Mr. Tuna Goes to Washington

With healthcare and tax reform in reverse and the debt ceiling sagging, I thought it might be fun to create some perspective. This will seem silly compared to all the serious things politicians say to us but sometimes it may be helpful to step back and see the essence of the situation – the proverbial bull in the china shop.

Imagine the Tuna sitting in his ill-fitting Walmart suit at the Sixth National Bank of North Avenue. He is more nervous than usual waiting for the Vice President of Horrible Loans to arrive. Tuna has a large roll of toilet paper next to him on which he has written down all his past debts, current income, and expenses. He also has a good luck charm from his glory days of tackling swift runners like the Kilt.

Luckily, the VP is in a good mood and offers the Tuna a bowl of Starbuck’s finest blend and then the fun begins. How much debt do you have, Mr. Tuna? Please call me Charlie the Tuna. Okay, Mr. Charlie the Tuna, how much debt do you owe? A ton, sir. In US dollars, I owe about a million give or take a grouper or two. Wow – that’s a lot of debt. I see you are retired, how much do you earn, including Social Security benefits each year? Together the missus and I earn about $60,000 per year. Hmm, says the VP. How much do you spend each year? Well sir, we are quite frugal in our household. We try to not spend more than $100,000 per year, if you count Mrs. Tuna’s weekly mani-pedi.

Why are you here today, Mr Charlie the Tuna? Well, we need to buy some of that long-term healthcare stuff, and we also want to buy an Airstream travel trailer. So we are going to need another $300,000. Tuna is quite confident that he has answered all the VP’s question and is beaming with pride.

So let me summarize, says the VP. You owe a million now. You spend $40,000 more each year than you earn, and you now want to borrow another $300,000. Yup, that’s about it. Tuna is very optimistic that the both of them understand the situation perfectly.

Then the VP asks another series of questions. Is it possible that you could spend a little less money each year? For example, could you cut back on large rib-eye steaks? Or maybe end your subscription to Hustler Magazine, or maybe even not subscribe to HBO? Or maybe you could get a paper route to earn more money? Tuna is confused. All those things sound crazy. Cut back on large rib-eyes? Reduce his porn intake? Work more? Geez, the next thing the VP might ask him to do is run a mile in short pants.The Tuna stands up and tells that VP a thing or two. Surely there are other banks that would treat him more fairly.

Okay, I had an extra JD with my bagel this morning. But I swear to you that this silly little tuna tale is exactly what is going on (in sophisticated language) in Washington, DC. The Congressional Budget Office projects government spending, revenues, and debt from 2017 through 2027. These numbers are based on past legislation. National debt held by the public will rise from $15 trillion to $25 trillion – or from 78% of GDP to 89% in 2027. The 78% today is the largest since World War II. So debt is basically huge today and promises to get much bigger even before we factor in proposed changes in infrastructure spending, tax reform, military spending, and so on. 

Government spending is also expected to grow – from about $4 trillion this year to $6.5 trillion in 2026. Taxes will also be rising but not fast enough. The federal government deficit will be about $600 billion in 2017 and without any new legislation will grow until it reaches $1.4 trillion in 2027. That means for every year between 2017 and 2027, yearly deficits will be somewhere between $600 billion and $1.4 trillion. That adds up!

These numbers are no better than the Tuna’s mythical situation above. This country is an economic train wreck. No wonder the economy is stuck in low gear. Our politicians put us in a no-win situation. If they raise taxes or reduce spending, we know that will have negative impacts that are nearly impossible to tolerate in this political climate. If they allow the debt numbers to rise even more, we could be the next Puerto Rico, and I don’t mean anything about rum.

That’s just the macro situation – it gets even uglier when we drill down to specifics. Senator A wants to spend more – not less – on defense. Senator B wants German Shepherds to have free health care. He won’t take a nickel away from any social program. Senator C says he loves old people and won’t threaten their ability to afford Mediterranean cruises nor will he touch spending on Medicare or Social Security. Senator D wants to reduce tax rates, and Senator E has a crush on Nancy Pelosi.

What’s the point of my rant? The harm has already been done, and our government officials do not recognize what is clear to many workers and business managers. Potential workers are staying out of the economic system. Firms are not investing in capital. The economy lags. Politicians give us technical crapola to divert our eyes and ears from what is real. What is real is that we are between a rock and a hard place, and the only salvation comes in ways that demand a first step backward. Someone is going to have to give up something. Few politicians will admit the truth because they fear they will lose their jobs. I don’t see any leaders out there. It will get worse before it gets better.

Merry Christmas from the Grinch. 

BTW. Charlie the Tuna didn't get the loan and decided to un-retire and run for the US Congress and swim with the big spenders.