In recent decades, proponents of more spending have largely treated tax policy as a separate battle — one that they’ve been willing to lose.They need to start fighting and winning both.It costs money to borrow money. Interest payments require the government to raise more money to deliver the same goods and services. Using taxes to pay for public services means that the government can do more.The United States paid $475 billion in interest on its debts last fiscal year, which ran through September. That was a record, and it will soon be broken. In the first quarter of this fiscal year, the government paid $210 billion.The payments aren’t all that high by historical standards. Measured as a share of economic output, they remain well below the levels reached in the 1990s. Last year, federal interest outlays equaled 1.6 percent of G.D.P., compared with the high-water mark of 3.2 percent in 1991. But that mark, too, may soon be exceeded. The Congressional Budget Office projects that federal interest payments will reach 3.3 percent of G.D.P. by 2032, and it estimates interest payments might reach 7.2 percent of G.D.P. by 2052.That’s a lot of money that could be put to better use.Borrowing also exacerbates economic inequality. Instead of collecting higher taxes from the wealthy, the government is paying interest to them — some rich people are, after all, the ones investing in Treasuries.If the debt ceiling serves any purpose, it is the occasional opportunity for Congress to step back and consider the sum of all its fiscal policies (emphasis added).
Thursday, February 2, 2023
#33 / Does The Times Have An Answer?
Regular readers of these blog postings may have noticed that I have been paying attention to the significant possibility that the United States Government might refuse to pay off its debts, as they come due.
Everyone pretty much agrees that this would plunge the nation into an unnecessary crisis, and might also lead to disastrous economic effects all over the world, since many countries (basically to the advantage of the United States) base their economies on the idea that the United States government will always pay back the monies it has borrowed.
What "makes sense" is not, automatically, what is going to happen, and the Republicans in charge of the House of Representatives, who claim that they will let the nation default on its debts, might just be bluffing - or maybe not! There does seem to be a lot of Republican Party support for destroying the United States government's ability to function, and if an armed invasion of the Capitol Building didn't do the trick, maybe blowing up the world's economy could be an alternative to consider.
My earlier blog posting, citing Jamelle Bouie, suggested that the 14th Amendment to the Constitution might be interpreted to eliminate the problem. Ultimately, relying on this interpretation is putting the fate of the nation into the hands of the United States Supreme Court, which is assuming ever greater powers within our tripartite governmental system. Some think, in fact, that the Court is essentially seeking to displace the Congress as the branch of government that "makes the law." Bouie has specifically said that the Court is "turning into a court of first resort." I'm nervous about giving the Supreme Court increased powers to determine national policy.
What to do, then? Well, in a January 25, 2023, opinion piece, written by Binyamin Appelbaum, The Times makes clear that there is a straightforward answer. The United States really does have a "debt problem," The Times says; the nation is borrowing way too much. However, cutting back spending - the demand of the Republicans in the House - isn't actually the way to a solution. How to solve the problem? Appelbaum says there's not really any big difficulty. The answer is to raise taxes!
Wow! What a concept. Let's pay for the expenditures we make by taxing ourselves, instead of borrowing money from the wealthy, and then paying the wealthy high rates of interest on the money we have borrowed:
I would feel comforted by Appelbaum's straightforward solution to our national "debt problem," except for one thing. Here's my reservation: Does the Republican House of Representatives actually want to solve the nation's "debt problem"? Or, on the contrary, are Republicans in the House trying to destabilize the United States government on purpose?
I tend to think, based on what has happened over the last couple of years, that it's that second option that is playing out behind the scenes. This means, I think, that we should be looking ahead to a real, and profound economic and political crisis, coming to our nation, and the world, in just about six months!