Deficits and Deficits

When I was just a little kid the teachers pointed out to my parents that I had an attention deficit. They thought my attention deficit should get more attention. As a result I became an expert on deficits in the fifth grade. A deficit means you are short on something – something presumably valuable and important. Pointing deficits out can be hurtful but the purpose is to signal a need for a remedy. When your fellow fifth grade students chanted songs about your social deficits that was just rude. But when Mrs. Montgomery told my parents of my attention deficit she was very much hoping that my father would beat me with a stick long enough so that I might not run my mouth incessantly while she was teaching the class how to count.

Today some of our government leaders, who apparently are not much farther along in intelligence than my fifth grade colleagues, are pointing out that the government budget deficit is not the only deficit our country should be concerned with. They list a number of worrisome deficits – in infrastructure, education, and little blue pills. What could be wrong with pointing out that we have national deficits in many areas and that these need attention?

Answer – there is nothing wrong with pointing out national problems. But please – we didn’t know we had these deficits? I think we knew. The problem is that by using the term “deficit” they are implying that each of these individual social deficits is equally important to the nation’s budget deficit. And this is where they are being disingenuous, misleading, and pretty much just plain wrong.  

What they are REALLY SAYING is the following….what we need to do in this country is to spend more and we can spend as much as we want to spend. Who cares if we can’t pay for solving all of mankind’s ills – we can just borrow money. And then we can borrow more. Because we are nice guys and because we won World War II and because Harry Reid knows the mafia – we can borrow all we want. Sure someday we will have to raise taxes on the rich to close the national budget deficit but that won’t be a problem either. By closing all these social deficits we will make the nation great and there will be no unintended side effects. Tax revenues will gush in.

Do they really think that we are so naïve or stupid that we would believe that story?  It is fine to be a liberal or a progressive or just a person with a desire to help other people. But today we find ourselves in a situation following a global crisis in which the government spent a lot of money. It is no secret that the national debt has multiplied and borders on 100% of the economy. Is there a tablet on a mountain somewhere that says 100% is the ceiling? I don’t think so. But when you almost triple what was considered a normal amount of debt burden, someone out there knows that. If you had a normal debt load and subsequently tripled the amount you owed, then your banker might be interested….especially if you come into the bank and ask for ANOTHER loan.

Hi Mr. Banker. Nice shirt and tie. I love paisley. Anyway, I want to buy another condo on a golf course in Florida.

Hi Larry. Nice sweatpants. Didn’t you just buy a condo in Florida? And didn’t you tell me then that you could barely afford it?

Hi Mr. Banker. Nice watch. I love Timex. Yes, but that other condo was not on a golf course and I plan to take up golf and alligator petting.

It sounds hard-hearted to say that finance is more important than people. That’s what some of these liberals are trying to say but it isn’t true. There is nothing more important than people. But there are good ways and bad ways to help people. That’s the real question – which is the best way?

Okay – so we take the advice of the liberals and spend a lot of money on education, infrastructure and Harry Reid’s latest pet project. And so the debt moves a little above 100%. Won’t that be groovy? What’s the harm?

There are three answers. First, the harm is that if other countries do a better job of cleaning up their debts, we will look less financially stable in global terms. That could spook financial markets. Spooking the financial markets doesn’t just affect rich people. Lower stock prices and higher interest rates would not be welcome in any corner of the economy. Second, when the government dominates financial markets the private sector has a harder time getting loans on good terms and this hurts their ability to be competitive. Third, and worse, there comes a point when enough debt is enough. What happens if we reach that point and a big hurricane levels Bloomington? Or a flood wipes out Arizona? Or killer bees migrate to Nevada and knock out the gambling industry? If you have reached the point of no return on debt and you have a national disaster, there is no money in the till to take care of emergencies. Then you are between a rock and a hard place meaning that there are no good options. Not tending to debt today means we put ourselves in a position where we can no longer help ourselves when emergencies arise. Maybe then we would ask for aid from Haiti.

The way to help people through government is to do it in a financially sound way. A millionaire who wants to help his local food shelter does no one any good if he borrows to support the homeless – and borrows so much that he cannot repay his loans. The last half century has witnessed a government that borrows more to support its programs. That trend is helping no one and threatens to a make it impossible to keep up levels of support in the future. There is only one deficit and it needs to be tended to ASAP.