Debt, Debt, And More Debt

Recent figures from the Treasury Department shows that the national debt of the United States is now $13.665 trillion.  It is an unimaginably large amount.  In numeric form, it comes out to $13,665,000, 000,000. How are our kids and grandkids going to pay off such a huge sum?

There is plenty of blame to go around for this appalling debt predicament.  According to the Treasury Department, during President George W. Bush’s eight years in office, the national debt increased by $4.9 trillion.  During President Obama’s two years in office, the debt has increased by another $3 trillion.  Both parties bear responsibility — or more accurately, irresponsibility — for this glut of debt, which has turned the United States into a debtor nation and imposed soaring interest costs that will make it virtually impossible to balance our budget and pay down that debt in the future.

Everyone seems to agree that our debt and constant borrowing is unsustainable, but no one seems to be doing anything about it.  President Obama apparently is waiting for the recommendations of a bipartisan commission, and every other politician is too busy running for office to take any action.  The  lack of action on even basic appropriations bills this past session shows that, for this Congress, hard work and hard choices on the federal budget is just not a priority.

What does all of this mean for the upcoming election if you are a voter who, like me, thinks there is no more important issue for our nation than bringing the federal budget under control?  I think it gives rise to the “throw the bums out” view UJ noted in his recent post.  Democrats control the White House and have huge majorities in both Houses of Congress, and they’ve failed to take any meaningful action on what should be our highest priority.  Why not give the Republicans a chance and then, if they fail, try something else?  Nothing that has happened in the last two years indicates that a Democratic-controlled Congress will tackle federal spending or debt issues, and if we wait too much longer to do anything about the debt issue it may be too late.

 

Katrina’s Five-Year Anniversary

It’s the five-year anniversary of Hurricane Katrina.  The media usually cannot resist anniversaries, particularly when there is powerful film footage to show, and this one is no exception.  This CNN story on the anniversary is typical — a rehash of what happened, some hand-wringing about it, and plenty of retrospective blame being put on President Bush and the federal government, but curiously not much blame being apportioned to the State of Louisiana or the City of New Orleans itself.

I’m not sure what to make of such stories.  With Katrina, the federal government did not cover itself with glory in dealing with an enormous catastrophe, and neither did the state or city government.  People were marooned on the roofs of their homes, were not readily supplied with food and water, and could not be evacuated quickly from the hellish environs of the Superdome.  We learned that the federal government is a ponderous entity that does not move with lightning speed.  Was that unique to the Bush Administration?  Apparently not, because we recently saw a plodding, uncoordinated federal government make a similarly muddled response to the Gulf of Mexico oil spill.   Katrina also taught us that the Louisiana state government and the New Orleans city governments were corrupt, inept and seemingly hamstrung by politics.  Has anything changed in that regard?

If I had my way, every retrospective story on a disaster like Hurricane Katrina would focus not on what happened — we can safely leave that to historians — but on how things have changed to make sure that it doesn’t happen again.  No blame-shifting politicians or social scientists could be quoted.  Instead, facts would be the focus.  Have the levees been sufficiently strengthened?  Have cumbersome federal bureaucracies been streamlined to better deal with disasters?  Are evacuation plans reasonable and capable of being implemented?  If Katrina were to happen again today, would the results be any different?  If so, why?  Those are the tough questions that “retrospective” stories tend to leave unanswered.

Should The Bush Tax Cuts Be Extended?

Beginning on January 1, 2011, the tax cuts enacted under President Bush will expire and significant tax increases — affecting Americans of different income brackets and many American businesses, and involving income taxes, estate taxes, capital gains taxes, and other forms of federal taxes — will automatically take effect as a result.  The Springfield News-Sun has published a helpful chart showing the changes in income tax rates that will occur if the Bush tax cuts are not extended.

Now Republicans and some Democrats are raising questions about whether raising taxes in the midst of a recession makes much sense.  The Obama Administration, through Treasury Secretary Timothy Geithner, says the tax cuts on the highest-income Americans should be allowed to expire, and they should pay an even larger portion of their income to the federal government.  As the Springfield News-Sun chart indicates, higher earning Americans already pay a significantly higher percentage in income taxes to the federal government.

Treasury Secretary Geithner refers to the higher-income earners as “the most fortunate” — as if the income they earn was the result of dumb luck, rather than hard work, opening their own businesses, developing a successful new product, intelligent investment risk-taking, or other activities that are rewarded in a capitalist economy.  That sort of bureaucratic attitude is infuriating, but typical.  If you’ve never held a job in the private sector where your hard work is rewarded, you tend to think that being successful in business is the result of happenstance as opposed to thoughtful effort.  That same attitude underlies the notion that, if the tax cuts expire, the highest-earning Americans will heedlessly continue to act as they have before and just pay more in taxes — as opposed to modifying their behavior in recognition of the fact that their hard work will put less money in their pocket.

In reality, of course, individuals and businesses do modify their behavior in response to tax rates.  That is why so many Members of Congress, and Fed Chairman Ben Bernanke, think that extending the Bush tax cuts would be helpful for our struggling economy, and that ending those tax cuts could potentially shove the economy into a deeper recession. Americans will have less to spend, and therefore the consumer spending that is one of the foundations of our economy will be weaker.  Businesses, too, may stay their hand on hiring or other activities because the tax burden is too great.

The battle over how to deal with the expiring tax cuts will be interesting, because it will play directly into the standard themes of the parties, with the Democrats saying that the Republican Party is interested only in business and the wealthiest Americans and Republicans saying that the Democratic Party is interested only in economic redistribution.  In the meantime, Americans will again be caught in the middle, wondering whether they should expect a significantly higher tax bill come January — and how they should plan their affairs given the continuing uncertainty.

The Prez And The Press

Some members of the press are raising questions about President Obama’s lack of formal, prime-time press conferences.  Indeed, he has gone longer between such conferences than did President Bush before him.  Most people probably will find this hard to believe, because President Obama seemingly has been all over the television screen since his inauguration.  Most of his appearances, however, are through scripted speeches, “town halls,” one-on-one interviews, or other forms of media exposure that do not involve fielding live questions from skeptical reporters.

It’s odd that President Obama seems to be dodging formal press conferences.  He obviously is an intelligent person, and his answers to questions typically are well-formulated.  Of course, the danger of a press conference is that an unscripted answer might gin up a media firestorm that distracts the President until it dies down.  Something like that happened at the President’s last formal press conference, when he said Cambridge police “acted stupidly” in their interaction with Professor Henry Louis Gates, Jr.  The resulting controversy was not put to bed until after President Obama hosted an awkward “Beer Summit” at the White House.  It may be that that experience caused the President to conclude that formal prime-time press conferences just aren’t worth it.

As a former journalist, I think such press conferences are worth it.  I think it is good for the President to break out of controlled environments and meetings with nodding, sycophantic followers and face some tough and even oddball questions from the media.  Presidents who are skillful in handling questions from the media — like President Kennedy — look sharp and at ease; their ability to deal with aggressive, probing questions with intelligence and humor inspire public confidence.  Press conferences undoubtedly keep the President more on top of issues that are of current interest to the country, even if they aren’t particularly of interest to the President or his advisors.  They also show that the President is not some remote, all-controlling figure, but a human being, elected to an important office, who is answerable to the public.  If Presidents duck the press, they end up being depicted as out of touch — and maybe they are.

Maybe Now, Everyone Will Recognize Hugo Chavez Is A Jerk

When Venezuelan president Hugo Chavez followed then-President Bush to the podium at the United Nations several years ago and said he still smelled the scent of sulfur, some American politicians and pundits who were opposed to Bush laughed, shook their heads, and said Chavez’s comments just reflected how the Bush Administration’s policies had reduced the esteem for America in the world.  Today, Chavez, who is attending the climate change conference in Copenhagen, used the same “scent of sulphur” line about — President Obama.

Hugo Chavez and Mahmoud Ahmadinejad

Maybe now everyone in our country — Democrat and Republican, liberal and conservative — will understand that Hugo Chavez is not some keen and witty observer of the international scene, but instead is just an anti-American jerk, an anti-democratic “populist” who has run his country’s economy into the ground and engages in tiresome America-bashing in an attempt to raise his international profile and prop up his sagging approval ratings at home.  Maybe now all Americans will come to realize that Chavez, who apparently received a standing ovation from delegates attending the Copenhagen conference, is just a slightly more outspoken example of the anti-capitalist, reflexively anti-western governments that make up significant portions of international bodies like the United Nations.  The next time someone expresses concern because the United States is following its own path, rather than hewing to the “international consensus,” remind them that the “international consensus” is largely made up of governments headed by former “rebel leaders,” dictators, “strong men,” thugs, scoundrels, “presidents for life,” and other representatives of repressive regimes.  Why in the world should we care what Chavez, Robert Mugabe, and Muammar Gaddafi and their ilk say about our country and its policies?

If Hugo Chavez’s comment about President Obama causes even a few Americans to wake up to the reality of what a rogues gallery many international organizations have become, we should thank him — and then never pay attention to him again.

Eyes On The Prize (Cont.)

President Obama soon will be leaving for Norway to give his speech accepting the Nobel Peace Prize.  According to this article, Norwegians are upset because he has cancelled a number of the events traditionally attended by the Peace Prize winner, including a lunch with Norway’s King.  I wonder if, perhaps, the President cancelled some of the events because he just did not think it would be politically helpful to be seen on TV back in the States attending function after function in Norway, all in relation to accepting a Prize that many people believe he did not really deserve?

I am sure that the President’s acceptance speech will be carefully analyzed.  Apparently he is going to tackle, head on, the irony some people see in his acceptance of the Peace Prize only days after announcing that he was going to send more troops to Afghanistan.  I think he should do so, and I think in that regard he should point out that, occasionally, peace must be achieved by standing firm and fighting those who have an insatiable appetite for conquest, for death and destruction, or for trampling on the human rights of others.  Many tried to negotiate with Adolf Hitler without success; peace in Europe ultimately was achieved only at the point of a sword.

I also think the President would do himself a favor by not criticizing his predecessor or, once again, suggesting that he has brought new enlightenment to a benighted United States of America.  Such criticisms seem motivated solely by a desire to obtain some kind of domestic political advantage by constantly making comparisons to a President who was tremendously unpopular at the end of his term.  I agree with the old adage, however, that politics should end at the water’s edge.  I think it seems small for the Obama Administration to constantly belittle the efforts of the Bush Administration.  Equally important, I question whether boasting about the policy changes that have occurred is a good foreign policy technique.  Foreign policy is supposed to reflect a country’s national interests, and those interests really should not change dramatically even if voters have decided to replace the party in power.  Do we really want foreign governments to think that a change in Administration will cause American foreign policy to swing like a pendulum?  Won’t that encourage foreign governments who disagree with our policy to either meddle in our political affairs or wait out the current Administration, in hopes that voters will replace it with one that will develop a new policy that is more palatable?

Botched Bailout

The Special Inspector General’s report on the bailout of AIG is pretty damning. It concludes that the bailout — which was engineered by the U.S. Treasury and Federal Reserve and occurred on the Bush Administration’s watch — involved some gross overpayments on certain credit default swap transactions. In many instances the Federal Reserve “made whole” the counterparties to troubled investments where the counterparties would reasonably be expected to take significant haircuts on what were, after all, extraordinarily risky transactions gone bad. One of the counterparties that made out very well was Goldman Sachs, which just recently reported enormous “earnings.”

The Special Inspector General’s report on the AIG bailout just confirms, once again, that when the government intervenes in a “bailout” scenario it is the taxpayers who inevitably end up getting fleeced. I appreciate that, at the time, there was significant concern that AIG’s collapse would have been tipping over the first domino in a long line. Still, you would like to think that the Bush Administration and the Federal Reserve would have had sufficient savvy, moxie, and guts to negotiate fair compromises with Wall Street firms and international firms that were looking to profit from bad deals.