- Monday, 29 April 2019
- Written by JOHN HOOD
New research by two North Carolina State University professors has brought into stark relief the following facts: America is in a debt crisis, our economy is suffering as a result, and politicians of both major political parties bear responsibility.
Economists Thomas Grennes and Mehmet Caner worked with a third author, Qingliang Fan of China’s Xiamen University, to produce the paper. Published by George Mason University’s Mercatus Center, it examines decades of fiscal and economic data for the United States and several other developed countries.
Their key finding is that when the indebtedness in a country reaches a certain level, it becomes a drag on economic growth. Low levels of debt don’t necessarily have this effect. If institutions borrow in order to finance valuable investment — to build or expand plants and equipment, improve infrastructure, etc. — that enhances productivity. The resulting gains can more than offset the cost of the debt.
But investments contain built-in uncertainties. Not all capital projects pay off. We generally borrow to fund the best bets at first, then the next-best bets, and so on. The more we borrow and spend, the less likely the spending will be worth it. What’s worse, we don’t always borrow to invest. We use credit to buy things for immediate consumption.
That’s not a big deal in small amounts. And it’s not necessarily disastrous even in large amounts if the good we purchase lasts a long time and has resale value, such as a house. But largescale borrowing to fund large-scale consumption is foolish.
The temptation is particularly strong, and the consequences particularly grave, government. Those who make the initial decision, the politicians, can get credit for what gets funded without getting personal blame years or decades later for the taxes or foregone expenditures required to pay off the resulting debts. And because governments don’t face the same competitive pressures that private institutions do, they are more likely to use borrowed funds either for questionable capital projects or for expenditures that are unquestionably consumption.
Generally speaking, states and localities are less guilty than Washington, D.C., is. Their rules require that operating budgets be balanced every year, which limits (but does not fully preclude) the use of public debt for consumption. Moreover, bonds that pledge the full faith and credit of state and local governments often require voter approval by referendum, which again serves as a brake, however imperfect, on reckless borrowing.
The federal government lacks these precautions. Even so, Grennes and his colleagues found that for most of its history, the federal government used debt sensibly. “During wars, spending increased, the government borrowed, and the debt ratio increased,” they observed. “After wars, the debt ratio gradually reverted toward the prewar ratio, without a clear long-term trend.” There may have been no formal constraints, but there was an “implicit contract that functioned as a coherent debt policy.”
That ended in the late 1960s, as the federal government took on new spending obligations, most involving immediate consumption rather than investment. Each new obligation had a powerful constituency, and often gained popular support (think Medicare). But the total effect was to boost federal spending above projected revenue. Rather than resolve the problem, Washington borrowed. What’s worse, during the same period federal tax and regulatory policies incentivized an increase in private borrowing, too.
The bill is now due. According to the new study, the annual rate of economic growth in the United States from 1995 to 2014 was more than a percentage point lower than it would have been in the absence of America’s debt explosion. That’s a very large effect.
What can be done about this? Previous attempts to use moral suasion or legislative pressure, such as the Simpson-Bowles Commission and debt-ceiling shutdowns, have fizzled. Another NCSU professor, Andy Taylor, advocates an intriguing set of federal budgeting reforms that may help. Or we could try devolving federal programs to the states, trusting that their preexisting safeguards will hold. As Johnny Mercer put it, something’s gotta give.
- Monday, 29 April 2019
- Written by KARL MERRITT
There are no words sufficient to describe the depth of my sadness, dismay, and even anger, in response to how far too many people are reacting to the report by Robert Mueller, special counsel. I think he was assigned to search for Russian interference in our 2016 election and any collusion by the Trump campaign with Russia in that election. I say “I think” because I repeatedly read that the full scope of his mandate has never been made available to the public. A redacted version of the report was released to Congress and the public Thursday, April 18.
The report clearly stated that insufficient evidence was identified to show collusion with the Russians by the Trump campaign or any American. Given that, for nearly two years, we were told by a multitude of Democrats, and seemingly every liberal media outlet, that Russia controlled our president, it would seem there would be celebration in finding that he did not collude with Russia. Instead, the same people and media outlets that pushed the collusion narrative immediately shifted to arguing that the report gave ample reason for Trump being guilty of obstruction of justice.
The Mueller report said there were actions by the president that could indicate obstruction, but other actions countered reaching that conclusion. In the end, Mueller said he would not charge the president with obstruction but would not exonerate him. The obstruction decision fell to Attorney General William Barr. In a press conference shortly before releasing the report, Barr explained the process that he and Deputy Attorney General Rod Rosenstein went through in deciding not to charge the president with obstruction. What Barr explained made total sense to me.
However, the rage regarding obstruction goes on full bore. Even as I started writing this article on April 19, The Fayetteville Observer has two articles that reflect this focus on obstruction while hardly mentioning the finding of no collusion. Here are those headlines: “Report provides layers summary could not” and “Analysis … Mueller paints damning portrait of Trump.”
After listening, on the radio, to the Barr press conference on Thursday and watching TV news reports and commentary, I was in bad shape by 6:10 p.m., when my wife Denise and I headed off to a Maundy Thursday service. The service was at First Baptist Church on Anderson Street, where Rev. Rob James is pastor. This service was filled with meaningful music, instructive and reassuring scripture readings and a sermon that reminded me there is only one way to overcome the division and hopelessness generated by, and reflected in, the Mueller report response.
James defined “maundy” as referring to a command, of being equal to a mandate. He said, “During Maundy Thursday, we are called to remember the last moments of freedom of Jesus before he is betrayed by one of his closest friends, before he is arrested by people he has seen every day in the temple, before he is mocked and ridiculed, before he is abused and spit on, before he is crucified and killed on a cross, before he is laid in a tomb.
“The commands that we are called to remember this night, the maundy of Maundy Thursday, are the things that Jesus told his disciples during those final moments of freedom: his commands, his mandates … in a very real way, his last wishes.”
James followed this by sharing his experience with his father as that father had been told he only had six months to live. His son was just a teenager. Thankfully, despite the doctors’ projection, his father lived three years. Over that time, he took the pastor on rides and talked about his (the father’s) life: the good, the bad, everything. When that father was at death’s door, he requested that his teenage son make some promises to him. James reviewed those promises with us, and then came to the last words his father spoke to him. He said, “Don’t ever forget that I love you and will always be proud of you.”
James kept the promises he made to his father. The critical point is that he kept those promises not because he expected reward but because he loved his father. This experience with his father clearly gives the pastor exceptional understanding of, and appreciation for, the last wishes of Jesus. One of those wishes appears in John 13:34-35 (New International Version): “A new command I give you: Love one another. As I have loved you, so you must love one another. By this everyone will know that you are my disciples, if you love one another.”
I left this sermon profoundly reminded that loving one another is our only hope for healing the divisions that threaten our very existence and for dispensing with the hate in our midst that is so obvious and destructive. However, reality challenged my capacity for believing that we can lay hold of loving one another. That is especially in doubt if our loving one another is to be driven by our recognition of Jesus’ love for us. In a nation where church membership is on the decline, especially among young people, and Christians are being pushed to the fringe of society, it does not seem likely that this “love one another” arrangement is possible.
Inspired, but still wondering if the “love one another” arrangement is possible in our time, Denise and I headed to the first baseball game being played by the Fayetteville Woodpeckers in our beautiful new stadium. Once in our seats and enjoying the game, we started talking with people seated around us. I was amazed that the atmosphere was so relaxed and welcoming.
Midway through the game, our team was down 5-2. At that point, there was a sense of concern throughout the stands. Despite being down by three, we kept pulling for our team. By the top of the ninth inning, the score was 5-5. We celebrated throughout the stadium. In the end, the Woodpeckers lost 7-5.
The point of sharing my baseball game experience is to acknowledge what happened in that stadium and how it speaks to loving one another because we love Jesus. At the low point in the game, when the outlook was not good, we kept pulling for our team. When the score was tied, we celebrated. When the Carolina Mudcats scored two in the ninth and went on to win, the crowd was still appreciative and supportive of our team.
Granted, this was just an entertainment event, but what happened there highlights the principle that common focus promotes unity. The fact is everybody in that stadium was committed to, and felt a connection to, the Woodpeckers. The result was a kind of unity that is missing in our country when it comes to the difficult issues that we face. A baseball game cannot fix what plagues us as a nation. But, if we have the common focus of loving Jesus because he loves us, we will follow his command to love one another. Therein is our only hope for overcoming the divisions and hatred that are wringing the very life from our nation.
Do not be fooled; no other focus will suffice. If you doubt the truth in that statement, consider what have become the objects of our focus, the Mueller investigation among them, and the results wrought by focusing on myriad subjects other than Jesus.