Public Enemy No. 1

Where can you find policy agreement among this motley group: retired Adm. Mike Mullen, Brent Scowcroft, Madeleine Albright, Henry Kissinger, Robert Gates, Leon Panetta, Zbigniew Brzezinski, Michael Chertoff, Janet Napolitano, George Shultz, Paul Volcker, and Hank Paulson? 

Yes, I know that many of the people on that list are dead and have been for a bit, but the facts of the case have been obvious to a great many well-informed people for a very long time. All of those people, and many more besides, agreed nearly a decade ago in a 2016 statement: The national debt is a critical threat to our national security. As Adm. Mullen put it when he was chairman of the Joint Chiefs of Staff: “The most significant threat to our national security is our debt.” He said that in 2010. The statement he co-signed with Kissinger et al. came out in 2016. 

You may have heard: The fiscal picture has not improved since then.

In 2017, when Donald Trump first took office as president, Republicans controlled both houses of Congress—with a 47-seat majority in the House. Republicans during that period could have passed a major fiscal-reform package, but they didn’t—because they didn’t want to. About 80 percent of federal spending consists of defense and entitlement spending, and Trump was adamantly opposed to cutting these—his 2017 budget proposal would have added tens of billions of dollars to defense spending, including a 10-percent increase in a single year, and he long has vociferously opposed (and, indeed, sneered at) the notion that entitlement spending needs to be reduced.

At the end of Trump’s first year in office, federal debt was 102 percent of GDP; by the time Joe Biden was elected, debt was 122 percent of GDP. Pandemic-related spending accounted for much of that spike, sure, but the debt was on its way up in the years leading up to COVID-19, too. The Biden administration has been no great shakes on spending, but it is worth pointing out that debt as a share of GDP is slightly lower today than it was at its peak during the first Trump administration. Of course, presidents are not uniquely responsible for debt and deficits—Congress has a say, too. But what congressional Republicans mainly have said to Trump is: “Thank you, sir, may I have another?”

Please don’t think of the following as a prediction—the economy is complex, the future is uncertain, and Trump is a mercurial economic ignoramus—but consider the following scenario. Trump has a great deal of power to unilaterally enact tariffs, which he apparently intends to do, and which he probably will enjoy: A high tariff wall creates all sorts of opportunities for favor-swapping and cronyism, and Trump will not hate it when corporate leaders of the sort that have long looked down their noses at him come around hat-in-hand begging him not to put an enormous sales tax (which is what a tariff is) on their essential inputs.

One of the few good things about higher taxes is that they are anti-inflationary (leave people less money to spend and they will have … less money to spend—economics isn’t always hard!), but Republicans are sure to try to offset the costs of tariffs with big fat corporate handouts (as Trump insisted they do when his idiotic tariffs threatened to destroy the U.S. soybean industry last time around) and with even bigger fatter cuts to business and personal income taxes. In that environment, tariffs will put upward pressure on prices as U.S. businesses facing higher costs attempt to pass those costs on to consumers and business partners. Big tax cuts are inflationary, too: Leave people more money to spend and they will have … more money to spend.

Trump has promised big tax cuts and tariffs that threaten to interrupt supply chains and put upward pressure on the prices of consumer goods and manufacturing materials both, all while spending money like that Nicolas Cage character in Leaving Las Vegas—you know: $29-a-night hotel rooms, $500-an-hour hookers. 

There is, of course, another way of describing the agenda that Trump has put forward and that his Republican enablers in Congress are setting us up for: Replacing the inflation that occurred during the Biden administration with inflation that will occur during a Trump administration.

That’ll be a hoot. 

One of the fun things to watch will be (could be—again, I’m not in the prediction business, but, dream with me) what happens when Trump tries to fire Jerome Powell over at the Federal Reserve and fails to, since he has no power to do it. At that point, a whole bunch of real-estate developers who backed Trump will discover that they had a nice little business with 5.2-percent construction loans and no business at all with 10.7-percent construction loans. Powell is already telegraphing that the Fed is likely to start slow-walking rate cuts in the face of worrisome inflation data, and the Fed may very well have to put a stop to those rate cuts entirely. Donald Trump has described himself as the “king of debt,” which is partly true, but his real claim to fame is being the “king of not paying back his creditors”—a strategy that is not really available to the U.S. government, unless Trump and his Republican allies want to provoke a worldwide financial meltdown with an Argentina-style debt crisis … except in a country that is responsible for about just over a quarter of the economic output of the human race. 

Less of a hoot, that. 

Trump is easily distracted. He’ll be busy settling scores with enemies real and imagined (hey, the guy has imaginary friends, too) and watching Fox News and rage-tweeting, and maybe somebody will have the good sense to send over a raft of cheeseburgers (don’t tell RFK Jr.!) or some Hitler speeches or over-the-hill porn stars or whatever strikes the presidential fancy these days. Republicans could probably figure out a way to make an end-run around him, if they wanted to.

But there is no reason to think they want to. 

Everybody knows the rap on Democrats and deficits. They’re the big-government, big-spending party and always have been. They’ll pretend to care about spending from time to time, but only when the government is spending money on stuff they don’t like, e.g., investigating the politicization of the Internal Revenue Service under Barack Obama. (That was a nice gift to Donald Trump, who surely will make the most of it. As I say: Democrats in power act like they’ll never be out of power, while Republicans out of power act like they’ll never be in power.)

Democrats are so hopeless when it comes to fiscal deficits that they made up a new kind of “deficit”—the “trade deficit,” which isn’t actually a deficit at all—in order to have something else to talk about with the word “deficit” in it. (They blasted Ronald Reagan over the “trade deficit,” which, as Reagan himself noted, does not mean what these idiots think it means: Imports often go up more than exports when the U.S. economy is outperforming those of our trading partners, because Americans are getting richer relative to the rest of the world and buying more stuff. The trade deficit went up during the Trump administration partly because real wages were increasing, a fact out of which a less stupid and lazy man might have made some good use.) Republicans, meanwhile, always talked a pretty good game when it came to fiscal discipline, but, predictably, did very little to impose discipline when in power. One thing that all of our fiscal-restraint policies from the Gramm-Rudman-Hollings Balanced Budget Act have had in common: If they work, they get repealed.

(Incidentally, I saw Phil Gramm, who is good on inflation, at the American Enterprise Institute dinner last week. Not every 82-year-old man is a doddering incompetent, and I’d have actually gone to the trouble of registering and voting if Gramm had run this year. Once he’s dead and gone, I’ll still be more inclined to vote for his chain-rattling ghost than any of the insipid little jumped-up serfs our actual political system produces.)

Republicans have had chance after chance after chance to demonstrate even a smidgen of conviction when it comes to debt and deficits, and the only convictions we’ve seen Republicans embrace are the dozens of felonies on Donald Trump’s criminal résumé. Why try to get past Trump? It would be like teenagers sneaking out of the house after their parents go to sleep to eat some spinach and go to a Bible study when mom and dad are perfectly willing to let them drink Wild Turkey and smoke weed in the living room.

If we had started addressing the problem 20 years ago, we might have gotten out of it with some substantial—but not necessarily radical—tax increases or spending cuts, particularly in the major entitlements, which are the main driver of our accruing debt. Now, we’re at the point where any realistic mitigatory policy (and here I mean something far short of actually balancing the budget) is almost certainly going to require both, at a time when there are many persuasive arguments that we need to increase military spending.

My progressive friends like to point to Eisenhower-era tax rates as a model of good economic policy, because my progressive friends are (for the most part) not my smartest friends. As a matter of fact, taxes were generally slightly lower during the Eisenhower years than they typically have been recently, though not radically so: Federal revenue as a share of GDP has tended to range between 15 and 18 percent, because tax rates are not the same thing as tax revenue. The Eisenhower-era revenue peak was 17.9 percent of GDP in 1953, Ike’s first year in office; the Biden-era peak was 18.8 percent in 2022. The Eisenhower-era low was 15.4 percent in 1955; the Biden-era low was 16 percent in 2020. The last time we had a notionally balanced budget was after the postwar peak of 19.76 percent in 2000, which was just shy of the 1945 overall peak of 19.8. The issue, of course, is that spending was around 20 percent of GDP during Trump’s time in office—not counting the 31 percent of GDP the federal government spent in 2020—whereas we ran budget surpluses in 1956 and 1957 in spite of that relatively low Eisenhower-era tax burden.

But what’s most relevant to our purposes in this discussion is where the money was spent during the Eisenhower years vs. today. As the Treasury Department runs the numbers, just under $1 out of every $5 spent by the federal government next year will go to defense, with the rest mostly going to various entitlement programs and, increasingly, to interest on the debt. In the Eisenhower years, those figures were essentially reversed, with national defense accounting for 73 percent of all federal spending in 1957. I do not think many of my progressive friends—or my right-wing populist friends—want to go back to spending three-quarters of the budget on the military.

Everybody loves the welfare state. Nobody loves the warfare state—until they need it. 

A powerful, splendidly provisioned military has one very important thing in common with a balanced budget and money in the bank: It gives you options. Of course, a big army and a balanced budget are goals that are in tension with one another—and goals that are impossible to align if you are going to have a massive, expensive, poorly run welfare state and relatively low taxation. If you want Norway’s welfare state, you’re going to have to pay Norwegian taxes at some point—either you pay for your consumption today or you pay for it 20 years down the road with lots of interest. We’ve already missed the opportunity to implement the easiest solutions—those options are off the table. And the longer we wait, the fewer options we are going to have.

When it comes to our fiscal situation, we remain, for the most part, in control of our own destiny—for now. At some point, investors will stop believing our story and start asking for bigger interest payments if they are going to keep lending us money at all. And while I think that those who talk in apocalyptic terms about forfeiting the “reserve currency” status of the U.S. dollar—that’s a fancy way of saying that we get to borrow money at lower interest rates because the dollar is the preferred currency for both public and private savings around the world—are probably making too much of that factor, it is probably also true that the era of Washington’s being able to access nearly free money in the bond market is over for good. Our national debt is high enough, our economic growth is sluggish enough, our government is dysfunctional enough, and our political culture is psychotic enough that lenders (which is what bond investors really are) are likely to see the U.S. government as more of a risky borrower than they judged it to be a generation ago. Having serial bankrupt “king of debt” Donald Trump at the head of that limping parade is probably not going to inspire a lot of confidence. But, still, for the moment, the U.S. government is not a hostage of events.

But we are always hostage to events when it comes to the things for which you need a big military. Washington doesn’t get to decide what Russia, China, Iran, et al. are going to do or when they’re going to do it. All Washington gets to decide is how to react to events that happen and how to plan in advance, to the degree that doing so is possible, for events that may come to pass. But when you’re spending so much money that the deficit and existing debt obligations add up to more than you’re spending on defense—and that is the leaky boat in which we find ourselves today—your options are constrained.

All those military leaders and diplomats who warned us about the economic weapon of mass destruction that is the national debt were right back in 2016. They were right in 2000. They were right in 1985. They were right in 1959. It’s a bomb with a long fuse, to be sure—but, at the end of that long fuse, there is a very, very, very big bomb. 

And, apparently, there is nobody in Washington with the least interest in defusing it—at least, nobody with the power to do so. 

(More) Economics for English Majors

Because of how we actually spend the money—popular entitlements and the military—we are not going to balance the budget, or even get the deficit under control, through cutting “waste, fraud, and abuse.” We should cut waste, fraud, and abuse, of course, and there is plenty of it: The federal government makes about $240 billion in improper payments a year and loses a similar amount, possibly more, to fraud. That’s a real chunk of change. But even if we eliminated all of those improper payments—and, again, we should try, but there are some complications I’ll get into—it would cover a bit less than one month of deficit borrowing. 

It is unlikely that we will entirely eliminate those improper payments—the more likely outcome is that we will spend some considerable amount of money converting them into proper payments. That is because most of those improper payments are not fraud or payments made to ineligible recipients; rather, they are payments made in situations in which there is inadequate documentation to establish that they are proper. The categories have descriptions such as “failure to access existing data needed to validate payment accuracy.” Sometimes, the problem is federal bookkeeping; sometimes, the states are providing insufficient or contradictory information. Some of the payments are “technically” improper, in that there was some regulatory box that was not checked, or, as the grievously misnamed Government Accountability Office (GAO) puts it, “payments that were disbursed to the correct recipient in the correct amount, but whose payment process did not follow all applicable statutes or regulations.” We should put a stop to that sort of thing, but, if we do, we’re going to end up making a lot of those payments, anyway, once the recipients dot and cross the applicable vowels and consonants.

One thing that may have occurred to you: We know where those improper payments are, and we’ve known for a long time. GAO reports on this every stinkin’ year. We have some pretty good ideas about where the outright fraud is, too, but Congress has not forced the agencies to implement better fraud controls and more competent auditing. We don’t need Elon Musk and Vivek Ramaswamy (I know: The sentence could stop right there) to list a bunch of dodgy small-ball funds for cocaine-monkey experiments (as much fun as it is to laugh at those) to deal with that stuff. As my friend Charles C.W. Cooke puts it: “This isn’t an information problem. This is a political problem.” It is a problem about which the Trump administration did exactly squat the last time around and about which it is unlikely to do anything meaningful this time around, because it lacks the things needed for meaningful reform: the will to improve things, a realistic program, and the competence to implement that program. 

And, to repeat: None of this is going to amount to a modest elevation rise in a landscape of garbanzo if Trump and his fellow Republicans build a wall around the Pentagon and Social Security. 

Words About Words

A correspondent reports that I have been referred to as “the ginchiest” at a meeting of the Federalist Society. I did not know what “ginchiest” meant, and thought my correspondent might have meant “grinchiest,” which I’ll happily cop to.

Apparently, “ginchiest” means “coolest.” Normally, that would be a pretty big compliment, but “cool” is in the eye of the beholder, and these are Federalist Society dorks we’re talking about. (Beloved dorks doing great patriotic work, to be sure. Some of my favorite dorks.) I mean, it would be one thing to be voted sexiest man by People magazine, but a very different thing to be voted sexiest man by the chess club. 

(I suppose this year’s choice at People, John Krasinski, could have gone either way.)

Ginchiest at the Federalist Society. Tallest building in Wichita. Etc. 

Another language note occasioned by material above: Phil Gramm often has been described as having a pronounced Texas drawl. He has no such thing. He is a cussed Georgia-born so-and-so who talks like Foghorn Leghorn. He lived and worked in Texas and represented Texas in the Senate, but he never lost his Georgia accent.

And yet another: The word garbanzo always tickles me. It is inherently funny, like kumquat and Schenectady. And it was funny in Latin, too, as Cicero—i.e., Sen. Garbanzo Bean—knew all too well. The famous name was originally a nickname given to one of his ancestors, who had a cleft in his nose that reminded the nicknamer of a chickpea.

Furthermore …

Robert F’n’ Kennedy Jr., Tulsi Gabbard, Matt Gaetz—please don’t act surprised. I’ll forgive my friends a lot, but I’m going to have a hard time if you act surprised by any of this. “But this isn’t what the voters voted for!” they say. The hell it isn’t. This is precisely what they voted for.

Elsewhere …

You can buy my most recent book, Big White Ghetto, here. 

You can buy my other books here. 

You can see my New York Post columns here. 

Please subscribe to The Dispatch if you haven’t. 

You can check out “How the World Works,” a series of interviews on work I’m doing for the Competitive Enterprise Institute, here. 

Correction

In a recent piece in which I wrote about the 2024 candidates’ vote totals relative to Trump and Biden in 2020, I was working from an incomplete provisional count, which means my numbers were wrong. I regret the error.

In Conclusion 

Life goes on. From the Wall Street Journal: 

Gillian Held wanted her daughter to grow up around her grandparents. But moving from suburban Orlando back to New Jersey would have meant downsizing. So last year, Gillian’s parents sold their house and relocated to Florida several months before baby Nora was born.

“I said, ‘I don’t want to be Grandpa on a screen,’” said David Held, a retired New York City police officer who now helps watch his 7-month-old granddaughter two days a week.

Baby chasers are one of the cuddlier demographic trends contributing to America’s southward migration, a shift that is shaping everything from home building to municipal finance. Retirees have long sought out Southern states’ warmer weather and year-round golfing. Lower living costs and ample jobs have prompted a decadelong population boom in the South, and now those states boast a new attraction for many older Americans: their grandchildren.

If you know very wealthy people, you may have noticed that many of them lead more modest lives than you might have expected, and that is because the point of being filthy rich isn’t to have a gold-plated toilet—the point of being filthy rich is that you get to do what you want. And we Americans are very, very rich compared to most of the rest of the world and to pretty much all of the people who ever lived in the generations before ours—rich enough to retire, or to semi-retire, while young enough to enjoy playing with the grandkids, rich enough to indulge in the one truly priceless luxury that no mogul or captain of industry can buy more of: time.

I’m at a stage in life that is uncomfortable in one way: Most of us in our early 50s can expect to live decades more, and expect that our friends and family around the same age will live decades more, but, from time to time, one of us gets suddenly snatched away: There’s a pancreatic cancer diagnosis and a friend you spent virtually every day with one summer when you were 15 years old is just gone. It’s like lightning strikes.

One is tempted to join Marcus Aurelius in taking the long view:

Augustus’s court, wife, daughter, descendants, ancestors, sister, Agrippa, his kinsmen, intimates, friends, Areius, Maecenas, physicians and priests: The whole court is dead. Then turn to the rest, not considering the death of a single man, but of a whole family, as of the Pompeii, and that which is inscribed on the tombs: The last of his line. Then consider what trouble those before them have had that they might leave a successor, and then, that, of necessity, someone must be the last.

It won’t do to be morbid, of course. Not at this beautiful time of year (beautiful where I live, especially) with Thanksgiving coming up. And maybe that points to the real choice before us: Whether to let the unhappy facts of the mortal case sharpen our fear or to let them sharpen our gratitude. Like St. Paul, I know what I should do, but I find it difficult to do it—and a good deal easier to do that which I shouldn’t. Resolutions aren’t just for New Year’s Eve.