We are seeing record spending and neither party has searched for cuts to offset the new spending. The vote on the $2 trillion CARES Act was unanimous in the Senate, and the House approved it by a voice vote. There was no debate to offset one cent of the trillions in new spending.
When you put the ‘deficits don’t matter’ mantra in context, the Reagan years were a time of much smaller deficits and a smaller government footprint on the economy. For reference, the government’s spending was far less during the Reagan years and the largest deficit was $221 billion in 1986 using White House figures. In 2009, President Obama’s administration ran a $1.4 trillion deficit. By 2017, President Donald J. Trump’s administration had a $665 billion deficit. Today’s figures make those deficits look small.
According to the Congressional Budget Office (CBO), “the federal budget deficit was $2.7 trillion in the first nine months of fiscal year 2020, CBO estimates, $2.0 trillion more than the deficit recorded during the same period last year.” The CBO estimates that the debt this year will hit $3.7 trillion, when it was originally projected to be at about $1 trillion before the coronavirus pandemic. In other words, the deficit for this one-year FY2020 will be more than the whole federal government spent in FY2017.
Politicians of both parties need to find ways to offset new spending.
Entitlements is where some large reforms can be made. James Capretta of the American Enterprise Institute (AEI) wrote in Real Clear Policy in 2018, “making adjustments to Social Security and Medicare is a complex undertaking that will take many years to complete.” He makes the case that you can’t change benefits for these programs currently, therefore the “big changes will have to be applied prospectively, and the budgetary payoff will come in 15, 20, and 30 years.” The goal is to strengthen the programs while reducing cost. Capretta recognizes that these changes are politically difficult because Democrats resist any changes to entitlement programs.
On the discretionary side, there are programs that are big ticket items that could be reformed and cut. One is the Pentagon’s trillion-dollar F-35 Joint Strike Fighter program. The House Oversight and Reform Committee is having a hearing this week titled “F-35 Joint Strike Fighter: Ensuring Safety and Accountability in the Government’s Trillion Dollar Investment.” That will be an opportunity to study the “DOD’s largest and most costly acquisition program, with sustainment contracts that require delivery of spare parts, and costs estimated at more than $1 trillion over a 60-year life cycle.” This is a program that can be reformed and cut in a way that reduces the number of F-35s and pivots to other less costly and just-as-capable aircraft.
Although the Democrats are probably attacking this program for the wrong reasons, the F-35 program has had some serious issues that should get the attention of Republicans. First, the program costs well over $1 trillion over its lifetime at a Pentagon that has a difficult time auditing programs. Also, there are F-35 design flaws. The F-35 can’t sustain supersonic flight for long periods of time for fear of damage to the aircraft and can’t fly when lightning is near. To put this in perspective, the annual budget of the Department of Defense is about $700 billion, yet, over the lifetime of the program, the F-35 will cost well over, by hundreds of billions, all yearly operating expenses for the Pentagon.
Congress needs to start looking at reforms and cuts to spending to pay for all the money they threw at the economy to fight the coronavirus pandemic. Republicans and Democrats need to find some big savings in entitlement programs and in Pentagon spending. If they don’t, they may be putting democracy in danger.
{ 3 comments… add one }
  • Ozman 01/08/2020, 7:10 am

    Heard Bix Weir say that the real US debt is over 120 trillion. Claimed he got the information from Professor Skidmore.

    Yanks need not worry, they can print as much monopoly money as they like, they have the reserve currency.

    The Yanks are like the banker in a game of monopoly who, as a player, slips money from the bank into his own account while nobody is looking.

  • luk1955 01/08/2020, 8:11 am

    Not one country on this planet is debt free. All countries have crippling debt. But who is all the debt owed to? Do the Rothschilds and Rockefeller families roll off of your tongue?

  • Neville 01/08/2020, 9:57 am

    So-called “modern monetary theory” is just that – a hypothesis (and we need to all note the difference between a hypothesis and a theory).
    It is based on the magic pudding idea that we can all keep consuming things (using non-existent ‘money’) without actually PRODUCING things.
    The end result is that, via simple bookkeeping, we all end up actual slaves to those who provide the virtual ‘money’.
    One just cannot keep on forever drawing from the debit side of the ledger.

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