The Shutdown Is About More Than Border Security

In his 1981 inauguration speech President Ronald Reagan stated emphatically that “government is not the solution to our problem – government is the problem.”  He claimed that government had grown beyond the consent of the governed and that he intended to “curb the size and influence of the Federal establishment.”  Even though Reagan didn’t actually accomplish this objective, it became the mantra of the Republican Party for the next four decades.

The Republican administration of President George H. W. Bush that followed failed to curb big government too, although they paid lip service to its evils.

But during President Bill Clinton’s two terms in the 1990s, a paradigm shift in Republican orthodoxy occurred when the GOP took control of the U.S. House in 1995 and Rep. Newt Gingrich (R-Ga.) became its Speaker.  He was a vicious, no holds barred politician who counseled against compromise with Democrats and attacked the government at every opportunity.  In order to force cuts in government spending, Gingrich engineered the longest government shutdown that had occurred until this year — 21 days – and he threatened to put the U.S. in default of its obligations by refusing to raise the debt limit.

Wherever I look for the origin of what the Republican Party has become over the past two decades, one name always pops out, Newt Gingrich.  He wrote the playbook for the Tea Party Republicans that gained control of the House in 2011 and set the stage for the gridlock that occurred during the eight years of President Obama’s administration.

But it was another ruthless politician – Sen. Mitch McConnell (R-Ky.) – who actually carried out the obstruction of Obama’s agenda.   As Minority Leader he weaponized the filibuster to the point that almost every piece of legislation required 60 votes to pass, even bipartisan bills.  Like Gingrich, McConnell concluded that Republicans had nothing to gain by compromising with Democrats on anything Obama could claim as a win.  In fact, in 2010 he said his number one objective was to make Obama a one-term president.

Over in the House, a group of radical right-wing conservatives were carrying out Reagan’s anti-government policies with a vengeance.  Using their power of the purse, they slashed the budgets of the Internal Revenue Service and the Social Security Administration, among others, seriously degrading the service these agencies provide.  Although they railed against Obama’s deficit spending, Republicans added to the government debt by greatly weakening the IRS’s ability to carry out audits that recovered billions from tax cheats.

In an effort to shrink the bureaucracy, the Republican Study Committee and the House Freedom Caucus spent endless legislative hours trying to defund or repeal Obamacare.  The result was dysfunction and chaos, particularly related to funding the government.  Rep. Paul Ryan (R-Wis.) — who was budget committee chairman at the time — even proposed eliminating two out of every three federal employees (except national security) through attrition.

The internal workings and procedures of Congress are not well understood by the public.  All they knew was that nothing was getting done and they blamed both Republicans and Democrats.  I believe the dysfunction caused by McConnell’s obstruction and Tea Party attacks on the federal government weakened the voter’s faith in our democratic processes [the establishment] and enabled Donald Trump to lie his way into the presidency.

Now the nation is facing a prolonged partial government shutdown – à la Gingrich — because Trump refused to sign a government funding deal unanimously passed by the Senate.  And the longer it goes on, the more Trump seems to like it.  He claims a wall is needed for border security but I think he’s trying to score an early victory against Speaker Nancy Pelosi and the Democrat-controlled House.  The conflict also deflects attention from the mounting scandal about his ties to Russia and its president, Vladimir Putin.

Senate Republicans, including McConnell, are feeling some pressure to end the shutdown, but they’re keeping one eye on the sentiments of Trump’s base in their state.  Trump’s “tribe” is his ace in the hole against defections by congressional Republicans and it seems to be working.

Many House Republicans like Freedom Caucus members Reps. Mark Meadows (R-N.C.) and Jim Jordan (R-Ohio) are backing Trump to the hilt.  They don’t care that much about the wall; they want to weaken the federal government, which they oppose with a passion.

The partial government shutdown is causing great hardship so I think a bipartisan group of lawmakers should propose the following to end it:

  • The president would sign the funding legislation originally passed by the Senate in December and recently passed by the House, immediately reopening the government.
  • An independent commission of experts would be appointed to determine within 90 days where a wall, physical barrier or a fence should be constructed along the border for better, cost-effective security.
  • Funding for the commission’s proposal would receive a guaranteed up or down vote by both chambers, with no filibusters allowed in the Senate.
  • The House Democrats would pass a bill providing a significant amount of additional funding for other types of border security, including additional border agents and surveillance equipment.

If this fight is about border security then those who are concerned about that issue should find this proposal satisfactory – and those who have another agenda or just want to cripple the government will be outed.

Let the chips fall where they might.

 

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Democracy Faces Continuing Challenges in 2019

Many columnists like to recap the year just ended around this time and highlight the most important events.  One of them was New York Times Op-Ed writer David Leonhardt who covered his top five stories in a series of columns from December 24 to December 31.  He began at the bottom of his list with the tarnishing of big tech — followed by President Trump’s scandals – Democrats win control of the U.S. House of Representatives — and the fight for democracy as Republican state legislatures passed laws to restrict incoming Democratic administrations.  His number one story for 2018 was climate change.

To me, the most impactful event was his number three — Democrats taking control of the House — because that will greatly influence the other four.  Had Republicans prevailed, there would be less pressure to regulate Facebook, etc.; Trump’s misdeeds would be swept under the rug; Republican state legislatures would feel freer to gerrymander, suppress voters and rig the system to their advantage; and Congress would be ignoring climate change.  So, hey!  I am really looking forward to an exciting year with House Democrats finally able to conduct oversight investigations of Trump and his administration.

One of my big concerns during this past year – which will continue in 2019 — involves the ballooning federal deficits and national debt.  So, I was thrilled recently when the Congressional Budget Office published “Options for Reducing the Deficit: 2019 to 2028.”  This very detailed, 316-page behemoth document gives policy makers all they need to know about putting the nation on the path to fiscal stability.  It details the spending cuts (mandatory and discretionary) and revenue increases that would significantly reduce deficits over the next 10 years.

Republicans never look for ways to boost revenues so they will focus on spending cuts, with emphasis on mandatory spending programs like Medicare, Medicaid and Social Security.   The CBO identified a maximum of $3.65 trillion worth of reductions in the mandatory category.  Sure enough, the social safety net programs would get hammered should Congress decide to adopt these deficit reducing proposals.  College education programs, veteran’s benefits and subsidies for farmers could also take a big hit.  Ahh — but any large reductions in mandatory spending would require some really tough, high-profile votes for reelection minded politicians.  So, how many of these deficit reduction proposals do you think will actually be enacted?

Discretionary spending — which is subject to yearly appropriations – could be reduced up to $2 trillion.  Almost half of this amount would involve cuts to defense programs like aircraft and ship purchases.  Other possibilities for significant spending reductions in this category include the head start program — which would be eliminated — international affairs, highway and transit programs (infrastructure), housing assistance for low income people and manned space exploration.  Now, do you think Congress will find significant opportunities to cut deficits by digging around in these options, particularly in the defense budget?  I sure don’t.

Well, guess what’s left – revenue increases.  This, of course, is where Democrats always want to focus; and according to the CBO, it’s a target-rich environment.  Its analysts identified where Congress could boost revenues over the next decade by up to a whopping $15.8 trillion.  The possibilities include raising all individual income tax rates by one percentage point, imposing a 0.01 percent tax on the value of stock transactions, increasing the payroll tax rate for Medicare Hospital Insurance, subjecting earnings greater than $250,000 to the Social Security payroll tax and many more.  The largest single revenue increase — over $2 trillion — could be achieved by phasing in a five percent value added tax (VAT) across a broad base of goods and services.

I believe Congress should control the rising budget deficits with a three-pronged attack — eliminate fraud and waste in government programs — craft reasonable spending cuts — and increase various taxes.  Wealthy taxpayers and corporations should applaud this shared sacrifice approach.  They will benefit in the long run because eventually the horrific debt will savage the economy and hurt all of us.

As 2018 began there were supposedly three adults in Trump’s administration, Sec. of State Rex Tillerson, Chief of Staff John Kelly and Sec. of Defense James Mattis.  They were a partial barrier to Trump’s worst instincts for a time.  Yet, each reportedly called him a moron or an idiot in private, sometimes with a strong preceding expletive.  Well, all three are now gone.  And I think only Mattis left after a man to man faceoff with the president.  The weakling in the White House likes to fire people with a tweet.

But read Mattis’ resignation letter and his farewell memo to the troops.  The former outlines where he differs with Trump on the role of the United States in the liberal democratic order that the U.S. primarily created at the end of World War II.  The second subtly advises the military to prevent Trump from undermining the Constitution, which he has been threatening to do almost on a daily basis since January 2017.  Both contain warnings that all concerned citizens should keep in mind during the coming year.

No doubt, the 2018 midterm election was one of the most important in the past two centuries.  Yet, 2019 will likely be a watershed for democracy in this nation.  Still, I believe it will emerge from this crisis and be stronger as a result.

Happy New Year to all.

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Republicans Own the Immigration Mess

When a friend urged me to write a blog on immigration, I wasn’t sure I could add much to the discussion.  But after reviewing some of the history surrounding this thorny issue – my enthusiasm blossomed.

Looking back over the past 25 years, it is clear that the great influx of illegal immigrants occurred during the second term of President Bill Clinton and the tenure of President George W. Bush.  According to a study by the Pew Research Center, the number of undocumented individuals living in the U.S. more than doubled from 5.7 million in 1995 to a high of 12.2 million in 2007.

Democrats regained control of both chambers of Congress in 2007 but held only a slim majority in the Senate.  Bush backed the bipartisan Comprehensive Immigration Reform Act of 2007 that was designed to address the growing illegal immigration problem.  This bill included tough border security and workplace enforcement provisions.  It also created a temporary worker program sought by business groups and provided a controversial plan to legalize an estimated 12 million – primarily Latin American — undocumented immigrants.  A majority of Democrats supported this legislation but an overwhelming majority of Republicans were opposed.  The bill died in the Senate when it failed to achieve the 60 votes necessary to advance.

During the early years of President Obama’s administration, the number of illegals declined — no doubt due in part to the Great Recession.  After a 44-point advantage among Latino voters helped Obama handily defeat Republican candidate Mitt Romney in 2012, the GOP did a comprehensive election autopsy.  The study concluded that the party needed to be more inclusive of Hispanics, stating: “[W]e must embrace and champion comprehensive immigration reform. If we do not, our party’s appeal will continue to shrink to its core constituencies only.”

As a result, a bipartisan group of Senators – the Gang of Eight – went to work on the immigration issue in 2013.  They produced the Border Security, Economic Opportunity, and Immigration Modernization Act.  This bill provided a path for undocumented immigrants to gain legal status — and eventually citizenship — and promoted talent-based immigration.  An amendment by Sens. Bob Corker (R-Tenn.) and John Hoeven (R-ND) increased the number of border patrol agents to around 40,000 and included other strong border security measures that Corker called “almost overkill.”  According to government estimates, this legislation would add $276 billion to Social Security revenues over 10 years and reduce deficits by $1 trillion over 20 years.

The Senate passed this bill by a healthy margin of 68 to 32 in June 2013 when 14 Republicans joined all the Democrats in favor.  But Senate Minority Leader Mitch McConnell (R-Ky.) and his four-member leadership team opposed it.  McConnell speciously claimed it lacked sufficient border security but I believe his opposition was directed at preventing a significant policy win for Obama.

Over in the Tea Party-controlled House, Speaker John Boehner (R-Ohio) was struggling with an obstructionist caucus that was mainly interested in taking meaningless votes on repealing Obamacare.  Many of these Republicans feared that wealthy conservatives would fund a primary candidate to oppose them if they voted for immigration reform.  So, because the Senate bill wasn’t supported by a majority of his caucus, Boehner refused to schedule it for a vote.  Again, Republicans poured salt on an immigration wound that continued to fester.

Later, House Majority Leader Eric Cantor (R-Va.), who had supported some piecemeal immigration proposals, was defeated by Koch brothers backed Dave Bratt in the 2014 primary.  Republicans understood the message; oppose immigration reform or lose your job.

Donald Trump obviously knew that the Republican base opposed being inclusive of Hispanics when he chose immigration as the signature issue for his 2016 presidential campaign.  Without evidence, he claimed that Mexicans crossing the border illegally were causing a crime wave and he hammered on it relentlessly.  Yet, a comprehensive, four-decade study published that year entitled “Urban crime rates and the changing face of immigration” negated the proposition that increased immigration was associated with increased crime.

As Trump was railing about illegals during campaign rallies and promising his supporters he would build a “magnificent” wall to keep them out, the number of undocumented immigrants in 2016 was dropping to 10.7 million, the lowest level in a decade according to the Pew study.

I totally agree that thousands of immigrants crossing the southern border present a significant challenge for the border patrol.  But in truth, we could have had comprehensive immigration laws and enhanced border security years ago but for GOP obstruction.   And search the Internet for Republicans in Congress who support Trump’s border wall and you’ll find it’s mostly far right conservatives, certainly not a majority.

But Trump’s agenda goes far beyond the people that are stacking up across the Rio Grande River.  He and his advisor Stephen Miller — a guy whose persona begs for a fascist military uniform – have rescinded the temporary protected [resident] status of 60,000 Haitians and 200,000 Salvadorians who have lived here for a decade or more.  And they’re trying to deport thousands of Vietnamese who have lived in the U.S. legally since the 1970s.

No doubt, Trump is focused on appealing to his base and Miller may have white nationalist objectives.  But I believe power-obsessed Republicans want to limit immigrants — particularly people of color — out of fear they will strengthen the Democratic Party.  Their goals are just that underhandedly partisan.

Here’s hoping you had a Merry Christmas, Happy Hanukkah and a great day, whatever holiday of family, peace and love you celebrated.

 

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A Letter to Speaker Paul Ryan as He Retires

Dear Mr. Speaker,

Congratulations on your retirement at the end of this Congress.   It presents a good opportunity to reflect on your 20 years of service as a representative of the great state of Wisconsin and the legacy you leave behind.

Your career as a congressman has been illustrious.  Before taking the gavel as Speaker, you chaired both the powerful House Budget Committee and the House Committee on Ways and Means.  For a politician who was elected at age 28 and has not yet turned 50, that was a very impressive accomplishment.  No doubt you had a lot more going for you than the sparkling blue eyes and boyish good looks that made you the darling of the beltway press for almost two decades.

In so many ways, I see your career as representative of the hard-right turn of the Republican Party in the 1990s.  As you were entering Congress, former speaker, Rep. Newt Gingrich (R-Ga.), was resigning in disgrace.  Still, the no compromise, corrosive partisan atmosphere he created remained among many GOP members and no doubt influenced you too.

You were a leading advocate of President George W. Bush’s failed plan to privatize Social Security in the mid-2000s.  After the Tea Party sweep of the House in 2010, you began drafting budgets for the GOP that would implement the party’s grand conservative scheme — eviscerate the federal government, repeal Obamacare, cut taxes for the wealthy and dismantle the social safety net.  Your legislative mission was to balance the budget on the backs of our most vulnerable citizens by slashing funding for so-called entitlements.

I suspect you would agree with an email I received from a conservative acquaintance who had a unique way of cutting Medicare costs: “If you don’t have the money to pay at least a significant portion of your final years for care and costs, don’t have a long term care policy or a family that can help defray the costs, you may be placed in a large facility specifically to offer only palliative care.  If that happens, you will be kept pain free until you die.  But no money will be spent for long term care, surgeries, emergency room visits or efforts to make you well, because it will simply be too costly, and our nation won’t be able to afford it.”

This gentleman went on to describe what he believed Americans should be entitled to: “We can have and spend what we have created, and feel free, without guilt, to use for ourselves and our loved ones.  Those who have earned their wealth by their hard work, ingenuity and yes, luck, are not required by law to be their “brother’s keepers.”

The various federal budgets you drafted that cut trillions from health care, education and social services supported theories like these.  But in the end, however, almost none of the policies you advocated over two decades have been adopted except the Tax Cuts and Jobs Act of 2017.  So, after years of railing against President Obama for using deficit spending to help bring the economy out of the Great Recession, you thought nothing of increasing deficits by $1.5 trillion to give tax cuts to those who didn’t need them.

Recently, you said that “history is going to be very good to this [GOP House] majority” because of the tax overhaul passed and increased funding for the military.  Well, history is only one short year now and it’s already not “very good” for you and Republicans.

In fact, you have pretty much been a total failure for the conservatives that have supported you.  How have you failed?  Let me count a few ways:

You portrayed yourself as deeply religious, but you fired Rev. Patrick Conroy, Chaplin of the House of Representatives, because one of his prayers was mildly critical of your precious tax cut bill.  Even Republicans trashed you for that small-minded decision and forced you to reverse it.

As Speaker you strongly supported Rep. Devin Nunes (R-Calif.), chairman of the House Intelligence Committee, as he attempted every procedural maneuver and underhanded trick he could use to undermine the Justice Department, the FBI and special counsel Robert Mueller’s Russia probe.

You have had the high honor of holding an office that only 52 men and one woman have succeeded in achieving since 1789, Speaker of the U.S. House of Representative — the people’s house.  As the third most powerful person in government, you could have been a leader revered in history, a campion of immigration reform, a protector of the rule of law and a bulwark against a mendacious, authoritarian President Trump and his far-right supporters in your caucus.  Instead, after getting your long-desired tax cut you are — as the Brits might say — “buggering off.”

So, go, and good riddance.  You are leaving a legacy of cowardice and shame, a stain on the high office you held.  According to Business Insider you could receive a lifetime annual pension of almost $85,000.  But no doubt that will just be pocket change compared to what you will receive as a conservative speaker, lobbyist and right-wing think-tank member.

In the end, however, your conservative, heartless goals weren’t draconian enough for the far-right House Freedom Caucus; and as partisan as you were, I don’t believe you are even well respected by the GOP.

Let that be the summary of your political career.

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Deficits Damage as Trump Undermines the Dollar

My last blog covered the economic woes of the Great Recession, the 2017 budget busting Republican tax cut, the 2018 bipartisan spending binge, the rising interest rates, the low unemployment numbers, the strong economy and the ballooning federal deficits.

But wait!  High employment and a booming economy typically reduce deficits.  More people working means fewer claims on social safety net programs and higher household incomes and corporate profits that boost tax revenues.

Yes, well, based on current tax and spending laws, here are some recent facts and projections that are cause for concern:

  • The U.S. Treasury will borrow $1.3 trillion during 2018, the highest yearly borrowing since the depths of the Great Recession in 2010.
  • The federal government will spend more on interest on the national debt in 2020 than it spends on Medicaid — more in 2023 than it spends on national defense — and more in 2025 than it spends on all nondefense discretionary spending programs combined.  Estimated interest cost over the next decade will total almost $7 trillion.
  • The U.S. economy will begin slowing down in 2019, according to the Congressional Budget Office and numerous economists.  The global economy is already slowing.  Half of the economists in a recent WSJ survey predicted a recession before the 2020 elections.

Well, what if the economy goes south within the next two years?  A recession would significantly exacerbate the already enormous deficits, just as it did after 2008.  And I think it’s just a matter of time before it happens.

What Results from Huge Deficits?

Ahh — it depends on which economist ventures a guess.  And that’s about all it would be, a guess.  Perhaps the worst scenario would involve rapidly increasing inflation.  That would cause the Federal Reserve (Fed) to significantly increase interest rates, supercharging the cost of financing the national debt and making the cost of expanding a business and buying a new home prohibitive.  All of this would damage the economy.

Regardless, almost all economists agree that large deficits give policymakers less flexibility in dealing with a future crisis, like a recession or a war.  A tax cut can be used to jump start a stalled economy but that card has already been played. Stimulus spending to juice the economy or added borrowing to finance military actions become much more problematic when deficits are already huge.

But even if a recession or war doesn’t occur anytime soon, large deficits will likely prevent Congress from enacting a critically needed robust program to upgrade the nation’s infrastructure.  I believe the $1.5 trillion that Trump and the Republicans wasted on a tax cut would have been much better invested in roads, airports, bridges and much more, i.e., for our future economy.

How Can Deficits Be Lowered?

There’s no doubt, Republicans want to use the ballooning deficit problems to push for huge cuts to social safety net programs, including Medicare, Medicaid and even Social Security.  That has been their goal for decades.  But as they discovered with their Obamacare repeal and replace efforts in 2017, cutting health care benefits for the 80 percent while proposing tax cuts for the rich won’t fly.

President Bill Clinton produced budget surpluses for 1998 through 2001 with a combination of tax increases and spending cuts, including reductions in outlays for defense and social safety net programs.  I believe this two-pronged approach is the only way deficits can be significantly reduced.

Trump, however, has a different opinion.  Conservatives have convinced him — with their alternative reality thinking — that economic growth will solve all the deficit problems.  When confronted by his staff with a projection that deficits will become untenable by 2028, Trump reportedly said “Yeah, but I won’t be here.”

Why Is the U.S. Dollar So Important?

Bad as they are, the nation’s fiscal problems would be considerably more troublesome if not for the U.S. dollar’s status as the primary global reserve currency.  American dollars are required for international commerce in commodities like oil and most of the world’s central banks hold dollars as their rainy-day fund.  This elite status of the dollar has immense advantages for the United States.  The government can just print paper dollars and the rest of the world treats them as if they were gold.  Really.

The dollar’s status, however, is not just an historical anomaly.  The dollar is underpinned by American institutions like the independent central bank (Fed) and the democratic processes established by the Constitution, like the rule of law.  These and other keystones of our democratic republic have earned the trust of global investors who see the dollar as a safe harbor when economic waters get rough.  Consequently, U.S. government bonds are treated as one of the world’s safest investments, which greatly facilitates financing federal deficits.

But Trump called the Fed “crazy” and “out of control” for raising interest rates, thereby eroding its independence.  And Trump is undermining the rule of law by denigrating other institutions like the Justice Department and the federal courts.  He’s being aided by Russian President Vladimir Putin, whose operatives use social media to sow mistrust in the U.S. justice system.

These senseless attacks by Trump are sure to shake foreign investor’s faith in the stability of the United States and seriously weaken the dollar’s status in the global economy. But Putin loves what he’s doing and China is attempting to elevate their currency (yuan) to be equal to the dollar as a reserve currency.  Even our European allies chaff at the dollar’s dominance in global finance but Trump treats them with distain.  The “Tariff Man” simply has no clue as to the consequences of his words and actions.

Well, what if our dollars ceased being treated as if they were gold?  What if the U.S. government could no longer solve deficit problems — like it has for decades — by simply printing more dollars and selling its bonds?  The resulting economic consequences for this nation are too catastrophic to contemplate.

Certainly, electing a Democrat-controlled U.S. House will reestablish some checks and balances in our government and restore some of the faith in America that Trump has squandered.  But if the United States is to remain a democratic republic, preserve its financial stability and maintain the elite status of dollar, concerned citizens must overwhelmingly vote Trump out of office in 2020.

We have survived almost two years under his erratic, authoritarian leadership and we can probably endure another two years.  But if he continues as president in 2021, I believe the damage he will do to this nation’s democracy and economy is incalculable.

PS – Congratulations.  I am confident that you now know a lot more about these subjects than Trump.   If you have questions, please send me an email.

 

 

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Of Federal Budgets, Tax Cuts, Deficits and Debt

You may ask, how does this affect me?  Or, there’s so much news about billions and trillions; how can a person comprehend it?  Well, this is part one of a two-part blog that I hope will help you understand more about some federal fiscal matters that will definitely have an effect on your future financial situation.

But first, it’s helpful to understand a few terms before digging into what it all means.

A.  Federal budget for fiscal year 2019 (October 1, 2018 until September 30, 2019) is around $4.2 trillion.  It has three major components.

  1.  Mandatory spending includes Medicare, Social Security, Medicaid and many other so-called “automatic” spending programs.  Unless they are amended by Congress, this spending continues year after year.  Along with interest on the national debt, these programs comprise around 70 percent of the budget.
  2. Defense discretionary spending, is subject to yearly appropriations.
  3. Non-defense discretionary spending is also subject to yearly appropriations and is typically around the same amount as defense spending.  This is the cost of ALL other functions of the government, plus or minus 15 percent of the budget.

B.  Federal deficit is the yearly amount that spending exceeds revenue.  Deficits add to the national debt, which is the total amount the U.S. government owes its creditors.

C.  U.S. Government Bonds are “sold” to the public to finance deficits.  Rising interest rates make financing the national debt more expensive, which adds to the yearly deficits.

D.  National debt is approaching $22 trillion.  Debt owed to the public is approaching $16 trillion.  The difference between these numbers is called intra-government holdings and includes money borrowed from various government trust funds.  Debt owed to the public is the more important number and includes debt owed to foreign countries.

E.  Gross domestic product (GDP) is the monetary value of all finished goods and services produced in the U.S. in a year.  Government spending, revenue and debt are typically measured as a percent of GDP.  Debt increasing as a percent of GDP is a warning sign.

The Great Recession

Tax cuts by President George W. Bush  in 2001 and 2003 greatly decreased the federal tax revenues that allowed President Bill Clinton to balance the federal budget four years in a row from 1998 through 2001.  The wars in Afghanistan and Iraq had cost hundreds of billions of dollars by the end 2008 and were ongoing as the economy faltered.

During the early years of the Great Recession (2008-2010), millions of Americans lost their jobs.  This resulted in a huge loss in tax revenue for both the federal government and state governments.  The job losses were exacerbated when states were forced to lay off employees in order to balance their budgets, as 49 of 50 states are required to do.

High unemployment means greatly reduced consumer spending — which is around 70 percent of the U.S. economy — so corporate revenues and profits plummeted.  This meant further job losses and even less tax revenue for governments.  Concurrently, more Americans qualified for social safety-net benefits like Medicaid, food stamps and unemployment compensation, which dramatically increased mandatory spending.

Due to reduced federal revenue and more federal spending, deficits exceeded $1.4 trillion in FY 2009 and continued at trillion-dollar levels through FY 2012.  Three things greatly balloon federal deficits, tax cuts, wars and recessions.  All three were at work in 2008 and for several years thereafter.

2017 and Beyond

After the economy slowly strengthened, unemployment was down to around four percent at the end of 2016 and deficits had been cut in half.  But the chances for further lowering deficits still looked grim.  The last of the baby boomers would be retiring between 2018 and 2027, boosting spending on Social Security and Medicare.   In June 2017 the Congressional Budget Office projected that deficits would again exceed $1 trillion per year by 2022.

Then in December 2017, President Trump and the Republican-controlled Congress cut taxes – mainly for the wealthy and corporations.  The resulting lost revenue will increase deficits over the next decade by more than $1.5 trillion.  While this law made the cuts for corporations permanent, those for individuals are scheduled to expire in 2025, sending tax rates back up in 2026 for the middleclass and wealthy alike.  No doubt Republicans thought political pressure would eventually force Congress to make the individual tax cuts permanent too.  They could well be right, but that will add another $600 billion to the national debt by 2028 and much more in the future.

Republicans always claim tax cuts boost the economy, which it does — but only for short periods of time.  Many of them even claim that tax cuts pay for themselves or are revenue neutral.  In other words, they profess that tax cuts will not reduce federal revenues.  At least since 1981, however, tax cuts have never even come close to being revenue neutral and have always resulted in higher deficits.

Republicans assured us that corporations would invest their tax savings in new plants and equipment and raise worker’s wages.  But most of it is being used to buy back record amounts of their stock.  This makes the wealthy even richer as it sends stock prices higher — but it does nothing for wage earners or growing the economy (GDP).

After cutting taxes, Congress significantly increased spending.  The Bipartisan Budget Act of 2018 that Trump signed in February is a two-year spending bill that will add at least an additional $300+ billion to the national debt over the coming decade.  It increased defense spending significantly but also added to nondefense spending.  Both Republicans and Democrats were pleased with this unbridled spending binge.

Labor shortages, made worse by Trump’s restrictions on immigration, have caused wages to increase modestly but inflation has mostly eliminated those benefits.  The tax cut and spending charged economy has caused the Federal Reserve (Fed) to increase interest rates, which makes financing the huge national debt even more expensive and exacerbates the deficits.

The Congressional Budget Office projected that deficits will rise to almost $1 trillion in FY 2019 and thereafter exceed that number in the foreseeable future.  But the White House’s Office of Management and Budget projects that the deficit will exceed $1 trillion this fiscal year.  I think the OMB is right.

These things we now know for sure:  The United States is experiencing huge yearly deficits and a growing national debt even as the economy is strong.  Mandatory spending will be increasing dramatically due to baby boomer retirements and the tax cuts are definitely not paying for themselves.

My next blog will delve into how deficits might affect the economy going forward and the importance of the U.S. dollar’s status to this nation and each one of its citizens.

 

 

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Pledge to Unite Americans and Preserve America

Signing a pledge is not unheard of for politicians.  Almost all Republican members of Congress have signed Grover Norquist’s promise to oppose and vote against any and all efforts to increase taxes.  It is enforced by Americans for Tax Reform, a well-funded organization that Norquist founded.  Any candidate who dares violate their  commitment will have an ATR backed primary opponent in the next election.  I believe this anti-tax pledge violates a politician’s oath of office and stifles compromise in the political process — but it exists and has been very effective.

Norquist is a Libertarian whose objective is to starve the federal government of tax revenue.  But his efforts have served to further divide our Congress into tribes.  This adds to the animosity among our elected officials that has escalated into vile campaign ads and even personal attacks.

The political process has always involved a fair amount of nastiness — but it seems to have gotten much more pervasive in recent years.  It is one of the facets of politics that not only divides our politicians and creates gridlock, it divides the electorate.  Another is the funding required to compete in elections and the necessary selling of one’s soul to get it.  Money in politics has shutout competent men and women while enabling special interests to literally buy many substandard, sometimes unethical candidates who are eager to do their bidding.

As a result, Americans are losing confidence in their elected officials, the political process and even in democracy.  Think of it – Congress has an approval rating of only 21 percent and it has been much lower than that.  We must find some way to reverse this discouraging trend — which is the impetus for the following:

A Pledge to Unite Americans and Preserve America

Recognizing that I am human and therefore fallible, to the best of my ability:

I PLEDGE TO

  • protect and defend the Constitution from all enemies foreign and domestic.
  • put this nation and my constituents above party loyalty and personal political gain.
  • uphold and strengthen the separation of powers, the rule of law and the independence of the Justice Department and the judiciary.
  • speak no hate and call out hate speech from supporters and opponents alike.
  • unite my constituents and never instill false fear in them for political gain.
  • be honest, as good as my word and never use my office for personal financial gain.
  • work vigorously to eliminate the influence of special interests and money in politics.
  • listen thoughtfully to my opponents and supporters alike and never denigrate opponents simply because they disagree with me.
  • facilitate voter registration and the right of every citizen to freely vote.
  • reject and seek to eliminate discrimination, bigotry, racism and anti-Semitism.
  • faithfully discharge the duties of my office in the best interests of my fellow Americans and legislate to improve their health, welfare and safety.

AND FINALLY TO

  • admit when I have violated this pledge, apologize and take corrective action.

You’re right – I am totally idealistic and naïve to propose such a pledge and even more so to expect any politician to sign it or to hope any organization would attempt to enforce it.  I plead guilty as charged.  And besides, this pledge would be vigorously opposed by many special interest groups and ideologically oriented organizations, along with white nationalists and neo-Nazis.  But — isn’t that the very reason it’s needed?

The midterm elections were a positive sign; still, this nation is in crisis.  It is divided like at no time in my memory.  Even the tumultuous period of protests during the Vietnam War and the criminal conduct of President Nixon’s administration didn’t seem as threatening to our democracy as what we see in the news almost every night.  This division — that seems to extend widely and penetrate deeply into the fabric of our society — is a threat to our national security that it is being exacerbated by an adversarial foreign power.  And these subversive tactics by Russia are being countenanced by some Republicans at the highest levels of our government.  It’s hard to believe.

Sadly, certain unsavory, even illegal, political practices have become commonplace over the past couple of decades.  Many politicians think nothing of casually lying about their positions and about the policies of their opponents.  State and county officials change the laws and rules to make it harder for some citizens to vote, usually minorities.  To these miscreants, retaining political power has become the overriding consideration, pushing ethics and the Constitution to the side.  Well, dammit, that is not acceptable conduct in a democratic nation.

I agree that corporate revenues and profits are important.  But they shouldn’t be paramount.  No rosy economic outcome is worth what is occurring — the angry rending of our citizenry along partisan lines and the erosion of the rule of law.  The stability of our society and the integrity of our judicial system have made the United States a beacon of hope for all freedom loving peoples around the world.  We must actively and strongly protect these and other critical keystones of our democracy.  And we must promote and support politicians who conduct themselves in the spirit of this pledge.   Working together, I believe we can help heal the divisions.

Today, however, our democracy is not in good hands.  Preserving it will most certainly rest in ours.

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