Scott Grannis has a characteristically good post on the federal debt. The TL;DR version is that he’s not particularly worried about it:

The “burden” of debt is not the nominal amount, nor is it the size of the debt relative to GDP. The true burden is the cost of servicing the debt, which is a direct function of the level of interest rates. As Chart #3 shows, the size of our debt is indeed huge, but interest rates are historically low. Let me point out a curious fact: a rising debt/GDP ratio tends to coincide with falling interest rates, and a falling debt/GDP ratio tends to coincide with rising interest rates. Not what you’ve been led to believe, I’m sure.

That’s my concern. His chart #6, reproduced at the top of the page, offers the best perspective. Here’s my interpretation of it.

Fiscal policy has been out of whack, out of touch with reality since the mid-1970s. Not coincidentally, that’s when healthcare spending went off to the races. Since the early Aughts it has become significantly worse which is precisely what I said was happening at the time. Obama’s policies made it worse again as did Trump’s tax cuts and COVID spending.

Attributing Biden’s spending to more COVID spending is just making excuses. The necessary relief had already been given; his additional spending has precisely the effect one would have expected and that theory dictates—it produced inflation. And you’ve got to recognize that debt overhang makes growing past it that much more difficult. And for goodness sake we’re not going to accomplish that by importing entry level workers who require more public spending than they produce in tax revenues.

The only way not to be concerned about servicing the debt is if you belief that higher interest rates will be transient. They will be but only in the sense of sic transit gloria mundi. Everything is transient. We’re saddling the kids who’ve been born in the last 30 years with high interest payments that will be increasingly difficult for them to bear.

If I’m a “debt scold” I’m an equal opportunity scold: I criticized Bush’s tax cuts, Obama’s increase in healthcare spending, Trump’s tax cuts, and Biden’s spending as fiscally irresponsible. Now we’ve got to pay the bills which are a lot higher than they would have been with greater responsibility.

I think that Chris Pope’s plea at City Journal for entitlement reform belongs in the “we just have to” school of public policy thought. Here’s a sample:

After three years of record spending, the federal government will soon face decades of steadily rising entitlement costs. Some Republicans believe that they can force reform by obstructing an increase in the federal debt ceiling, but doing so would more likely force House leaders to accept proposals crafted by Senate Democrats. Yet as interest rates rise and fiscal constraints tighten, the longer-term prospects for entitlement reform become more propitious. Balancing the budget by increasing taxes is even less popular with voters and both parties than doing so by reforming Medicare and Medicaid, because tax hikes would represent a greater disruption to the status quo.

Congress has given up trying to hold the line on Medicare spending. After a decades-long charade of “sustainable growth rates” in Medicare and annual “doc fixes”, Congress gave up. In theory it might raise marginal tax rates on the rich but in practice I believe that increasing revenue by doing so is beyond Congress’s reach. The only group on which it can impose taxes is the middle class and it has refused to do that.

At this point I don’t believe anything will be done by either party until the whole thing goes splat.

There’s an old joke. A tourist is lost in rural Maine and arrives at a general store stuck out in the middle of nowhere. The tourist asks the geezer sitting on the porch of the general store for directions. After hemming and hawing for awhile the Mainester responds “You cahn’t get the-ah from he-ah”.

In a piece in the Washington Examiner Richard Rahn urges the U. S. to adopt the “Swiss debt model”:

Rather than fight about specific spending cuts in the next two months (which are likely to be very small at best), it might be wiser to demand spending process reform. Two decades ago, the Swiss reformed their system to require a balanced budget over the business cycle, known as the “Swiss debt brake.” It has worked very well, as can be seen in the table, and is fiscally responsible. Congress should try a similar system in the U.S.

The Swiss approach is interesting and completely in alignment with Keynes’s advice. Swiss public debt is around 14% of GDP compared with U. S. public debt at 115%.

However, the differences between Switzerland and the U. S. are stark. Switzerland is a small, landlocked country with an allergy to involvement in any form with the affairs of other countries. It is not a member of the European Union and didn’t join the United Nations until 2002.

Switzerland’s is a consensus-based society and, despite having four official languages, is highly socially cohesive. It’s probably the most democratic country in the world—all legislation of any substantial scope is subjected to a referendum. Switzerland has a universal draft.

Switzerland has never had debt as high as ours. To push our debt down to Switzerland’s level would take trillions in spending cuts, tax increases, or both. That would fall very hard on the poor and, since the poor are disproportionately black or Hispanic, would fall hardest on blacks and Hispanics and would be castigated as racist.

We can’t get there from here.

I wanted to call attention to one sentence in Walter Russell Mead’s latest Wall Street Journal column:

If Ukraine had depended on Europe alone for help, the Russian flag would be flying over the ruins of Kharkiv, Kyiv and Odessa.

If one thing emerged from the wargames to which I have repeatedly referred it is how vital European preparedness is.

Dr. Mead refers to the frailty of European triumphalism about the Ukraine war. IMO that’s understating it. Any “triumphalism” is fantastical but it’s part and parcel of how the Europeans, the Germans in particular, have been behaving lately. They’ve been treating posturing and position statements as though they were accomplishments.

The editors of the Washington Post chide President Biden for his mishandling of classified documents. Both he and President Trump did the wrong things. Leaving aside the bickering over who was wrong-er, their conclusion is about right:

But none of that lets Mr. Biden off the hook. It is important that authority figures try to follow the rules and own up to their mistakes when they make them. Justice Department guidelines mean that no sitting president will be indicted. But maximum allowable transparency is vital. Mr. Biden needs to ditch the defensiveness. Acknowledging that he has grounds for regret would be a good start.

Eventually, perhaps the Congress will come around to the realization that a process for the change from one administration to the next needs to be codified into law, even amending the Constitution in the process if necessary. We have now had at least two consecutive administrations in which the process was bungled (from Obama to Trump leaving classified documents in Joe Biden’s possession, from Trump to Biden leaving classified documents in Trump’s possession). I suspect that the transition has been bungled much more frequently than that.

Absent that the bickering only serves political actors.

Many of the readers here are probably not familiar with the Korea JoongAng Daily. It’s a South Korean daily. I wanted to pass along this editorial:

The world’s most populous country saw its population decrease by 850,000 last year to total 1,411,750,000 for the first time since the Great Chinese Famine in 1961. The fall in population and working population will translate into that much of a decline in consumption and output. The phenomenon is a loss not just for the country but the world economy. South Korea relies heavily on external trade, especially with China. Exports to China made up 22.8 percent of total outbound shipments last year. Our 2,000 import items in raw materials and others rely on China for more than 80 percent. Outbound and inbound trade must brace for risks from China.

The economy must wean away from China. Government and corporate efforts must accelerate. Korea must pivot more aggressively towards India, rising as the next China, and Vietnam which was the largest surplus maker for Korea last year, as well as other Asean countries and the Middle East.

I found the editorial baffling. I simply don’t see a direct causal connection between a decline in China’s population and a decline in its trade with South Korea. If anything it might be the other way around.

South Korea runs a trade surplus with China. It doesn’t sell much in the way of consumer goods to China—most of its sales to China are integrated circuits, machinery, and refined petroleum. Even with a declining population it’s hard for me to imagine China’s demand for refined petroleum products declining in the near to medium term. If anything I expect China’s demand for ICs and machinery to rise. Just because it has fewer people doesn’t mean it will stop manufacturing for export.

In a piece at Military.com Geoff LaMear expresses a view that is contrary to the prevailing wisdom. According to him sending Patriot missiles to Ukraine is an “expensive blunder:”:

The truth is Patriot systems are as likely to stop the drone threat as a water balloon is to stop a forest fire. The mismatch is too great. And Washington’s persistence despite that reality is a blunder that will prove costly.

Air defenses rely on radars that scan for threats in a specific area. For Patriot systems, these areas are small and meant to be pinpoint locations like a military base or power plant. A single Patriot system would not alter the inherent vulnerability that Ukraine experiences in the air, given its vast front of fighting against Russian troops. It might protect a few nodes that Kyiv prizes, but Russian air attacks can counter these missile systems.

He has an additional criticism:

Ukraine is also not equipped to use Patriots. American personnel spend months studying what is a complex and highly technical system. That time is dedicated by military planners despite U.S. troops typically facing no language barrier in doctrinal or technical documents, having access to experts with years of experience, and support from the contractors who design the systems.

Ukraine will still need extensive support to operate and maintain the equipment even after training. To employ Patriots effectively would require embedding U.S. personnel with these missile batteries. Doing so risks U.S. casualties and a direct U.S.-Russia confrontation that could easily escalate.

and here’s his peroration:

The knee-jerk dosomethingism in Washington doesn’t help. It may produce warm and fuzzy feelings, but this doesn’t translate into a peace that will bring a return to normalcy for Ukraine’s people. What’s more important, the pretense of moral superiority or an end to the carnage?

Washington absolutists may say that principle trumps pragmatism. But how many thousands will have to die before the inevitable negotiations bring about the war’s end? Tactically questionable weapon shipments won’t change the outcome. They may delay it. And ordinary Ukrainians and Russians, oftentimes conscripted into a war not of their choosing, will continue to bleed until that reality is acknowledged.

Sadly, I think that ensuring that Russia loses the war resoundingly has overwhelmed any desire to “end the carnage”.

I don’t honestly know whether sending Patriots to Ukraine is right, wrong, or irrelevant. I have to take the word of those with more knowledge than I. While the expense is certainly a consideration, I’m actually more worried about the time and lives that will be used in learning that it’s the wrong use for that weapons system. And unlike many Americans, I’m a lot more interested in seeing that Russia doesn’t win outright than in ensuring that they lose.

I will only repeat what I have said before:

1. We classify too many documents.
2. There should be a regular, mandatory process under which exiting administrations turn over all classified documents with searches performed by some competent third party or pseudo-third party agency.

IMO putting such a procedure in place should be one of the new Congress’s highest priorities. Among its many other urgently high priorities.

I found this lament for Japan by Rupert Wingfield-Hayes at BBC touching. The TL;DR version of the piece is

• Forty years ago Japan was the richest country in the world on a per capita basis
• Now it’s lagging behind many developed countries including Germany, the United Kingdom, and United States
• He attributes the decline to Japan’s demographic collapse
• Japan’s population is unlikely to recover through immigration

Here’s a snippet:

In front of the Imperial Palace in Tokyo, the skyline was dominated by the glass towers of the country’s corporate titans – Mitsubishi, Mitsui, Hitachi, Sony. From New York to Sydney, ambitious parents were imploring their offspring to “learn Japanese”. I had wondered whether I’d made a mistake plumping for Chinese.

Japan had emerged from the destruction of World War Two and conquered global manufacturing. The money poured back into the country, driving a property boom where people bought anything they could get their hands on, even chunks of forest. By the mid-1980s, the joke was that the grounds of the imperial palace in Tokyo were worth the same as all of California. The Japanese call it the “Baburu Jidai” or the bubble era.

Then in 1991 the bubble burst. The Tokyo stock market collapsed. Property prices fell off a cliff. They are yet to recover.

A factor Mr. Wingfield-Hayes does not consider in his calculus is public debt:

Japan has the highest debt to GDP ratio of any major developed country—right around 230%. As I have mentioned before debt overhang is known to be a drag on GDP growth.

As to immigration as a solution to Japan’s problems, let’s make a comparison. I do not believe that Germany can spur its economy by importing illiterate non-German speakers from Africa and such “workers” will inevitably become a drag on German public services. In many cases migrants are making their way to Germany expressly for the purpose of availing themselves of public services. It’s not a winning formula.