September 17, 2019

The Ignorance of Our Times

U.S. Treasury Building

In his August 8, 2016 column, Time to Borrow, economist Paul Krugman asks:

“So what should she (Hillary Rodham Clinton) do to boost America’s economy, which is doing better than most of the world but is still falling far short of where it should be?”

Not surprisingly, his answer reflects the ignorance of our times.

Borrow.

Our Congress and whoever becomes president in November are facing some dire statistics. To ignore them is to make our debt situation even worse. More government debt is sure to be the result of this election one way or the other. But the sad fact remains that we have already spent ourselves into a massive borrowing hole.

Interest on the National debt is currently running at 7% of our federal budget. With the inclusion of Medicare and Health spending into the mix, you can add another 27% of the federal budget. Lastly, with Social Security, add another 33%. Now, unless my math is wrong, 67% of the new federal budget has or will already be spent on October 1, 2016. This leaves our beloved leaders with 33% of the incoming tax revenue.

No wonder we are running trillion dollar deficits.

Simply, more borrowing adds more dollars to the interest on the debt. If we fail to address the current cost of entitlement programs, the combination of interest on a rising federal debt and these social programs will soon top 70% of our federal budget.

We cannot live on the remaining 30%.

Every politician likes to propose lower taxes but fails to come up with any sane plan to cut spending. Playing with the tax brackets is like playing Russian roulette. In most cases, the lower taxes will generate lower incoming revenue and any increase in spending creates a greater deficit which is ultimately added to our National Debt.

The argument to borrow because interest rates are low now is only good if there is money set aside to pay off the debt when interest rates rise. Otherwise the cost of borrowing will grow as the debt is rolled over at higher and higher interest rates in future years.

It appears that no one wants to look at the big picture. We need to reign in our federal spending through the implementation in some form of a balanced budget. Our federal debt is growing without any additional borrowing as we have spent 67% of the revenue that we anticipate coming in before the new budget year even begins. We need to address federal waste; we need to evaluate many of the programs we already have in the federal budget; we need to eliminate many of the loop holes in our 96,000 page Federal Tax Code. The list goes on and on.

In the end, one thought keeps coming back to me. Perhaps the real problem is that our federal government is too big to manage and not too big to fail.

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Written by
Donald Wittmer

DONALD WITTMER is a retired business executive who held key roles in the automotive and banking sectors. For a time, he also served as a Fiscal Agency Manager for the Detroit branch of the Federal Reserve Bank of Chicago. He received his undergraduate degree from Cincinnati's Xavier University, an M.A. in business management from Central Michigan University, and earned certification in bank operations from the School of Banking at the University of Wisconsin-Madison. A husband, father, and grandfather, he teaches part-time at the Kent Place School for Girls in Summit, New Jersey.

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Written by Donald Wittmer
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