Make America self-reliant again

Learn the word: autarky

For decades Americans have enjoyed access to cheap goods, due in large part to the fact that we’ve outsourced our industrial and supply capacity to cheap, overseas markets like China and Vietnam. The free traders, roosting in their D.C. think tanks and on Wall Street, worry that the U.S.-China trade war is uprooting our supply chains and that Huawei (shown to have deep connections to the Chinese intelligence apparatus) is only a theoretical threat. They tell us that we must come to terms with China’s rise, that there is no other way. But what if there was?

My critics will more than likely dismiss this idea either insane or reckless. But throughout the late 19th and 20th century, it was a policy that led to prosperity and self-sufficiency. I’m talking about autarky. In our over-globalized world, a policy of total autarky is infeasible. But a degree of autarky should be recognized as self-evidently in America’s national interest.

Autarky, for those unfamiliar, was an economic and industrial policy of self-reliance wherein a nation need not rely on international trade for its economic survival. This is not to say that said nation rejected international trade or isolated itself from the global economic order, rather that it merely could survive on its own if necessary…

In the early days of the American republic, Alexander Hamilton advocated for a limited measure of autarky. Hamiltonian autarky—or industrial self-reliance—aimed to protect weak American industries from foreign manipulation by the likes Great Britain and France. Today, we must look to protect what remains of American industry from the manipulations of state-backed industrial sectors in China…

Critics, namely neoliberal internationalists and free-trade libertarians, will assuredly wail and gnash their teeth about the bounty of cheap consumer goods we have “won” from free trade, but to that I would caution: The United States risks becoming its own special category of the “sick man”—an obese has-been that sinks into a recliner and stuffs its face with cheap consumer goods provided by its global rivals, looking back woefully on its glory days. But it is not yet too late.

Hamilton was far from the only advocate of American economic independence.  Henry Clay, possibly the most influential Congressman in the nation’s history, fervently believed in the “American System” that emphasized a tariff to protect and promote American industry, a national bank to foster commerce, and federal subsidies for roads, canals, and other “internal improvements” to develop profitable markets for agriculture.  It was an inward-looking “America First” way of developing the young nation’s economy into the powerhouse it would eventually become.

Bringing critical manufacturing home reduces our dependence upon others, and provides large numbers of well-paying jobs — jobs that will be essential as our economy recovers from the COVID crisis.  It will also reduce avenues of influence and espionage by our enemies, such as the telecommunication company Huawei.  We’ve been given a glimpse of how helpless we will soon be if we stay on our current path.  Will we be foolish enough to return to the status quo ante when this is all over?

Marx and medicine don’t mix

As Americans turn their eyes to Uncle Sam for guidance about the COVID-19 pandemic, it’s a certainty that Leftists will be mindful of Rahm Emanuel’s mantra “never let a crisis go to waste.”  Every misstep and deficiency will be touted as an example of why there should be a single, government-run healthcare system in our country.

Fortunately, we have a counterexample: China.

I was witnessing the kind of maximum, almost brutal efficiency a society must develop when the state is the master and the individual is merely a subject. Why would a Communist country not have an effective FDA? Because who are you going to complain to if you get tainted food? The government? They don’t answer to you. The press? They are owned by the government. And again, they don’t answer to you.

So what if you don’t like the conditions in the hospital? Where else are you going to go? This hospital is the last (and only) stop. You can’t opt for another place and then just pay out of your own pocket. The government has capped financial upward mobility. There is now “income equality.” And that means nobody has the means to buy their way into a different (or better) situation. And even if you could, one doesn’t exist. The state provides it all. You’re stuck.

Single payer also means single buyer. That means the dynamics of the market get eliminated. One of the natural checks-and-balances of finding a hot-shot surgeon willing to do the risky procedure or even just seek a second opinion, get chopped away little by little. Because now we’re answering to the government. It isn’t answering to us. After all, where are we gonna go? They’ve got us. And our cancer treatment or skin graft surgery or kidney stone blast is up to their red tape. Sure, we can get in the door for free. But we might die in there, waiting on someone with no incentive and who faces no recourse, to change our plasma bag.

That’s a good summary of two basic problems with government-run anything: a lack of competitive incentives to improve and reduce costs, and no recourse when the product/service isn’t what is needed.  Left unmentioned in the linked article is an additional problem: when government is a provider, it also decides who gets the provisions.  They can decide you don’t merit the product/service because you’re too old, or a troublesome dissident, or a newborn who would be ‘too expensive’ to save.

There are legitimate criticisms of how healthcare is provided today in the United States.  Costs consistently rise faster than general inflation, making much of it unaffordable for those without access to group insurance plans or government programs.  It can be argued, though, that this is the case precisely because the government is already heavily involved.  The idea of free markets is that the cost of goods and services will reach an equilibrium based on what the market (consumers) will bear.   But the presence of a purchaser/guarantor (Uncle Sam) who believes he can throw as much money as he wants at a problem, eliminates any market incentives to become more innovative and efficient.  In fact, Sam’s presence as a customer is usually accompanied by extra overhead and red tape that make the product/service less efficient.  This same dynamic is at work in higher education, where the rising costs of tuition parallel the rise of government aid and the availability of student loans.  If County General Hospital and the University of Hereville could only charge what the average American family could afford, their operations would, of necessity, become leaner and more efficient (sorry, diversity bureaucrats!).

This is not to say government doesn’t have a role.  But instead of being a consumer, it’s supposed to be a referee — the one to whom people have recourse when an industry is being abusive or careless.  The recent requirement for hospitals to post prices for most common procedures is a tiny step in the right direction.  The requirement needs to be clarified that hospitals provide the lay reader with context by linking associated costs and giving a reasonable range of the average total price for a given procedure.  Such information is necessary for customers to know their options and take advantage of competition (which currently is next to nonexistent).

The same is true for pharmaceuticals.  Patients in the U.S. can pay anywhere from two to six times more than in other countries for the same brand-name prescription drugs.  In this paragraph’s linked article, the argument is made that’s because buying is more fragmented than in a country like the United Kingdom, whose National Health Service is a large, single buyer with associated market clout.  CNN is, of course, in favor of nationalizing U.S. health care, so it makes sense that would be their take on it.  But as they admit in their own article, Medicare is legally forbidden from negotiating drug prices (wonder who lobbied for that rule).  It isn’t that the market is ‘fragmented,’ it’s that there are only a few big players, including Uncle Sam.  When a prescription drug becomes available in an over-the-counter strength, pricing shifts to a broader market: the individual consumer, who will compare prices and look to save money.  There’s no reason this wouldn’t work in the prescription category:

[Dr. Peter] Bach, of Memorial Sloan Kettering, said that when buyers can say no, for whatever reason, they can control prices better. In fact, Bach’s hospital refused the colon cancer drug Zaltrap in 2012 because it cost double that of a reasonably good alternative, Avastin. The company that manufactures Zaltrap, Sanofi, worried that other cancer hospitals and doctors would follow suit, so it halved the price of the drug.

And they would do the same if it was millions of Americans individually making the same cost comparisons in their purchase decisions.  Granted, for some medications there are no approved substitutes, so such competition wouldn’t apply.   But those situations occur in part because drug manufacturers can patent their new products for as much as 20 years.   I sympathize with the argument that development can be expensive and it’s right to expect a return on investment.  But given how many drug-related trinkets I see in doctor’s offices and patient discharge bags, I’m not sure it takes two decades to recoup costs on an effective new medication.  I’m wary of any scheme wherein government determines prices, so the preferred solution would be to reexamine what a reasonable patent period should be before generic equivalents are allowed on the market.  After that point, let market forces work.

As repeated examples have shown in history, the equality Marxism achieves is an equality of misery for the masses, with exceptions and privileges for those running the Leviathan of government.  That’s not the right prescription for whatever ails us.

A pivotal pathogen?

COVID-19 is now the topic du jour across the planet.  Perhaps nothing exemplifies the interconnectivity of our world than a novel virus that appears in China, then spreads to every continent but Antarctica.  As such, it’s causing humanity to rethink a number of trends.  We may look back on this time as a pivotal one.

The reaction to the excesses of globalism had already begun with the election of Donald Trump, who appealed in 2016 to those most left behind by the paradigm.  For the first time since Ross Perot warned in 1992 of the “giant sucking sound” of industry that would be pulled out of America through the North American Free Trade Agreement and similar arrangements, a president openly questioned whether the status quo was truly beneficial to America.  Long-ignored trade deficits with potential rivals such as China came under scrutiny, as did the practice of obtaining essential goods through such sources.

Today’s coronavirus scare will accelerate that trend, regardless how mild or deadly the virus is in the end, because for the first time, the vulnerabilities inherent in globalism are easy to understand:

While many are rightfully concerned about stopping the virus, few are focused on the fact that the more it spreads, the more the U.S. ability to treat any Americans who are stricken is vulnerable to the tender mercies of the Chinese Communist Party because of a strategic shift in health care that occurred without debate or decision in Washington.

Everything from antibiotics to chemotherapy drugs, from antidepressants to Alzheimer’s medications to treatments for HIV/AIDS, are frequently produced by Chinese manufacturers. What’s more, the most effective breathing masks and the bulk of other personal protective equipment — key to containing the spread of coronavirus and protecting health care workers — and even the basic syringe are largely made in China. The basic building blocks of U.S. health care are now under Xi’s control.

The list doesn’t stop at medical commodities, either.  The Trump administration has recognized how dependent the U.S. had become on China as a source of rare earth minerals, a strategic category of raw materials upon which many modern devices depend.  The U.S. has deposits of such minerals, but largely lacks the capacity to mine and process them — after all, everything is done more cheaply in China, right?

We are beginning to realize the multifaceted hidden costs of offshoring — costs that were never publicly factored into the promotion of globalism.  Over time, the public has come to appreciate how many manufacturing jobs were lost — jobs that provided useful work and a “living wage.”  Most criticism of the emerging global economy has been predicated on that aspect.  But what was good for the corporate bottom line devastated families both in the U.S. (unemployment and despair as skills became irrelevant) and in China (sweatshop hours, bad working conditions and little pay).  In fact, one of the revelations of the current crisis is just how bad China’s industrial and urban pollution has become.  In short, it’s cheaper to make things in China because labor can be underpaid or even conscripted, there are no Occupational Safety and Health Administration-type standards to worry about, and none of the manufacturers there have to worry about mitigating pollution (at least, until it embarrasses the government).  Those tacky inflatable holiday lawn figures (sorry, personal pet peeve) and other assorted non-essential trinkets cost far more than what WalMart charged the consumer who purchased them.

Globalism isn’t the only paradigm that will be questioned in the weeks ahead. Ever since the dawn of the Industrial Age, work increasingly has been performed outside the home, concentrated first in factories and then offices.  This drove a reorganization of society.  Families spent more time apart, as fathers, then mothers, increasingly found their sustenance by working for others.  This led to children learning more from schools and other institutions than from growing and learning within a family economy.  People left the countryside for the cities to find work.  The rise of suburbia cemented the necessity of automobiles and led to the invention of the traffic jam as infrastructure failed to keep pace.  Only since the creation of the internet has there been a serious attempt to change this equation by finding ways to work from home.

While it isn’t practical for every type of work, telecommuting may be about to get a huge turbocharge:

In the past week, companies across the U.S. have started canceling major conferences, halting most business travel and urging employees to work from home in response to the growing viral outbreak in the country. Few will require telecom operations as vast and complicated as ICANN’s, but as companies such as Twitter and Microsoft start shifting to virtual work en masse, the vision of a decentralized work world long promised by telecommuting evangelists is starting to materialize.

Even if businesses intend for their policies to be a temporary response to COVID-19, once it’s discovered that desk-based workers can be productive — possibly more so — without being corralled into cubicles, the public may seriously question a return to the old ways, with its long commutes, office squabbles and occasional control freaks.

Higher education has been gravitating toward more online learning for some time now.  As a result, many universities and colleges are somewhat prepared to continue their activity remotely by scaling up what they’re already doing in some areas.  The same cannot be said of most public elementary and secondary schools.

What if this pandemic led to decentralization, more time with family instead of traffic, increasing interest in homeschooling options, a desire for national self-sufficiency and security, and a return of well-paying industrial jobs to the U.S.?  There is a possibility the blight of COVID-19 may contain the seeds of long-term benefits.  The city of Enterprise, Alabama, has a monument to the boll weevil, an insect that devastated the cotton economy of the southern U.S. in the early 1900s.  Despite the infestation, farmers were reluctant to abandon cotton, due to its profit and ability to grow on land few other cash crops could tolerate.

Enter the lowly peanut.  An Enterprise (and enterprising) man convinced some farmers to switch to peanuts, and those who did found their fortunes rising.  By 1919, as the boll weevil continued its destruction, the county around Enterprise, Alabama, was the largest producer of peanuts in the country, and shortly began to produce peanut oil.  Local farmers continued to diversify their crops, adding sugar cane, potatoes and others, and the area found renewed prosperity.  All because of necessity brought on by a bug.

What lasting changes will today’s “bug” bring?

Setting an example

Many of us of a certain age are increasingly concerned about the growing popularity of socialism among the younger generations.  We rightfully point out that the horrors of communist life in the 20th Century have been minimized in our history classes, so that the siren sound of “equality” has regained some of the appeal it lost amid prior carnage.

The truth, though, is that America has been flirting with socialism for about a century ourselves — we just haven’t called it that.  And while the young may not be as wise as we might hope, they’re not completely blind to the hypocrisy:

…the irony is that these old anti-socialists already live in a wonderland of government generosity that bears a passing resemblance to the socialism they so dread.

The federal government already guarantees single-payer health care to Americans over 65 through Medicare. Senior citizens already receive a certain kind of universal basic income; it’s called Social Security. While elderly Americans might balk at the idea of the government paying back hundreds of billions of dollars in student debt, they are already the grand beneficiaries of a government debt subsidy: The mortgage-interest deduction, a longtime staple of the federal tax code, effectively compensates the American homeowner (whose average age is 54) for their mortgage debt, thus saving this disproportionately old group approximately $800 billion in taxes owed to the federal government each decade. The economist Ed Glaeser has likened these policies to “Boomer socialism.”

In this framing, Sanders is not offering his more youthful constituency a radically new contract. Instead, he is extending the terms of an existing social contract to cover more—and, necessarily, younger—Americans.

Now, while I’m inclined to agree with this diagnosis, I don’t agree with the proposed treatment: “Some, but not all, of the problems facing young adults would be well addressed with an expansion of government.”  The socialism we’ve tacitly accepted since the days of the Progressive Era and FDR has already warped our society and economy in harmful ways.  Government spending in the areas of healthcare and education (much of it debt subsidy in the latter) has allowed prices in those arenas to skyrocket far beyond the rate of inflation (itself a result of government meddling with the currency).  Want to reign in health costs?  Put the consumer back in control by forcing providers to post price lists and compete for business that’s paid for at the point of sale.  When someone else is paying the bill, there’s no incentive to reduce costs, and those who don’t have that “someone else” are left priced out of the market altogether.  Same with education – get the government treasury out of it, and institutions will suddenly no longer have funding for “diversity coordinators” that add little value to the transmission of useful knowledge that leads to gainful employment.

For many years I’ve said I’d love to have the option to sign away my claim to any Social Security benefits in exchange for never paying the tax again.  As I get closer to retirement, that’s obviously less of a good deal for me.  But while I’d love to have the taxes I’ve paid in my private accounts rather than in Uncle Sam’s, the fact is that *if* I draw what Social Security currently projects for me (something I certainly don’t count on), I’ll recoup my contributions in less than 6 years.  So if I live another decade or more after that, where’s the money coming from?

The paychecks of younger workers, that’s where — the very generation that realizes the system will not work for them as it has their elders.  Where their contributions don’t cover it all, Uncle Sam’s uses his credit card, the balance of which is a drag on everyone’s fortunes whether they realize it or not.  For example, Sam is desperate to keep interest rates low, so he can continue to carry that balance (and add to it!).  But in doing so, he robs those who dutifully save of the interest they would normally make as a result of their frugality.  Since the elderly on a fixed income can no longer live on interest earnings, Social Security becomes an essential part of most people’s retirement plans… and the cycle begins anew.

That which can’t go on forever, doesn’t.  Our current structures are unsustainable.  We are at a crossroads: either we double down on what is known to be a failed economic model (planned economies), or we get the government out of the driver’s seat.  We need to find a way to set the sun on Social Security and Medicare (just for starters), while putting consumer protections in place like truthful labeling of medical costs and investment risks.  Government is supposed to police abuses of the market, not become the major provider of a good or service.  I’ve said it before: the worst result of our current hybrid system is that it isn’t true market capitalism in many respects, but is believed to be.  As a result, truly free market economics gets a bum rap.

So it’s worth keeping in mind the difficulty of convincing Bernie Bros not to point our nation toward full-blown Marxism when we’re already relying on programs of which Karl would have heartily approved.

Revenue isn’t the problem

Yesterday’s post dealt with the precarious financial situation Uncle Sam is in.  Interestingly, today I happened to stumble onto U.S. News and World Report’s ranking of the “Best States for Fiscal Stability.”

The top three are Tennessee, Florida, and South Dakota, in that order.  What do all of these have in common?

They are three of the eight U.S. States that still don’t have a personal income tax.  Tennessee does tax dividend — investment — income, but not wages.  But it relies mostly on sales taxes to pay its bills.  So why is it so stable?

For one thing, its Constitution requires a balanced budget.  Spending in a given year cannot exceed revenue collections and reserves.

Maybe Uncle Sam should take a trip to Nashville before he has to face the music.

UPDATE: as I was saying

That which can’t continue, doesn’t

The fiscal day of reckoning may be close at hand for the United States:

According to the U.S. Treasury Department’s Office of Debt Management, the U.S. government is just five years away from the point where every new dollar it borrows from the public will go toward funding interest payments on the national debt.

That is the main takeaway from the Debt Management Office’s Fiscal Year 2019 Q1 Report, which featured the Office of Management and Budget’s latest projection of the U.S. government’s borrowing from the public…

Net interest on the national debt has become one of the fastest growing segments of federal spending. When the national debt reaches the point where all newly borrowed dollars must be used to pay this mandatory expenditure, the U.S. government will have passed the event horizon that marks the boundary of the national debt death spiral.

Cities and territories in the United States that have crossed that crisis point have either gone through bankruptcy proceedings or their equivalent, or they have implemented major fiscal reforms that reversed their fiscal deterioration, wherein the best-case scenarios, they acted to restrain the growth of their previously out-of-control spending to restore their fiscal health.

Interest on the national debt is going up quickly for two reasons.  Obviously, the government continues to spend waaaaaaaaay more than they squeeze out of the economy (us) through taxation, adding to the total amount it owes.  More importantly, however, the many record deficits recorded over the past 10 years were done so at historically low interest rates (engineered by the Federal Reserve, which in the process robbed productive citizens of some of the proceeds they would normally have earned through their savings).  Inevitably, those rates have begun to climb again.  It may seem incremental on a chart, but keep in mind that just one percent of $22 trillion is $220 billion.

Continue reading

Tariffs and national self-interest

Patrick Buchanan provides a succinct summary of why Trump’s emphasis on tariffs in the relationship with China is hardly unprecedented.  In fact, one could say it’s a return to the policies that once made a young nation great:

A tariff may be described as a sales or consumption tax the consumer pays, but tariffs are also a discretionary and an optional tax. If you choose not to purchase Chinese goods and instead buy comparable goods made in other nations or the USA, then you do not pay the tariff.
China loses the sale. This is why Beijing, which runs $350 billion to $400 billion in annual trade surpluses at our expense is howling loudest. Should Donald Trump impose that 25% tariff on all $500 billion in Chinese exports to the USA, it would cripple China’s economy. Factories seeking assured access to the U.S. market would flee in panic from the Middle Kingdom.
Tariffs were the taxes that made America great. They were the taxes relied upon by the first and greatest of our early statesmen, before the coming of the globalists Woodrow Wilson and FDR.
Tariffs, to protect manufacturers and jobs, were the Republican Party’s path to power and prosperity in the 19th and 20th centuries, before the rise of the Rockefeller Eastern liberal establishment and its embrace of the British-bred heresy of unfettered free trade.
The Tariff Act of 1789 was enacted with the declared purpose, “the encouragement and protection of manufactures.” It was the second act passed by the first Congress led by Speaker James Madison. It was crafted by Alexander Hamilton and signed by President Washington.

As Buchanan mentions, tariffs were once an integral part of an economic policy that became known as “The American System” — a policy so successful that other nations emulated it.  It’s worth noting the Federal government undertook its first infrastructure projects with almost no other source of funding other than tariffs (land sales being the main exception).  I’ll admit: I’m not a fan of the Federal government doing public works projects.  But the limited revenue stream tariffs provided kept such activity modest in the early republic, and for the most part it’s easy to see the wisdom of such projects as lighthouses, postal routes and the Cumberland Road.

Still, public works projects were controversial, even then.  Many in the South believed tariffs disproportionally benefitted northern industrial interests through protectionism and infrastructure.  Tariffs sparked the Nullification Crisis in South Carolina, and was cited as one source of discontent as States left the Union after Lincoln’s election in 1860.  Sectionalism aside, the nature of tariffs as a voluntary tax that promotes national self-reliance and internal growth recommends it as one of the best ways to fund a limited government.  Certainly, the explosive growth of Uncle Sam after institution of the Income Tax is evidence of that.  I’ve said before that a national sales tax would be preferable to an income tax (provided it didn’t result in both being in effect).  Many of the same reasons apply to tariffs.

Buchanan rightfully points out that abandoning so-called “free trade” for a tariff system that enforces fair trade will be painful in the short term, much like a junkie getting over their addiction.  American wages have been stagnant in inflation-adjusted terms since the 1970s.  The only reason we appear to have a higher material standard of living is the influx of overseas goods that appear cheap on the price tag, but which in reality take a heavy toll on the nation in terms of lost industries, disappearing jobs and a growing economic dependency on outsiders.  That doesn’t even take into account that many of the reasons goods made in places such as China are ‘cheaper’ is that they lack protections for workers and the local environment — impacts we considered so important here that we willingly added them to the economic burden of production.  In short, “free trade” as it’s currently practiced is an apples-to-oranges comparison that hides or downplays the negative aspects of globalism.

Why are we buying from China?

It’s no secret the U.S. and China are increasingly at odds with each other.  China fully recognizes — even embraces — this development, pouring effort into projects like the Confucious Institutes and developing spies among the key staff of important members of Congress.  China holds a significant fraction of the U.S. public debt — a potential lever in any showdown, given our nation’s reliance on deficit-spending.  While we’ve heard nothing but “Russia, Russia, Russia” since the 2016 presidential election, it’s China that poses the most long-term threat to U.S. national security.

And yet, we continue to enable them:

There are two ways for spies to alter the guts of computer equipment. One, known as interdiction, consists of manipulating devices as they’re in transit from manufacturer to customer. This approach is favored by U.S. spy agencies, according to documents leaked by former National Security Agency contractor Edward Snowden. The other method involves seeding changes from the very beginning.

One country in particular has an advantage executing this kind of attack: China, which by some estimates makes 75 percent of the world’s mobile phones and 90 percent of its PCs

Supermicro had been an obvious choice to build Elemental’s servers. Headquartered north of San Jose’s airport, up a smoggy stretch of Interstate 880, the company was founded by Charles Liang, a Taiwanese engineer who attended graduate school in Texas and then moved west to start Supermicro with his wife in 1993. Silicon Valley was then embracing outsourcing, forging a pathway from Taiwanese, and later Chinese, factories to American consumers, and Liang added a comforting advantage: Supermicro’s motherboards would be engineered mostly in San Jose, close to the company’s biggest clients, even if the products were manufactured overseas.

Today, Supermicro sells more server motherboards than almost anyone else. It also dominates the $1 billion market for boards used in special-purpose computers, from MRI machines to weapons systems. Its motherboards can be found in made-to-order server setups at banks, hedge funds, cloud computing providers, and web-hosting services, among other places. Supermicro has assembly facilities in California, the Netherlands, and Taiwan, but its motherboards—its core product—are nearly all manufactured by contractors in China…

“Think of Supermicro as the Microsoft of the hardware world,” says a former U.S. intelligence official who’s studied Supermicro and its business model. “Attacking Supermicro motherboards is like attacking Windows. It’s like attacking the whole world.”

The entire, detailed article, is worth reading. As you do, consider that our government increasingly uses server-enabled cloud computing, even for the most sensitive of information. Does it make sense for our government and military to use hardware produced by our all-but-in-name adversary? What carefully implanted surprises now await us in an actual showdown with this emerging power? Shouldn’t our policy be to encourage cost-effective manufacturers here at home?

Over the past 30 years the world became obsessed with obtaining cheap products from China. We’re finding out now they may have cost more than we ever suspected.

Make America great again — make America self-reliant, manufacturing its own goods again.

Uncle Sam’s debt is getting “interest”ing

That which cannot go on forever, ceases:

Interest payments will make up 13 percent of the federal budget a decade from now, surpassing spending on Medicaid and defense.  Finding the money to pay investors who hold government debt will crimp other parts of the budget. In a decade, interest on the debt will eat up 13 percent of government spending, up from 6.6 percent in 2017.

Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.

Some members of Congress want to set the stage for even more red ink. Republicans in the House want to make last year’s tax cuts permanent, instead of letting some of them expire at the end of 2025. That would reduce federal revenue by an additional $631 billion over 10 years, according to the Tax Policy Center.

Despite the tax cuts pushed by the Trump administration, the Federal government collected a record amount of tax revenue from October 2017 to August 2018. Washington doesn’t have an income problem. It has a spending problem.  Roughly a third of the Federal Budget in any given year is financed by borrowing money.  A family that ran its household budget that way would soon be bankrupt.  The Federal government has creative ways of masking its increasing insolvency, but it’s there nonetheless.  The spending spree of the past two decades was possible mainly due to low interest rates across the economy.  As the economic outlook in the U.S. turns upward, so will those interest rates.  A single percentage point increase equates to about $160 billion, given the official government debt of just shy of $16 trillion.  (Counting the ongoing raid of Social Security Funds — listed innocuously as “intragovernmental holdings” — the actual debt is over $20 trillion.)

In short, next year the government will spend close to $400 billion just to service the debt.  Not a penny of that amount will improve the infrastructure of our nation, modernize our military or provide services for our citizens.  It will simply go straight into the pockets of those who hold pieces of our country’s debt.

That debt has increased eight times faster than the government’s annual budget.  In 1981 — 37 short years ago, the U.S. debt hit $1 trillion for the first time.  That was an accumulation of more than two centuries.  In less than 40 years, that debt increased 1,600%.  The Federal budget over the same period increased from $1.9 trillion in 2015 dollars* to $3.8 trillion in 2015 — a “mere” doubling in spending.

We’ve been running like the cartoon coyote in thin air after leaving the cliff.  Gravity — in the form of normal historical interest rates — is about to kick in.

It will not be pretty.

___________________________________

* People are so used to hearing about inflation, and the need to “adjust for it” when comparing years, that few stop to ask what drives it.  The standard explanation is that basic market economics causes it.  Not true — government deficit spending does.  By flooding the market with dollars to enable his spending sprees, Uncle Sam diminishes the value of each individual dollar.  It is, in effect, a “stealth tax” on the spending power of Americans.  The value of a U.S. dollar remained remarkably stable from 1787 to 1913, with a directly convertible exchange rate of $20 to an ounce of gold.  Only after creation of the Federal Reserve, which enables this gorging on debt, did that change.  As of this writing, one ounce of gold is worth about $1200.  That represents an 85% loss of dollar value in just over a century.

The absolutely useless GOP

It’s clear at this point in history those of us who want a restoration of the characteristics that once made America great — prudence, self-discipline, foresight, statesmanship, to name a few — will have to look somewhere other than the GOP to find them:

Sen. Rand Paul (R-Ky.) was hoping his Republican colleagues would be embarrassed by their vote to jack up federal spending earlier this year and support his plan to phase in a balanced budget. Few were.

Paul got 20 other Republican senators on Thursday — less than half of the Senate GOP caucus — to vote for his “penny plan,” which would balance the federal budget over five years by cutting spending except for Social Security by 1 percent every year. No Democrats back the proposal…

“Republicans only care about budget deficits when they’re in the minority,” said Jason Pye, vice president of legislative affairs at FreedomWorks.

Mark Meckler, president of Citizens for Self Governance, agreed, saying, “There are very few sane people willing to have a rational discussion about fiscal responsibility … It’s obscene. These guys are pigs in slop.”

One percent a year should be easy to find in a $4 trillion budget.  But I’m sure the gluttonous swamp would cry the fiscal sky is falling (“Children will starve!  Seniors will be destitute!  Illegal aliens won’t have as much welfare support”).  Well, maybe not that last talking point (they aren’t completely foolish and willing to admit their agendas).  But here’s some perspective:

Paul’s plan would have reduced spending by $404.8 billion in the fiscal year that starts October 1. After the budget balanced in five years, spending would be held to 1 percent increases per year, resulting in a budget that was 14.6 percent bigger in 10 years that it is now.

In other words, even after balancing the budget, the overall size of it would continue to grow.  Don’t overlook the fact in the excerpt above that a mere one percent of Federal spending equals $404.8 billion!  A true conservative would say balancing the budget would be preparatory to starting to trim back the Federal Leviathan.  Yet these GOPers can’t even countenance the first step!

Putting America first, or “making America great again” is inseparable from solving our budgetary house of cards.  You failed once again, GOP.  When you ask yourselves how in the world a man like Donald Trump could get elected, just look in the mirror.

As for us, primary season is upon us.  One of my Senators just guaranteed he won’t have my vote.  How about yours?