I recently revisited an archive of essays I wrote for AEI. Among my favorites are:
Why Our Current Budget Situation is a Crisis.
The first chapter of the history runs from 1950 through 1969. I call these the Surplus Years. At the time, the official data showed deficits. One reason was that only under President Johnson did the government adopt the “unified budget” that included Social Security receipts and outlays. Because until very recently Social Security ran surpluses, the “unified budget” shows more fiscal strength than was initially reported in the 1950s and early 1960s. In addition, we are looking at the primary surplus, which excludes interest payments. Adding in interest expense would move some of the individual years into deficit, but it would not erase the overall surpluses in the five-year totals.
In addition to the primary surpluses, the Surplus Years saw GDP growth in excess of the interest rate by a substantial amount. As a result of these factors, at the end of the Surplus Years the ratio of debt to GDP had plummeted to 29 percent from 79 percent.
You can argue that I was crying wolf back then by saying that our budget was in crisis. But I don’t think I was wrong. We have done nothing to address the issue. And it is closer to coming to bite.
I view the deficit as a problem for the political system, leading to friction and strife.
when the government borrows the money, nobody is unhappy. Sammy gets to eat an extra bushel of corn, and Lois willingly defers consuming one bushel of corn with the expectation of getting it back next year.
However, this sets the political system up for conflict and strife in year two, when the burden of paying the debt has to be apportioned. As we have seen, it could be divided any number of ways. However, consider this: Lois is expecting three bushels of corn, based on what she produces and her expectation of having her loan repaid. Meanwhile, Sammy is expecting two bushels of corn, based on what he produces. There are only four bushels of corn available, and there will be a political battle over who gets disappointed the most.
I wrote an early version of what banks do. I provided a more complete description of the liability transformation function.
My essay on Overreaction Syndrome said,
Today’s short news cycle tends to steer people away from thinking carefully about trade-offs. When the media is focused on crime, aggressive action against minor crime is termed “broken-windows policing” and earns praise. When a suspect is killed while being arrested for a minor crime, aggressive police action becomes “harassment” and draws accusations of racism.
That essay would predict that after over-reacting to the George Floyd case by being lenient toward crime, we will at some point swing too far in the opposite direction.
In The Recipe for Good Government, I pointed out how countries with large populations are almost all poorly governed. Some of the most well governed countries have five to ten million people. What did not make the article was a further breakdown of countries by a controversial measure of national average IQ. That IQ measure does a very good job of predicting which small states will be governed well and which will be governed poorly.
In Tribal Politics in the 21st century, I sketched the model that I wrote up in The Three Languages of Politics. Links to the self-published version of the book, which was taken down when the Cato version came out, so the link is dead.
re: "I view the deficit as a problem for the political system, leading to friction and strife."
The problem is they don't see enough negative consequences and therefore they don't solve the problem, they merely keep kicking the can down the road. Thomas Jefferson warned of this in a letter to James Madison decrying the idea of national debt that could be passed down to future generations, obligations passed without their consent:
https://web.archive.org/web/20010226092602/http://press-pubs.uchicago.edu/founders/documents/v1ch2s23.html
"Then no man can, by natural right, oblige the lands he occupied, or the persons who succeed him in that occupation, to the paiment of debts contracted by him. For if he could, he might, during his own life, eat up the usufruct of the lands for several generations to come, and then the lands would belong to the dead, and not to the living, which would be the reverse of our principle."
Unfunded liabilities are a can they keep kicking down the road, and like Jefferson referred to, they are an obligation being imposed on future generations since they can get away with it. As this page points out, the US Debt clock indicates the total US assets are barely above estimates of unfunded liabilities:
https://BornInDebt.com
If nothing changes, that will all be added to the debt over time. When you add the existing national debt, the country as a whole is in the red. In essence future generations being born now are "Born In Debt" with their share. Politics is often about "the children", and although some have tried to make the about "intergenerational warfare " before and hadn't succeeded yet: but that doesn't mean that argument can't. While many of us are skeptical of Greta Thunberg's concerns when she said "How dare you !": the concern for children resonated politically, and so that site suggests asking "how dare you!" but future generations in debt without their consent, that it needs to be fixed.
Once again, Kling drops another nesting-doll of an essay (about other essays) that will leaving me reading all day. If he were a milkman, he’d leave the cow!