Soaring government debt is in the U.S.’s future, and at borrowing costs that will continue to decline. See the excellent Holman Jenkins at the Wall Street Journal if you’re doubtful. Arguably the most influential business and economics writer in the world, in his most recent column Jenkins wrote that “Tax reform is in the industrial world’s future one way or another to deal with its debts.” Jenkins would prefer a carbon tax to raise revenue meant to allegedly shrink the debt.
What’s notable isn’t the carbon tax Jenkins prefers, it’s that he believes more government revenue is the way to solve what he deems a growing debt problem. It’s further confirmation that on the debt, the only real difference between Democrats, supply siders, libertarians, Republicans, and Jenkins is in how they would raise tax revenue to supposedly reduce it.
The Democrats’ debt fix is reduced military spending and more taxes on the rich, supply side happy talkers want more taxes from the rich via lower tax rates on them, Republicans imagine we can grow out of the debt while limiting spending by Democrats, while sky-is-falling libertarians clamor for spending cuts, entitlement reform and tax increases to save us from a “future” calamity, and as though trillions worth of annual spending now isn’t itself the biggest calamity of all.
Never broached is a problem of too much tax revenue as argued in The Deficit Delusion, thus the debt. Which is interesting. Individual borrowing capacity is invariably an effect of rising optimism about the present and future incomings of the borrower, and the same informs corporate borrowing. But with government, the various economic persuasions claim the fix for the debt is more incomings for Treasury. It’s odd, and it raises a simple question.
Just why do they think the U.S. has so much debt? As paragraph three argues, the warring religions invariably happen on too much spending, not enough taxation, or a combination of both. They imply that U.S. politicians are unique and that markets are stupid.
If too much spending is the cause of the debt, why does the Unites States have $38 trillion worth of debt, but Russia only $300 billion? Is Vladimir Putin a closet classical thinker who secretly sees government spending as a tax? Clown question, right? Putin can’t borrow much because lenders don’t trust Russia’s future very much. What’s true about Russia is true about most nations.
The overwhelming, basic truth is that the U.S. can borrow in size because it takes in enormous amounts of tax revenue now, and much more perilously, it will take in exponentially more tax revenue in the future. As opposed to markets being stupid as the too much spending, too little tax arguments imply, markets are in truth ruthless. The U.S. can once again borrow in size because its present and future tax revenues rate the borrowing.
Jenkins yet again says the answer to the debt is “reform” that would generate more tax revenue, but tax revenue has soared since the 1980s with predictable, rising debt results. Despite this, the battling economic schools imply that this time is different, that if we send more money to Washington this time, that the debt will be paid off. What’s that they say about the definition of insanity?
Given the history of debt and what enables it, it’s arguably insane that none of the experts are talking about too much tax revenue as the problem, the debt the symptom. That they’re not talking about it and won’t talk about it bolsters the prediction in this opinion piece’s opening sentence.
