Rural Routes/Margot Ford McMillen

Debt Before Dishonor

Does it seem like just yesterday that we were talking about raising the debt ceiling? Well, it was. Before September, it was June 2023 and before that were three debt ceiling increases in 2021, two in 2019, two in 2017, two in 2015. If you are wondering why these crises happen in odd-number years, the answer lies in the political calendar: Presidential elections happen in even-number years, every four years, and midterm elections are held in the other even-number years. So, the October 2023 budget brouhaha — which is debt ceiling disruption by other means — is right on schedule and there will be at least one more—in November—before the calendar turns to 2024, an election year. To guarantee that there won’t be a debt ceiling shutdown until 2025, there’s a suspension clause in the 2023 agreement.

So, is the debt ceiling a political game to allow parties to tease each other, using the media as go-betweens in their theatre? Well, in a way, yes, and the October budget settlement is a perfect example. It provided weeks of fodder for the Sunday news shows and worried Americans by suggesting that the government would shut down. That means national parks closing, Social Security and Medicare processing disrupted, schools starved for funds, total dysfunction. And when agreement was reached? Roll out the campaign speeches. Joe Biden reminded viewers that he had promised “compromise and consensus,” “bipartisan agreement,” “grow our economy,” “crisis averted,” “turning things around” and followed each catch phrase with explanation of his governing skill. Fair enough. That’s his gig.

There is a contingency of pundits and government policy wonks who think the debt is unimportant. They argue that borrowing means that somebody gets paid and puts the money into the economy, thus growing the GDP. As if to settle the argument, they’ll say, “We are the richest country in the world …”

The trouble with this thread of thought is that it ignores the lenders who purchase US bonds and notes. Those lenders can, at a certain point, sell back their bonds and notes, meaning we have to find new lenders, and usually at a higher rate. Americans hold a lot of those issues, but about 25% of US debt is in foreign hands, putting the US in a fragile position.

According to USA Facts, “As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).” Most of those nations are our friends and not in need, right now, of cash. But USA Facts adds another note: “Investors from Russia, China, and Indonesia had sharp drops in US Treasurys over the last several years due to sanctions and short-term capital needs, among other reasons.”

“Ay! There’s the rub!” as Hamlet said when he was contemplating bad dreams. The Office of Management and Budget says that net interest payments on the debt will total at least $395.5 billion this fiscal year, or 6.8% of all federal spending. That’s the sixth biggest category of all the checks the government writes, and exceeds government spending on the next categories combined—veterans’ benefits and services, elementary and secondary education, disaster relief, agriculture, science and space programs, foreign aid, natural resources and environmental protection.

Any kind of major disruption can upset the national budget. War. Climate change. Pandemic. Our nation is prone to fixing things on the fly without a longterm plan. We are like scientists constantly surprised at the unintended consequences of our experimental treatments.

To take a recent example, the experts are always reminding us that the world is ripe for pandemics. So, using the expenses from the past, we can imagine another outlay. The last one cost the Feds $4.3 Trillion. That went to the Treasury, Small Business Administration, Labor Department, Health and Human Services, Education, Agriculture, Transportation, Homeland Security, Pension Benefits and Veteran Affairs.

While citizens can plan for our households, and while cities and states can design contingencies based on the outcomes of COVID-19, that’s not how the US government works. While old-fashioned containment would have meant that sick people were quarantined and well people went about business until they got sick, the new strategy was to command various degrees of shutdown. First, cities closed public gathering places. Then, communities asked for shelter-in-place. As medical services became jammed, states ordered citizens to stay at home. Finally, the federal government stepped in. To shield the economy, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed in 2020, followed by the Coronavirus Response and Consolidated Appropriations Act in 2021.

Did we do it right? Will this be the strategy for every pandemic? Is anyone planning in advance? COVID is still with us even though vaccines have lessened its impact and, as mentioned, there will be more pandemics in the future.

The spending, while welcome, meant that our coffers are tapped out for whatever the next crisis might be. Flooding? Fires? War? A run on the banks?

We hold our collective breaths.

Margot Ford McMillen farms near Fulton, Mo., and co-hosts “Farm and Fiddle” on sustainable ag issues on KOPN 89.5 FM in Columbia, Mo. Her latest book is “The Golden Lane: How Missouri Women Gained the Vote and Changed History.” Email: margotmcmillen@gmail.com.

From The Progressive Populist, November 1, 2023

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