Speaking of unintentional humor, in his Washington Post column Charles Lane is worried that we’re borrowing from foreign countries to finance political squabbling:
What accounts for the current ramp-up in the debt, at a time of relative peace and steady if unspectacular economic expansion? On June 25, the Congressional Budget Office reported that, under the most politically realistic forecast, the debt will hit 105 percent of gross domestic product by 2029, a level not seen since World War II.
Obviously, federal spending exceeds revenue, as it has every fiscal year since 2002. On a deeper level, though, the explanation is that the United States is at war — with itself. It is manifestly not a shooting war such as the one between 1861 and 1865, which drove the federal debt to a then-record of just over 30 percent of GDP.
Yet polarized and mutually distrustful Republicans and Democrats are engaged in a Cold Civil War, and have been for years, even before the Trump presidency. The impasse has rendered impossible the compromises and trade-offs — tax increases and spending cuts, or some combination thereof — needed to adjust the existing array of government programs to modern priorities, and to available national resources. Two such deals in centrism’s last heyday, the 1990s, helped create a balanced budget from fiscal 1998 through fiscal 2001, the first and only ones of the past half-century.
In more recent years, however, politicians keep the government more or less going via short-term deals (usually increasing outlays on existing programs and priorities) and borrowing, borrowing, borrowing — to the tune of 42 out of every 1,000 dollars the U.S. economy will produce in the current fiscal year, according to the CBO.
Okay, I’ll bite. According to the Treasury during fiscal 2018, foreign purchasers reduced their holdings of Treasuries from $6,433.3 billion to $6,180.5. How does a net reduction finance anything?
Spending exceeds revenues because we’re spending too much. Full stop. We are borrowing consumption from the future to pay for today’s consumption. We’re also deluding ourselves into thinking that it’s investment. Whatever else they are, end of life care for the elderly, pensions, endless foreign wars, and college degrees which do not lead to gainful employment are not investments in any measurable sense. They are consumption. We need to reduce consumption and increase proper investment. Renaming consumption investment does not make it investment.
