Monday, February 23, 2009

The Burden We Ought to Bear

February 23, 2009, 12:15 p.m.; February 24, 2009, 5:10 p.m. (source for "George Washington" quote)
Cutting That Baby in Half
(brought to you by*)

President Obama says he wants to cut the deficit in half. Jackie Calmes, "Obama Planning to Slash Deficit, Despite Stimulus Spending," New York Times, February 21, 2009 ("After a string of costly bailout and stimulus measures, President Obama will set a goal this week to cut the annual deficit at least in half by the end of his term, administration officials said. The reduction would come in large part through Iraq troop withdrawals and higher taxes on the wealthy").

He's called a meeting today to start the process. Michael Falcone, "The Early Word: Budget Week," New York Times, February 23, 2009 ("At a mini-summit today, President Obama and an invited group of lawmakers and advisers will be discussing how to shrink the federal deficit and possibly how to reform some of the largest government programs, including Social Security and Medicare").

That's good. But cutting that baby in half is not enough. For starters, the public needs to understand the difference between "deficit," "debt," and "unfunded obligations."

President Bush started his eight years with a President Clinton-created surplus and ended with a half-trillion-dollar deficit he handed off to Obama. Roger Runningen, "U.S. Deficit to Reach Record $490 Billion in 2009," Bloomberg, July 28, 2008 ("The projected deficit for the fiscal year that begins Oct. 1 [$490 billion] is higher than the $407 billion forecast by President George W. Bush in February. . . . Bush inherited a budget surplus of $128 billion when he took office in 2001").

It looks like this year's "deficit" is going to be well over one trillion dollars. Lori Montgomery, "Congress Urges Spending Restraint; Facing Largest Deficit Since 1945, Obama Names Official to Help Retool Budget," Washington Post, January 8, 2009, p. A2 ("The nation's budget deficit will soar to an unprecedented $1.2 trillion this year . . ..").

That will increase our current "debt," which is in excess of ten times that. (Once it went over $10 trillion, the National Debt Clock actually ran out of numbers. Frank Ahrens, "Debt Clock Out of Numbers," Washington Post, October 8, 2008. reports that "We hit a 53-year high for debt as a percent of the economy (GDP).")

All of which pales by comparison with the unfunded future obligations of our government now approaching $70 trillion. Jerome R. Corsi, "Federal Obligations Exceed World GDP; Does $65.5 Trillion Terrify Anyone Yet?" WorldNet Daily, February 13, 2009:
As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligations embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.
In other words, cutting the deficit in half means we're going to continue to add to the government's debt each year at least $500 billion -- if Obama is successful, and of course more if he's not.

A story later in the day hit on many of the above issues. David Stout, "Obama Vows to Slash Federal Deficit," New York Times, February 23, 2009 ("The president promised, as expected, to halve the deficit that he inherited, estimated at $1.3 trillion or more for 2009, by the end of his first term . . .. The deficit is the year-by-year gap between what the federal government spends and the revenue it takes in. So even if the annual deficits are cut, the total national debt will continue to grow. It now stands at just over $10.8 trillion, according to the Department of the Treasury").

No less an Obama predecessor and American hero than George Washington once encouraged his countrymen to exercise "vigorous exertion in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear." (The full passage is quoted and linked below.)

(Around the Internet this quote is often attributed to a 1789 letter from Washington to James Madison as "No generation has a right to contract debts greater than can be paid off during the course of its own existence." See, e.g., Joan C. Browning, "Spending Our Grandchildren's Money," February 2, 2008. But I have been unable to find any more precise reference to the source, let alone a link, to confirm it. It is not even included in Wikipedia's rather lengthy collection of Washington quotes. This may be in part a confusion with the first "Farewell Address" of 1792, following which Washington served another term, a draft with which James Madison is said to have assisted. Obviously, if you know of an authoritative online source for the "quote from the letter" please enter it as a comment to this blog entry.

Feb. 24, 5:10 p.m.: The mystery is solved. It was not a letter from Washington; the letter was written by Thomas Jefferson. And having done the research, to save others going through the same lengthy process, here are a couple of hard copy cites and a link as my modest daily contribution to academic scholarship and my "let's please provide sources for our Internet postings" campaign.

Thomas Jefferson, Correspondence: To James Madison, Paris, September 6, 1789, in Andrew A. Lipscomb and Albert Ellery Bergh, eds., The Writings of Thomas Jefferson, Definitive Edition (Washington: The Thomas Jefferson Memorial Association, 1905), vol. 7, pp. 454, 456.

Thomas Jefferson, The Earth Belongs in Usufruct to the Living, II. Thomas Jefferson to James Madison, Paris, 6 September 1789, in Julian P. Boyd and William H. Gaines, eds., The Papers of Thomas Jefferson, 27 March 1789 to 30 November 1789 (Princeton: Princeton University Press, 1958), vol. 15, pp. 392, 393.

The quotation ["no generation can contract debts greater than may be paid during the course of its own existence"] is contained within a lengthy and very thoughtful essay on the subject, well worth our reading and contemplating today. A link to a brief excerpt from the essay, including this quote, is available at "The Limits on Contracting Debt" in 38. The National Debt, Thomas Jefferson on Politics & Government, Jefferson Quotations, University of Virginia.)

As is so often the case, our editorial cartoonists are often much more able to make the argument with the point of a pen:

[Credit: Gary Bookins, Richmond Times-Dispatch, February 13, 2009; reprinted, The Gazette, February 23, 2009, p. A4.

Here is the passage that contains the opening Washington quote:
As a very important source of strength and security, cherish public credit. One method of preserving it is to use it as sparingly as possible, avoiding occasions of expense by cultivating peace, but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it, avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertion in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear. The execution of these maxims belongs to your representatives, but it is necessary that public opinion should co-operate. To facilitate to them the performance of their duty, it is essential that you should practically bear in mind that towards the payment of debts there must be revenue; that to have revenue there must be taxes; that no taxes can be devised which are not more or less inconvenient and unpleasant; that the intrinsic embarrassment, inseparable from the selection of the proper objects (which is always a choice of difficulties), ought to be a decisive motive for a candid construction of the conduct of the government in making it, and for a spirit of acquiescence in the measures for obtaining revenue, which the public exigencies may at any time dictate.
George Washington, "Farewell Address," The Avalon Project, Yale Law School Lillian Goldman Law Library, September 17, 1796.

Needless to say, I'm going to be very interested to see what comes out of today's White House meeting. My three great grandchildren are asking me how much debt our generation is going to be leaving to them.

Related Blog Entries on Global Economy and Bailouts

Nicholas Johnson, "Who's The Reason?" September 5, 2008

Nicholas Johnson, "How Much Do You Owe the Chinese?" September 6, 2008

Nicholas Johnson, "Taxpayer Rescue," September 15, 2008

Nicholas Johnson, "Global Finance: The Great Fountain Pen Robbery," September 21, 2008

Nicholas Johnson, "Alternatives to 'The Plan,'" September 28, 2008

Nicholas Johnson, "Better Alternatives to Congress' Bailout Plan," October 2, 2008

Nicholas Johnson, "Can We Trust Our Bankers?" October 29, 2008

Nicholas Johnson, "It's the Economy," November 7, 2008

Nicholas Johnson, "Jobs, Not Unemployment, Key to Recovery," November 8, 2008

Nicholas Johnson, "Trust Your Instincts, Auto Bailout's Terrible Idea," November 14, 2008

Nicholas Johnson, "Auto Bailout: An Open Letter to Congress," November 19, 2008

Nicholas Johnson, "A Trillion Here, a Trillion There," November 20, 2008

Nicholas Johnson, "FromDC2Iowa's Weekend Edition," November 21, 2008 ("The Answer to Global Economic Collapse" and "Auto Bailout: 'Show Me the . . . Plan'")

Nicholas Johnson, "Citigroup Deal Stinks," November 25, 2008

Nicholas Johnson, "Only Select Few Are Thankful for Trillions," November 27, 2008

Nicholas Johnson, "Auto Loan Makes Too Few Dollars Even Less Sense," December 4, 2008

Nicholas Johnson,"Quick Fix for the Economy," December 12, 2008

Nicholas Johnson, "You Know It's Serious When We Start Laughing," December 15, 2008

Nicholas Johnson, "A Car in Every Garage," December 16, 2008

Nicholas Johnson, "Forget Madoff, Focus on Bernanke," December 17, 2008

Nicholas Johnson, "Of Theaters and Automobiles," December 20, 2008

Nicholas Johnson, "There's Bad News and . . . and . . .," December 21, 2008

Nicholas Johnson, "Et Tu, Toyota?" December 22, 2008

Nicholas Johnson, "Revolting Developments," December 23, 2008

Nicholas Johnson, "First Things First," January 8, 2009

Nicholas Johnson, "Why We Should 'Point Fingers' and 'Look Backwards,'" January 13, 2009

Nicholas Johnson, "Fool Me Twice," January 14, 2009

Nicholas Johnson, "Economic Sorrows and Solutions," January 27, 2009

Nicholas Johnson, "No More for Wall Street!" February 1, 2009

Nicholas Johnson, "Hang Onto Your Wallet," February 5, 2009

Nicholas Johnson, "Quick Fix: Support Jobless, Not Bankers," February 7, 2009

Nicholas Johnson, "Geithner's Same Old, Same Old," February 10, 2009

Nicholas Johnson, "Terrorist Bankers,"
February 13, 2009

Nicholas Johnson, "Financial Crises for Dummies," February 17, 2009

Nicholas Johnson, "They're Back!!" February 20, 2009

Nicholas Johnson, "The Burden We Ought to Bear," February 23, 2009


* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself. -- Nicholas Johnson

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1 comment:

Anonymous said...

But Nick--weren't you supportive of debt a few months ago when you saddled your grandchildren with the 20+year conservation tax?