Jay Evensen
  • Front Page
  • Opinions
  • Second Thoughts
  • Portfolio
  • Awards
  • About

All this pandemic spending must be dealt with some day

6/23/2020

0 Comments

 
Given the economic hardships caused by the pandemic, the federal government was right to authorize stimulus checks and approve loans to help people cope with the sudden drop in economic activity. 
But no one should discount the seriousness of what $3 trillion in new spending will do to the nation’s heavy debt burden, nor its impact on future generations. Washington was irresponsible leading up to this crisis. Once it has passed, Congress and the president need to work to reduce spending.
We are aware of the new “Modern Monetary Theory” that says governments that control their own currency — and the United States has done so since it left the gold standard and made the value of the dollar dependent on the full faith and credit of the government — may order up and spend however much money they want, free from adverse consequences. So long as interest rates remain low, the risk is minimal. The only limit is the ability of a nation’s workers, technology and resources to produce. Exceed that and you may encounter inflation, the thinking goes.
However, we prefer the opinion of Desmond Lachman, resident fellow at the American Enterprise Institute who, in a recent blog post, labeled this thinking dangerous. Among other things, he said, “when something is unsustainable it will at some point come to an end. In the case of the U.S., an unsustainable public debt situation might come to an end in the form of a dollar crisis.” This would happen when foreign investors begin to fear the United States has few options left other than to print money and induce inflation to minimize its debts. 
Federal Reserve Chairman Jerome Powell sounded a similar note last week when he told the Senate Banking Committee that overspending has put the nation on an unsustainable path. 
“The United States federal budget has been on an unsustainable path for years now,” he said, adding “the debt is growing faster than the economy, so debt-to-GDP is rising. That is, by definition, unsustainable.”
Consider that the annual budget deficit in Washington now is approaching $3 trillion, and that the national debt has surpassed $26 trillion. Interest on the debt is now $385 billion. This is money that must be paid through taxes before the government can begin funding necessary programs. It also is money that otherwise could be in private hands, funding businesses and innovations that create jobs.
In an op-ed published by insidesources.com, Duquesne University economics professor Antony Davies and the head of the Center for the Philosophy of Freedom, James R. Harrigan, calculated how long it would take the federal government to run out of money if it had an entire year’s tax collections in a lump sum and began spending at the current rate on Jan. 1. The answer is June 21, a date they labeled as “deficit day,” noting that everything spent after that day would be with borrowed money.
Because of the pandemic, this date has moved farther up the calendar than at any time since the end of World War II. Prior to this year, it had averaged sometime in October since the great recession.
“If federal spending returns to normal in 2021, we could achieve a balanced budget if Washington froze federal spending for almost a decade,” they wrote. If spending were held to the level of economic growth for every year thereafter, “it would take an additional 50 years to pay off the debt.”
The economy may return to prosperity once the threat of the novel coronavirus is gone, but fending off a much more damaging fiscal day of reckoning, in which the world loses faith in the dollar, will take hard work and sustained effort. That effort isn’t helped by the notion that deficits don’t matter.
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    RSS Feed

    Search this site


    Like what you read here?

      Please subscribe below, and we'll let you know when there is a new opinion.

    Enter your email address:

    Delivered by FeedBurner

    Picture

    The author

    Jay Evensen is the Senior Editorial Columnist of the Deseret News. He has nearly 40 years experience as a reporter, editor and editorial writer in Oklahoma, New York City, Las Vegas and Salt Lake City. He also has been an adjunct journalism professor at Brigham Young and Weber State universities.

    Archives

    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012

    Categories

    All
    Campaign 2012
    Congress
    Crime
    Culture
    Iran
    Oil And Gas
    Poverty
    Steroids
    Taxes
    Utah
    Washington
    World Events
    World Events

    Links

    Deseret News
    Newslink
    Marianne Evensen's blog

Powered by Create your own unique website with customizable templates.