Federal Debt Ceiling Observations
May 11, 2023
Hanging their hats on false equivalence
The underlying logic Speaker Kevin McCarthy and his crew lean on in their arguments relative to the federal debt ceiling rely on false equivalencies.
The gist of their message seems to be, “Just as families and businesses balance their checkbooks every month, we believe the federal government needs to make balancing the nation’s checkbook a top priority. Raising the debt ceiling is a short-term solution to a long- term problem. Before we consider raising the debt ceiling, our federal government needs to focus on reducing spending and living within its means to ensure a healthy economy for future generations”.
Sounds pretty good, right?
Yet, that explanation illuminates one of the greatest obstacles we face as a nation: A void of economic and financial understanding among most American adults.
The ‘checkbook’ is the equivalent of an annual budget. Current revenues flow in, and current expenses flow out. If revenues exceed expenses, there is a surplus. When revenues exactly equal expenses, it is ‘break even’. When expenses exceed revenues, there is a current-year deficit.
Staying with the household theme, the federal debt is most equivalent to a home mortgage, and the balance due is an accumulation of debt over time. Remember that new roof? That new kitchen? That fabulous backyard pool? Those were capital expenses, incurred in one year, but with an expected useful life of 10, 15, even 30 years. You add these expenses to the mortgage so that they get paid off over time.
As a retired professional in the field of finance and economics, when I hear Speaker McCarthy or members of his crew attempting to equate current spending to our overall aggregate debt obligations, I cringe.
Some rather simple adjustments to our tax code, including elimination of the carried interest loophole and raising the top corporate rate from 21% to 28% would make huge revenue contributions to balancing the annual (current FY) federal budget.
And, why is it that low- and moderate-income wage earners are required to make contributions to Social Security on every dollar of their earnings up to the current wage cap [a.k.a. ‘the contribution and benefit base’] of $160,200, yet those who are blessed to earn in excess of that amount are exempt from contributions to Social Security on earnings above that amount?
The wage cap on Medicare contributions was eliminated in the 1990’s, so even higher-income wage earners are required to make the 1.45% contribution to the Medicare tax with no limit on earnings.
We clearly have a revenue gap. Why does the cap on social security earnings continue to this day? And, those who claim their income not as ‘wages’ but as ‘carried interest’ not only receive beneficial income tax treatment, they also are exempt from FICA contributions. What a racket!
Federally guaranteed obligations are debt securities issued by the U.S. government, currently considered risk-free because they are backed by the full faith and credit of the federal government. When the Treasury sells these securities, they help to finance the federal debt outstanding at that time.
Allowing the government to default as an outcome from a false debate linking current revenues and spending to our long-term debt obligations would be a preventable tragedy of immense proportions.
Minority Leader Hakeem Jeffries (if you are listening): I implore you to be bold and to tear apart Speaker McCarthy’s logic map, and to take this opportunity to focus in on one of the greatest obstacles we face as a nation: A void of economic and financial understanding among most American adults. Until the American people awake from their deprivation of economic and financial principles, they will continue to be vulnerable to Alternative Facts such as those presented by Speaker McCarthy and his crew.
The Big Lebowski must have learned of McCarthy’s foolish and destructive crusade to equate and combine the federal debt ceiling with the current (2024) federal budget when he so eloquently said, “This will not stand, you know. This aggression will not stand, man”.
Compromise on Federal Government Shutdown?
January 19, 2019
What is there about the simple concept of separating day-to-day operations from long-term planning that our elected federal officials seem unwilling or unable to comprehend?
Our current federal budgetary process was set into law by the 1974 Budget Control Act, based on a federal fiscal year which runs from October 1st to September 30th. Thus our current Federal Fiscal Year — known as FY 2019 — runs from October 1, 2018 until September 30, 2019.
In February 2018, President Trump – through the Office of Management and Budget – submitted a proposed budget to Congress for FY 2019. The operating budget for FY 2019 was discussed, deliberated and adopted, and it needs to be funded.
There just isn’t any room in the process for the President – or any other elected official — to demand modifications to the current FY budget prior to approving ongoing funding for current government operations.
While it is unfortunately true that Congress doesn’t always follow the schedule as proscribed in the 1974 Budget Control Act, the proper time for the President to present new spending initiatives to Congress is during the annual federal budget deliberations process which typically begins in January when the OMB presents a proposed FY budget to the President.
President Trump’s current demands are only legitimately appropriate as a component of a proposed FY 2020 federal budget proposal.
PLEASE: Let’s get the federal government back into its day-to-day operation by providing necessary current funding, and bring the debate over additional border funding where it belongs – in the discussions and deliberation toward a FY 2020 federal budget.
Where’s Mitch McConnell?
January 17, 2019
Where’s Mitch is a question many people are asking.
There are 800,000 federal workers and their families who are going without pay right now – including thousands of Kentuckians.
Here in Florida, we have about 5,000 Coast Guard members doing their jobs to protect our 1,350 miles of Gulf and Atlantic coastline, and they are not currently being paid.
The new Democratic House, on its first day in office, passed two bills funding and reopening the government.
McConnell has refused to allow a vote on any of those bills in the Senate. He’s even twice blocked a bill reopening the government from coming to the floor that he himself voted for back in December.
Despite the fact that Majority Leader McConnell has the ability to end this shutdown right now, Mitch is seemingly nowhere to be found.
I’m angry that this one man who has the power to stop this absurd drama has refused to do his job.
If you are nearly as angry as I am, perhaps you will consider donating $15 – or what you can afford – to the Ditch Mitch movement. Let’s shine a bright light on McConnell’s irresponsible behavior.
Labor Day Reflections
September 2, 2018
Labor Day, the first Monday in September, is an outcome of the U.S. Labor Movement and is dedicated to the social and economic achievements of American workers. It is an annual national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.
The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City, in accordance with the plans of the Central Labor Union. It didn’t take long for the federal government to recognize it (1885), and it became a national holiday in 1894.
The inspiration of Labor Day is closely tied to both the roots of Capitalism and the emergence of Labor Unions in the U.S.
In 1983, the first year for which union data are available, the union membership rate was 20.1 percent and there were 17.7 million union workers.
By 2017, the union membership rate had declined to 10.7 percent, and – most alarmingly – union representation of public-sector workers (34.4 percent) had become more than five times higher than that of private-sector workers (6.5 percent).
The origin of Capitalism as economic system assumed that private individuals or families who directly invested in (and directly took on the risks of loss) would own the means of production, distribution, and thus ensure a free and fair market for goods and services: They had real skin in the game.
Relying on the theories that: (1) people (consumers) are rational and will seek maximum utility from their economic actions; (2) information is transparently available to all who participate in the economy; and (3) markets are self-correcting; the concepts of Capitalism are compelling to most people when contrasted to cooperatively or state-owned means of wealth.
Worker exploitation was one of the early criticisms of the Capitalism model. The Labor Movement in the U.S. was instrumental in creating a buffer (safeguard) to help ensure a safer workplace, fair wages and reasonable hours and benefits. The Labor Movement was enabled by Labor Unions.
Today’s version of Capitalism has morphed into ownership of corporations by passive investors (mutual funds, pension funds, venture funds, etc.) which seek maximum current ROI with little or no regard to sustainability or externalities.
The executives who are charged with achieving the expectation of the passive investors are “hired guns” who begin with no skin in the game, yet who often are rewarded with stock options when short-term outcomes are positive.
In 1978, the average CEO earned about 30 times as much as the average worker. U.S. Census data tells us that the average income for U.S. households was $17,730, pegging average CEO income at $531,900.
In just 40 years, statistics from 2017 indicate that CEOs in the 350 largest companies in the U.S. are earning over 300 times as much as the average worker (actually, 312:1).
A recent survey by Glassdoor found that the median salary for U.S. employees is $51,272, implying median CEO compensation at nearly $16 Million.
There is no rational explanation for the explosion of the CEO to Worker compensation ratio. It seems to reflect a total lack of oversight by those individuals who have been elected to represent the interests of the American people.
Current economic conditions ought to raise a red flag to our elected officials that our nation has navigated very close to a Feudalistic System which is on track to implode and to destroy the very notion of what is described in the Declaration of Independence.
Labor Day seems like an appropriate time to pause and reflect on what seems to be an egregious obstacle to the healthy future of our American society.
Paul Ryan Announces Retirement
April 11, 2018
April, 11, 2018: Paul Ryan announced his plan to retire from Congress in January 2019, at the end of his current term, and further stated that he will not run for re-election.
Ryan said that he is proud of the accomplishments which occurred during his 20 years of service in Congress, although he regrets that ‘they were unable to achieve Entitlement Reform’ during his tenure in office. Despite his vocal regrets, he is planning to leave Washington in January 2019 with some of the most generous and egregious entitlements remaining in the U.S.
It has been said that Ryan’s remaining goal (‘Entitlement Reform’) is razor focused on cutting federal spending on Medicare, Medicaid and welfare programs as a way to temper extraordinary increases in the federal deficit.
These increases in the deficit were willfully enacted as a component of the 2017 Tax Cuts and Jobs Act as a result of rare, curious, wild and crazy tax cuts combined with wild and crazy spending increases, at a point in our economic cycle which begs for caution and restraint.
Paul Ryan said that he is extremely pleased to have played a significant role in the passage of the Tax Cuts and Jobs Act which he considers to be a highlight of his service in Washington.
Background on Jobs:
Since 2010, the U.S. economy has supported the creation of almost 17.5 Million jobs, leading to a November 2017 unemployment rate of 4.1%, a 17-year low. (Perspective: Unemployment reached 15% toward the end of 2009; many economists agree that “full-employment” occurs when the unemployment rate is at 5% or lower.)
Hundreds of U.S companies have been looking to hire workers for skilled positions to help them meet growing demand for their products and services. These jobs are often called “family wage jobs” because they provide compensation and benefits sufficient to support a family in the local economy.
The number of job openings in the U.S. (October 2017) remained at the 6 Million level, marginally lower than at the end of 2016. (Perspective: When the Great Recession was at its worst in 2009, job openings fell to 2.2 million, an all-time low.)
Average hourly earnings had risen just 2.5% over the 12 month period ending in October 2017, helping to support the theory that a significant skills gap continues to impede hiring for family wage jobs which typically require advanced reading, math and computer skills.
In addition to the dilemma of finding skilled workers in shrinking regional labor market pools (“skills gap”), hiring managers and economic development experts also report obstacles cited by job seekers such as: transportation (including long commutes); day care/child care; and noncompetitive wage rates.
Despite these documented facts, Paul Ryan, many members of Congress and President Trump actively and enthusiastically supported “The Tax Cuts and Jobs Act” of 2017, telling us – among other things, “Our legislation is focused entirely on growing our economy, bringing jobs back to our local communities, increasing paychecks for our workers…”
At a point in time when we had apparently reached full employment; when some 6 Million higher-skilled, family wage jobs were unfilled, at least 2 questions remained unanswered:
– Other than engaging in war, or the innovative programs launched in the 1930’s (CCC, WPA, etc.), has the federal government ever succeeded in an effort to create sustainable private sector employment?
– If new family wage jobs are created, who would be available to fill them?
Background on the tax side:
When George W. Bush (POTUS 43) took office in January 2001, he inherited a federal budget from his predecessor.
Fiscal Year Ending (FYE) 9/30/2001 resulted in revenues of $2.39 Trillion and expenditures of $2.23 Trillion, resulting in a budget surplus of $0.15 Trillion. FYE 2001 federal debt held by the public was $3.34 Trillion, representing 31.7% of GDP.
Fast forward to his final full year in office (FYE 9/30/08), Bush watched over a federal budget which included revenues of $2.52 Trillion and expenditures of $2.98 Trillion.
That left a FYE deficit of $458.6 Billion, which (combined with prior deficit spending) resulted in total federal debt of $9.99 Trillion at FYE (9/30/08), representing 67.7% of GDP.
The federal budget for FY 2009 was developed by then-president Bush, submitted to Congress, and inherited by Obama (POTUS 44). The actual federal revenues for FY 2009 were $2.10 Trillion; expenditures were $3.52 Trillion. That left a 2009 FYE deficit of $1.41 Trillion, which (combined with prior deficit spending) resulted in total federal debt of $11.88 Trillion at FYE (9/30/09), representing 82.4% of GDP.
Most reasonable people will agree that a newly elected President who inherits a spending plan from his predecessor should not be given credit for its success or failure.
POTUS 44 (Obama) presided over 7 years of steady economic growth in the U.S., and under his watch, the close of FY 2017 budget reflects an increase of total federal debt to $14.67 Trillion, which was a numerical increase, but which represented a relative decrease to 76.3% of GDP.
Not great, but a clear improvement over what Obama inherited from Bush.
Some economists have suggested a 60% ceiling for publicly held debt vs. GDP which seems to make sense.
Although policies enacted during the Obama administration did reduce the ratio for 82% to 76%, we have a long way to go.
The correct way to address this situation is through tax policy reform designed to create balanced federal budgets, focused on reducing federal deficits.
That is not what our Congress has approved, and what President Trump signed into law just prior to Christmas 2017.
Most recent analysis by the Congressional Budget Office (4/10/2018) estimates that the combined effect of the 2017 tax cuts and the March 2018 budget-busting spending bill is sending the annual federal deficit toward the $1 Trillion mark in 2019.
The CBO report says our nation’s current $21 Trillion debt would spike to more than $33 Trillion in 10 years, with debt held by investors spiking to levels that would come close to equaling the size of the economy, reaching levels that many economists fear could spark a debt crisis.
CBO says economic growth from the tax cuts will add 0.7 percent on average to the nation’s economic output over the coming decade. Those effects will only partially offset the deficit cost of the tax cuts.
The administration had promised the cuts would pay for themselves.
Best I can see, only Robert Reich has focused on the Real Facts, and who would listen to a guy like Reich, who has degrees from Yale, Oxford, Dartmouth — clearly a left-wing Liberal Snowflake….
As interim Pres. Trump tweeted today, “We are with you, Paul!”
Walrus Feeling Guilty
October 4, 2013
With all of the attention on the shenanigans in Washington and the in-depth moment by moment reporting, I thought the Walrus might sit this one out, but various forces have caused guilt.
Congress certainly has the authority to challenge the Affordable Care Act. Why don’t they just challenge the ACA in Court? Why are they messing with the greatest economy in the World?
Oh, wait. They did challenge it in court. In the Supreme Court. The highest court in the land. On June 28, 2012, the United States Supreme Court issued an opinion upholding the constitutionality of the “Patient Protection and Affordable Care Act” finding that the federal government can require people to purchase affordable health care insurance coverage or face an income tax penalty.
So, we have a law which was approved by the House of Representatives, approved by the U.S. Senate, approved by the President of the U.S. and affirmed by the Supreme Court.
But, wait! We also have a splinter group of dubiously elected officials (i.e. the Ayatollah John Boehner, Cruz Control, Private Ryan, Eric “T.P.” Cantor – and others who shall remain anonymous for now).
These creatures have determined (in September 2013) that the only appropriate way for the Congress to arrive at a Continuing Budget Resolution which would keep our federal government running is to open a debate on a law which was enacted in 2010?
Now, don’t get me wrong. There are many times I wish that I could just put all of the clocks and calendars around the world on pause. Just give me a few days to catch up on all of the loose ends, and then I would restart the clocks and calendars as though those few days I had to myself were invisible and inconsequential. Sort of like a short “working vacation” in the Twilight Zone.
Boehner and his Band of Merry Men apparently have gone beyond the Twilight Zone and have jumped all the way down the rabbit hole, desperately trying to drag the rest of the country with them.
I have to wonder – how does the Supreme Court feel about this behavior?
Sequestration Solution
February 24, 2013
Given Speaker John Boehner’s recent attacks on the executive office regarding federal budget cuts he believes are appropriate and necessary to bring Federal spending under control, I thought I would take a look at the most recent Federal budget to see what all of the commotion is about.
It probably shouldn’t be a surprise that trying to read and/or understand the Federal budget is an almost impossible task.
I was able to find some detail that shows the budget for “Salaries and Expenses of the House of Representatives” is $1.25 Billon. Plus an additional $574 Million for “Members’ representational allowances, including Members “clerk hire, official expenses, and official mail.” Plus, hundreds of millions of additional dollars to fund: various committees; salaries and expenses of ‘officers and employees’; allowances and expenses; joint items; and more.
Although determining the full cost allocated to support the expenses of having an elected House of Representatives seems to be almost impossible, it was also not clear what effect – if any – sequestration might have on the members of Congress and their staffs.
We’ve certainly heard dire predictions of negative consequences regarding loss of services due to cuts to the FAA; Homeland Security; and Department of Defense.
If funding to support the bureaucracy of our elected officials in the House of Representatives and the Senate were interrupted and all of the elected officials and employees of the legislative branch were furloughed for a week, 2 weeks, even a month — would there be any negative consequences to our society?
If we need to incur some immediate spending curtailments, I say, let’s furlough the legislative branch! Let’s send Speaker Boehner home to Ohio for a month with no salary, no benefits and no staff. When he comes back in April, maybe he will be ready to talk Turkey!
Wizard of Oz & Sequestration
February 23, 2013
For the first 210 +/- years of our 2-party Democracy, we were blessed to have elected officials who were statesmen and who seemed to place the public good before their own personal agendas.
Since the birth of Americans for Tax Reform under the leadership of Grover Norquist – and subsequently the rise of ‘Tea Party’ backed candidates — we’ve witnessed a series of national dramas which seem to accomplish nothing, but waste scarce resources and divert our elected leaders from doing the job we elected them to do.
The only honest and sustainable way to reduce taxes is to re-engineer and reform government, and that requires a great deal of analysis, planning and making tough decisions.
It seems that some of our elected officials just don’t want to roll up their sleeves and do the hard work; then make the tough decisions which are supported by careful analysis and research.
We just can’t let a farmer from rural Ohio continue to hold our country hostage because of some wealthy campaign contributor(s) he is beholden to.
That’s not a Democracy: it is a ‘Wizard of Oz’ Dictatorship.
And that’s wrong, terribly wrong.
http://www.dccc.org/page/s/sequester-ja?source=fb_auto_share_sequester_ja
A Letter to Hon. John Boehner
December 28, 2012
Hon. John Boehner
Office of the Speaker
H-232 The Capitol
Washington, DC 20515
Dear Mr. Boehner:
I’ve been following the saga of ‘the fiscal cliff’ since the end of summer 2012.
It was made very clear to us outside the Beltway (commonly known as citizens, voters and taxpayers) that our elected officials in Congress would take no action until after the November elections.
As disappointing as that news was, it seemed reasonable and appropriate to many of us on the outside to expect that our elected officials would do some talking behind the scenes in preparation for a call to action after the election at which time our elected officials would work together in the best interest of the overall U.S. economy — business, commerce, education and the citizens of the United States.
Now – several months later and just a few days from the ‘tipping point’ a.k.a the ‘fiscal cliff’– we seem to have a continuation of the petty, partisan and puerile drama that has come to categorize our Congress following the national elections of 2010.
November 2010 marked the point in time when a number of conservative tea party candidates were elected to the House of Representatives. The infusion of passionate but neophyte tea party representatives — all of whom signed the Grover Norquist Pledge — precipitated your election as Speaker in January 2011, which coincidently seems to mark the beginning of extreme dysfunction in our nation’s capital.
I have listened to you and some of the ‘young rascals’ who were elected in 2010 under the tea party platform.
When I listen, I hear some really great sound bites, focused almost entirely on the federal government.
There is no one I’ve met who wouldn’t like to see smaller government and reduced government spending — sweetened by the magic elixir of reduced taxes.
The real problem seems to be: Government (as we see and interact with it from outside the Beltway) includes federal, state, county, local, schools and a vast number of entities which operate in the public sector as ‘quasi-government’ agencies.
As a citizen, voter and taxpayer in the U.S., I know I pay: federal income taxes; federal excise taxes; state income taxes; state sales taxes; county property taxes; county sales taxes; city property taxes; city sales taxes; city sewer taxes; city library taxes; and property taxes levied by my local school district. I can quantify the majority of those taxes: what I can’t quantify is the amount of other government and quasi-government fees and taxes I pay daily, weekly monthly or annually: highway and bridge tolls, parking fees, hotel occupancy fees, motor vehicle fees, MTA fees, license fees, daily use fees, and park access fees, most of which are invisible to me.
You and the ‘young rascals’ have some great rhetoric: What I don’t hear from you and your tea party cabal is dialogue, discussion, research or new ideas about re-engineering our overall government in the U.S. for enhanced efficiency and longer term sustainability.
Mr. Boehner: With your intractable and rigid focus on cutting spending at the margins and continued tax breaks for the ultra-rich, I think you and your tea party followers may be threatening the very essence of the United States and our economy as a going concern.
That thought leads me to believe that you and some (or all) of your tea party cabal may be guilty of treason because your actions are diametrically opposed to the best interests of my fellow citizens, voters and taxpayer of the United States of America.
It is my hope, Mr. Boehner, that come Monday, December 31, 2012, you and your followers will move away from treason to align with the majority of American citizens, businesses and American society to ensure a rational, sensible and sustainable solution to the ‘fiscal cliff’ dilemma which currently threatens our country.
Thank you in advance for considering my opinions, and hopefully, for adjusting your posture to a more inclusive and mainstream position.
Sincerly,
The Walrus
Mount Vernon, NY 10552
walrus51 