New 728 Area Code is now
JL
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Deficits and Debts
Let’s clarify something. Often I hear the words ‘deficit’ and ‘debt’ used together, which is okay (because remedying the former results in the latter), but some folks don’t seem to recognize that they are not synonymous.
The
Federal deficit is the difference between (1) the amount of
money that Congress votes to spend each year and (2) the amount of money the
government takes in taxes and other income sources for that year. The government borrows to make up that
difference through Treasury bond sales and similar loans. Each year’s borrowing to make up that deficit
gets added to the amount still owed from earlier years’ borrowing for the same
reason and that total number is the national debt.
There is a statutory limit to the
amount of such debt that the nation can carry, similar to the
limit that one can owe on a credit card.
Failure to keep that limit up to the amount of the accumulated debt can
result in the inability to make interest payments on it, have funds with which to pay bills that would pile up, and to increase the
cost of further borrowing, if lenders can still be found to make loans to a
nation unable to pay its bills, all very bad things. Investors in government ‘paper’ (Treasury
bonds and notes) comprising that debt also risk losing some of the money
they put into what they thought to be a historically safe, conservative,
investment.
I have a solution to this problem, other than the obvious one of collecting enough taxes to pay for whatever spending Congress authorizes. Too many businesses and billionaires get away with paying far too little. Cracking down on them might reduce a year's deficit but the debt, accumulated over the years, would remain.
My 'compromise' solution would be to have two separate kinds
of debt, one to cover deficits created by borrowing for essential
spending to maintain the Armed Forces, Social Security, Medicare and other
government sponsored health insurance … and another kind of debt. created by borrowing
to fill deficits created by all other discretionary spending which might
include spending for the nation’s infrastructure, protecting the environment, paying government salaries, covering retirement benefits, paying bills, various 'subsidy' programs, 'welfare' benefits, and all else.
The first kind of debt’s limit would
be automatically renewed annually to what it has to be to cover that entire
debt, and the Treasury ‘paper’ sold to fund this borrowing would pay a lower
interest rate to lenders because of its resulting security. The country could not renege on these
debts. In effect, there would be no debt
limit for them.
Borrowing to cover the other
kinds of deficits, subject to a ‘traditional’ debt limit, would pay a higher interest rate to
lenders because of the annual risk of that limit not being increased by
Congress, with all of the unfortunate damage to the economy that would accompany
it.
It would be like having two
credit cards, one with no limit whatsoever and the other one subject to an
annually determined limit the amount of which would be up to the bank issuing the credit card.
This dual ‘ceiling’ will take a
while to kick in because of the existing
debt, with its single limit, which is not neatly divided in that manner, but it would put the nation’s borrowing on the
right track. At least it would narrow the battlefield between Republicans and Democrats down to arguing about which deficits would be funded by which of the two types of debt. There might even be a way to convert existing debt into either one of the two types I suggest, but I would leave
that to the economists, who have answers for everything, although they cannot
agree as to what they are.
JL
*
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The State of the Union Address
I am including this because I know some of you probably did not watch it on TV and do not read newspapers any longer. Rather than give you my thoughts on the President’s State of the Union
address on Tuesday night, here is Professor Heather Cox Richardson’s excellent summary
freshly written that evening. I have
highlighted certain passages in color.
“And then there was President Joe
Biden’s 2023 State of the Union address.
This is the annual event in our
politics that gets the most viewers. Last year, 38.2 million people watched it
on television and streaming services.
What
viewers saw tonight was a president repeatedly offering to work across the
aisle as he outlined a moderate plan for the nation with a wide range of
popular programs. He sounded calm, reasonable, and upbeat, while Republicans
refused to clap for his successes—800,000 new manufacturing jobs, 20,000 new
infrastructure projects, lower drug prices—or his call to strengthen the middle
class.
And then, when he began to talk
about future areas of potential cooperation, Republicans went feral. They
heckled, catcalled, and booed, ignoring House speaker Kevin McCarthy’s (R-CA)
attempts to shush them. At the State of the Union, in the U.S. Capitol, our
lawmakers repeatedly interrupted the president with insults, yelling “liar” and
“bullsh*t.” And cameras caught it all.
Extremist Marjorie Taylor Greene
(R-GA), her hands cupping her wide open mouth to scream at the president,
became the face of the Republican Party.
Biden began with gracious remarks
toward a number of Republicans as well as Democrats, then emphasized how
Republicans and Democrats came together over the past two years to pass
consequential legislation. Speaker McCarthy had asked him to take this tone,
and he urged Republicans to continue to work along bipartisan lines, noting
that the American people have made it clear they disapprove of “fighting for
the sake of fighting, power for the sake of power, conflict for the sake of
conflict.”
For the next hour the president
laid out a promise to continue to rebuild the middle class, hollowed out by 40
years of policies based on the idea that cutting taxes and concentrating wealth
among the “job creators” would feed the economy and create widespread
prosperity. He listed the accomplishments of his administration so far:
unemployment at a 50-year low, 800,000 good manufacturing jobs, lower inflation,
10 million new small businesses, the return of the chip industry to the United
States, more than $300 billion in private investment in manufacturing, more
than 20,000 new infrastructure projects, lower health care costs, Medicare
negotiations over drug prices, investment in new technologies to combat climate
change. He promised to continue to invest in the places and people who have
been forgotten.
Biden described a national vision
that includes everyone. It is a modernized version of President Franklin Delano
Roosevelt’s New Deal, and he very clearly invited non-MAGA Republicans to
embrace it. He thanked those Republicans who voted for the Bipartisan
Infrastructure Law, then tweaked those who had voted against it but claimed
credit for funding. He told them not to worry: “I promised to be the president
for all Americans. We’ll fund your projects. And I’ll see you at the
ground-breaking.”
But then he hit the key point for
Republicans: taxes. To pay for this investment in the future, Biden called for
higher taxes on corporations and the wealthy. He noted
that “in 2020, 55 of the biggest companies in America made $40 billion in
profits and paid zero in federal income taxes.” “That’s simply not fair,” he
said. He signed into law the requirement that billion-dollar companies have to
pay a minimum of 15%—less than a nurse pays, he pointed out—and he called for a
billionaire minimum tax. While he reiterated his promise that no one making
less than $400,000 a year would pay additional taxes, he said “no billionaire should
pay a lower tax rate than a school teacher or a firefighter.” He also called
for quadrupling the tax on corporate stock buybacks.
Republicans consider these
proposals nonstarters because their whole vision is based on the idea of
cutting taxes to free up capital. By committing to higher
taxes on the wealthy, Biden was laying out a vision that is very much like that
from the time before Reagan. It is a rejection of his policies and instead a
full-throated defense of the idea that the government should work for ordinary
Americans, rather than the rich.
And then he got into the
specifics of legislation going forward, and Republicans lost it. The minority
party has occasionally been vocal about its dislike of the State of the Union
since Representative Joe Wilson (R-SC) shouted “You lie!” at President Obama in
2009 (Obama was telling the truth); a Democrat yelled “That’s not true” at
Trump in 2018 as he, in fact, lied about immigration policy. But tonight was a
whole new kind of performance.
Biden noted that he has cut the
deficit by more than $1.7 trillion (in part because pandemic programs are
expiring) and that Trump increased the deficit every year of his presidency,
even before the pandemic hit. And yet, Congress responded to the rising debt
under Trump by raising the debt limit, cleanly, three times.
Biden asked Congress to “commit here tonight that the full faith and
credit of the United States of America will never, ever be questioned.” This,
of course, is an issue that has bitterly divided Republicans, many of whom want
to hold the country hostage until they get what they want. But they can’t agree
on what they want, so they are now trying to insist
that Biden is refusing to negotiate the budget when, in fact, he has simply
said he will not negotiate over the debt ceiling. Budget negotiations are a normal
part of legislating, and he has said he welcomes such talks. Tonight, once again, he asked the
Republicans to tell the American people what, exactly, they propose.
And then Biden did something
astonishing. He tricked the Republicans into a public declaration of support
for protecting Social Security and Medicare. He noted that a number of
Republicans have called for cutting, or even getting rid of, Social Security
and Medicare. This is simply a fact—it is in Senator Rick Scott’s (R-FL)
pre-election plan; the Republican Study Committee’s budget; statements by
Senators Mike Lee (R-UT), Lindsey Graham (R-SC), and Ron Johnson (R-WI); and so
on—but Republicans booed Biden and called him a liar for suggesting they would
make those cuts, and they did so in public.
Seeming to enjoy himself, Biden
jumped on their assertion, forcing them to agree that there would be no cuts to
Social Security or Medicare. It was budget negotiation in real time, and it
left Biden holding all the cards.
From then on, Republican heckling got worse, especially as Biden talked
about banning assault weapons. Biden led the fight to get
them banned in 1994, but when Republicans refused to reauthorize that law, it
expired and mass shootings tripled. Gun safety is popular in the U.S., and
Republicans, many of whom have been wearing AR-15 pins on their lapels, booed
him. When he talked about more work to stop fentanyl production, one of the
Republican lawmakers yelled, “It’s your fault.”
In the midst of the heckling,
Biden praised Republican president George W. Bush’s bipartisan $100 billion
investment in HIV/AIDS prevention and treatment.
And then, in this atmosphere,
Biden talked about protecting democracy. “For the last few years our democracy
has been threatened, attacked, and put at risk,” he said. “Put to the test
here, in this very room, on January 6th.”
With lawmakers demonstrating the
dangerous behavior he was warning against, he said: “We must all speak out.
There is no place for political violence in America. In America, we must
protect the right to vote, not suppress that fundamental right. We honor the
results of our elections, not subvert the will of the people. We must uphold
the rule of the law and restore trust in our institutions of democracy. And we must
give hate and extremism in any form no safe harbor.”
“Democracy must not be a partisan issue. It must be an American issue.”
With Republicans scoffing at him, he ended with a vision of the nation as
one of possibility, hope, and goodness. “We must be the nation we have always
been at our best. Optimistic. Hopeful. Forward-looking. A nation that embraces
light over darkness, hope over fear, unity over division. Stability over
chaos.”
“We must see each other not as enemies, but as fellow Americans. We are a good people.”
Arkansas governor Sarah Huckabee Sanders gave the Republican rebuttal. Full of references to the culture wars and scathing of Biden, she reinforced the Republican stance during the speech. “The dividing line in America is no longer between right or left,” she said. “The choice is between normal or crazy.”
She is probably not the only one who is thinking along those lines after tonight’s events, but many are likely drawing a different conclusion than she intended.”
JL
*
* * *
Photo Op
And while on the subject of the State of the Union address, Arizona’s Independent (formerly Democratic) Senator Kyrsten Sinema must have confused the session she was attending on Tuesday evening where Biden delivered his address with Sunday night’s Grammy Awards and dressed for the earlier event. Oh well, we all make mistakes. Or was she hiding a botched tattoo on her upper arm?
 |
| Who could miss her among the sea of duller colors? |
*
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Today’s Whig Party - The G.O.P.
Lincoln
said that a 'house divided cannot survive.' It is now clear that a party
divided cannot either. That describes today's Republican Party. Future history
books will put the hopelessly divided Republicans into the same category as the
hopelessly divided Whigs were in the 1850s. While there are disagreements among Democrats as
well, they are not as profound as those found in the G.O.P.
The G.O.P.'s disintegration will proceed further to its final stage when its House 'Freedom
Caucus,' probably numbering over one hundred Representatives, eventually dumps
the pathetically weak House Speaker (who allowed himself to be hijacked by them in
exchange for their support of him for his job) for not sufficiently buying into their
disrespect for democratic principles. They 'scuttled' the speakerships of John Boehner and Paul Ryan and will not hesitate to do the same with McCarthy.
We also see this in the open wound between Senators Mitch McConnell and Rick Scott. We saw
this well illustrated by the 'elementary schoolyard' behavior of many Republicans during the
President's State of the Union address. Again, Biden offered his hand and again they spit on it. But what else could be expected of those who are counted among the 'Freedom Caucus'? It is not inconceivable that House Democratic leader Hakeem Jeffries
will end up as House Speaker as the Republican majority there splits into two
parts when a replacement Speaker has to be chosen. Stranger things have happened.
JL
*
* * *
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