I didn’t get to blog this yesterday, but it’s still worth a mention. It’s always wise to check your assumptions when promoting an idea, especially when that idea is that deficits are wonderful:
A reporter once asked President Reagan if he had anything to say in defense of his deficits. “No” answered Reagan, “they’re big enough to defend themselves.” Liberals howled, and conservatives chuckled, but no one questioned the premise of the question: that deficits are inherently a bad thing. The argument has always about whether the bad thing called deficits are too large and whether they will ever be paid off, not whether they can actually be good for our country. For the record the answers are: no, they’re not too big (see attached chart); no, they will never be paid off, and yes, they can be a good thing.
I actually like the premise of the question, because deficits involve politicians playing with other people’s money. Considering some of those other people haven’t been born yet, caution and responsibility seem to be key. But that’s not the flawed assumption I’m concerned with in this essay.
When strong nations go to war, they borrow money. Weak nations, not so much. That’s because strong nations usually win, and winning nations usually repay their creditors. Rich and successful people don’t have any problem getting someone to loan them money. The same holds for wealthy and successful nations. That’s why, historically, the interest rate of a nation’s bonds is a pretty good inverse indicator of investor confidence in the war effort. The more trouble investors see on the horizon, the more compensation they demand for the added risk.
This is the way the world works, some might say, but is it right? What about the children? Is it really fair for them to shoulder the burden of our wars? Heck yeah, it’s fair. Number one, they won’t be children when they start to share the burden of the national debt. Number two, they benefit.
Here’s the flawed assumption. The author expresses a selfish belief that we can have anything we want, and as long as the country survives, the children should just shut up. We’re wise, or at least rich. That’s enough, right?
The author concludes:
Defense is a sort of infrastructure, too. It provides benefits for future generations, just like roads and bridges do. Is it some kind of rip-off that my kid’s future tax bills will include interest payments from the war against Jihadists? Not if we win.
Good grief. Of course defense is vital, and the benefits of maintaining a strong nation carry over beyond just the immediate expenditure. (An assumption with some danger, but I can accept it.) No sane person believes that government shouldn’t protect its people. Defense is a legitimate expense for any government and should be made to the point that the nation remains safe. But that does not give a free pass for rampant spending elsewhere at the expense of future generations.
Look at the federal budget. The bulk of expenditures are in entitlements (Social Security, Medicare, etc.), not defense. To ignore these and believe that the war on Jihadists somehow excuses annual deficits of hundreds of billions of dollars is absurd. Eventually, the interest will absorb the entire budget, so the government will need further resources. At what point does this stop? (Hint: It begins with bank and ends with ruptcy.)
If the author wanted to make a case that the national debt is good, and shouldn’t be paid off, we can talk. He’d still be wrong, I believe, but there might be a case. But the deficit? Ridiculous. There is more than just interest rate signaling involved. Namely, interest payments.
If we want to do something for the children, we need to teach them economics. And the author of this essay should be last in line for the job.