Why Don't We Care About the Budget Deficit?
Can you help us with a puzzle (please)? In the short history of the Maryland Policy blog we have already learned one thing that people don’t appear to care about: the federal budget deficit.
Last week’s post "Deficits Don’t Matter" included this quote about our growing budget deficit, the interest we pay on the debt, and our ability to pay for things like health care and education:
"The only thing the United States is able to do a little after 2040 is pay interest on massive and growing federal debt."
To be clear, under the present course, there will be no public funding available to pay for education, health care, roads, national defense, national parks... Just interest payments.
Our post added that U.S. debt and obligations are about $150,000 per person. And as bad as things are, Congress and the President are poised to make things worse.
Thanks to the beauty of web-tracking software, we know that visitors to the Maryland Policy blog have found this to be the least interesting item that we have posted (well, excluding the post where I encouraged people to listen to the General Assembly proceedings over the Internet. What was I thinking?).
Chances are that YOU passed over "Deficits Don’t Matter" too (preferring our post titled "Governor Ehrlich Was Correct" and other items).
Here is our question to you: Why is this subject so uninteresting? Is it that 2040 is too far away? That the numbers are too big to grasp? That people always throw out data to make us believe that the sky is going to fall and in the end it doesn’t even descend a little bit? That you feel helpless to do anything about it? Or maybe it's that the rest of the content on our blog is so darn good. That's probably it.
Last week’s post "Deficits Don’t Matter" included this quote about our growing budget deficit, the interest we pay on the debt, and our ability to pay for things like health care and education:
"The only thing the United States is able to do a little after 2040 is pay interest on massive and growing federal debt."
To be clear, under the present course, there will be no public funding available to pay for education, health care, roads, national defense, national parks... Just interest payments.
Our post added that U.S. debt and obligations are about $150,000 per person. And as bad as things are, Congress and the President are poised to make things worse.
Thanks to the beauty of web-tracking software, we know that visitors to the Maryland Policy blog have found this to be the least interesting item that we have posted (well, excluding the post where I encouraged people to listen to the General Assembly proceedings over the Internet. What was I thinking?).
Chances are that YOU passed over "Deficits Don’t Matter" too (preferring our post titled "Governor Ehrlich Was Correct" and other items).
Here is our question to you: Why is this subject so uninteresting? Is it that 2040 is too far away? That the numbers are too big to grasp? That people always throw out data to make us believe that the sky is going to fall and in the end it doesn’t even descend a little bit? That you feel helpless to do anything about it? Or maybe it's that the rest of the content on our blog is so darn good. That's probably it.
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Steve Hill
shill at mdnonprofit dot org
By MarylandPolicyBlog, at 6:17 PM
You said, "And as bad as things are, Congress and the President are poised to make things work."
Did you mean to say "...make things worse?
By Andrew Broman, at 11:40 PM
Thanks for pointing that out -- it does change the point of what I was saying, doesn't it.
Yes, I did mean to say "...make things worse." I have fixed it on the original post.
By MarylandPolicyBlog, at 8:05 AM
Is it that 2040 is too far away? That the numbers are too big to grasp? That people always throw out data to make us believe that the sky is going to fall and in the end it doesn’t even descend a little bit? That you feel helpless to do anything about it?
Yes. To which you can add that nobody's yelling about it every day, therefore it isn't on the radar screen of our SAP-py society. (SAP=Short Attention Span)
I live in Mass, so adjust this for geological and cultural bias (bearing in mind that I live in central Mass which is very conservative) but what I'm hearing is that Bush has convinced them this whole deficit thing is political, that it really isn't as bad as the tv news (they don't read papers any more) says it is but he has to pretend because otherwise those scummy liberals will tax them out of their shorts. IOW, that the so-called deficit is a liberal invention of the tax-and-spend crowd.
Make of it what you will.
By Mick, at 7:15 PM
I am enormously concerned about the federal deficit and feel like the tax cuts that were approved several years ago were enormously foolhardy and will come back to hurt those most in need. Unfortunately, with the balance of power the way it is in DC, I feel pretty unempowered to do anything about it.
By Scott Graham, at 12:49 PM
I care! I care!
The challenge to get someone to read about something is to tell them something they don’t already think they know. “The deficit” is such a monolith: big and scary, but in a somewhat undifferentiated way. The challenge is to help people think about it from a variety of different angles. I'm fond of the "Argentina" angle myself.
Also remember that there was a lot of deficit obsession about 14 years ago, at least as much as there is now, and within a few years we were back in surplus. The problem is that both the first President Bush and, two years later, the Congressional Democrats paid the ultimate political price for setting up the conditions for the surplus...
By Nick, at 3:05 PM
Nick and others
Well it appears that we have quite a challenge ahead of us. How can we expect our leaders to do something about the deficit if doing so means that we will vote them out of office?
If President George H.W. Bush lost an election in part by taking steps to reduce the deficit (your post reminded me of the criticism he got for reversing his "read my lips" proclamation), followed two years later by Democrats losing the House of Representatives for their 1993 tax reforms, then that doesn't bode well for a reversal in course now.
Unless something changes.
Steve Hill
shill at mdnonprofit dot org
By MarylandPolicyBlog, at 4:10 PM
The federal deficits do matter to me!! I wake up every day worried about where this country is going financially. And I don't understand why business has not weighed in on this--they may be benefiting now from tax cuts, etc., but the damage that massive budget cuts will do to this country will also hurt business. I suppose they think that they can get what they need by exporting jobs.
Gail Sunderman
glsunderman at yahoo
By Gail Sunderman, at 12:39 PM
Why don't people care about the federal budget deficit? Mainly because the most devastating consequences of it have yet to happen. Our government is deficit spending like crazy and charging it all to a credit card. It won't be until we get the bill that we realize how screwed we are. (Nevermind that we are already looking at part of the bill through increased local taxes to make up for cuts in federal funding.)
So who are the owners of the credit card company and why aren't they doing something about the reckless spending? 1) foreign national banks, 2) wealthy Americans.
The Asian central banks have been buying our bonds to artificially inflate the relative price of our currency, thereby giving their industries a trade advantage. The successful growth of their industry is dependent on this, though soon they will have built up their own economies to the point that they no longer need our markets. Meanwhile, the twin deficits of budget and trade are destroying our manufacturing base and threatening another Great Depression-scale economic collapse. Already there is occasional chatter about the Asian central banks diversifying their holdings (i.e. selling US bonds).
In addition, the superwealthy American creditor class also gains from the federal deficit. Acting like predatory lenders, they want to keep the public in perpetual debt so that they can keep on collecting the interest. But in the long term, they are acting irrationally because a great economic collapse would hurt them as well. Also, the deficit gives them an excuse to "starve the beast" of government, defense spending aside of course.
Closing the deficit means raising taxes. But people like their taxcuts and the corporates elites have done a good job of fooling America into thinking that all taxcuts are the same. The Democrats need to return to the old school class-consciousness of the New Deal and call for a tax increase on UNearned incomes (dividends, interests, capital gains, etc.) and a return to progressive taxation. Of couse they won't do this on their own; there's too much corporate money influencing the Party. We have to push them from the grassroots.
By Phil, at 5:01 PM
Once you get into figures in the trillions, most people can't wrap their heads around it. It's too abstract. Furthermore, the potential consequences of an unpayable debt are either 1) too far in the future to be of concern (warning about disaster coming in 2040 hasn't exactly swayed people to Bush's side on Social Security, either); or 2) based on dry economic models that aren't easily accessible to average people.
The real danger we face from the current glut of deficit spending, in my opinion, is the risk of a rapid dollar devaluation when foreign investors are no longer interested in or able to continue to finance our debt at our current low interest rates. Even if we manage to slip out this situation without a rapid devaluation, interest rates cannot continue to remain so low forever. I, for one, really do believe that we are currently in the midst of a housing bubble fueled by artificially low interest rates. When the bottom falls out of the speculation, we are all in a lot of trouble. We have seen housing values in our rather modest Silver Spring neighborhood double in less than three years. Clearly, incomes have not increased by the same proportion over that time. People who are buying these houses are leveraging themselves deeper and deeper into debt--they will be affected very negatively when interest rates begin their inevitable rise. And of course, when this happens, it will be the middle class and lower-middle class strivers who will be hit the hardest: the people who have had it drummed into them that the only responsible financial decision they can make is to *own their own homes* and that they should scrape together every last penny in order to do so, taking huge (predatory) loans if necessary. But if you have 100% financing and an interest only loan, you haven't exactly joined the ownership society, now, have you?
The Asian central banks have themselves in quite a pickle, FWIW. Any move to diversify will shake market confidence in the dollar and leave them holding (outsized) dollar assets of significantly lower value. I suspect that they will continue to maintain this policy until it becomes entirely unsustainable in a desperate hope that they can hold on until US fiscal policy changes.
By Mrs. Coulter, at 11:53 PM
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