If you interact with current events in any way whatsoever, you’ve probably heard a figure thrown around, a figure in the trillions, so large it’s hard to conceive of it being measured in real dollars: the national debt. Since 2001, soaring debt has been part of our national backdrop. It almost starts to seem…normal.
Bill White‘s book, “America’s Fiscal Constitution: Its Triumph and Collapse” delves into history to demonstrate that carrying a national deficit is not the norm. Growing the debt year after year to cover normal operating expenses is unprecedented.
In the book – which is surprisingly readable, despite being dense with information. White examines periods in American history when the government went into debt. Using these examples, he elucidates part of an unwritten constitution, the American Fiscal Tradition, that guided how the government spent money, levied taxes, and borrowed money.
For those of us who came of voting age post-2001, it’s full of surprises.
His conclusion: America grew into the superpower that it is on a “pay as you go” plan, borrowing money only to preserve the nation, expand and connect the nation’s borders, wage war, and during severe economic downturns. When they borrowed, repayment was a front and center priority in the short years that followed.
What’s different now, White explains, is that both parties lack the political will to directly correlate spending and taxes. Our nation is borrowing money to pay for normal expenses – like Medicare. Meanwhile we continue with a wartime budget that was never financed through taxes. The problem is bipartisan, and White offers up bipartisan suggestions to get a conversation rolling. He maintains that while polarized leadership may have different desires when balancing the budget, history shows that if it’s a high enough priority for both parties, it can happen. And it would really help if the voters knew what to demand.
“America’s Fiscal Constitution” might not be this summers #1 beach read, but if it were, we’d be a long way toward a more informed electorate.
Rivard Report: For those who came of voting age after 2001, lowering taxes (or instituting new programs without raising taxes) has been a standard campaign promise. Do you think that contemporary campaigns have contributed to making the discussion too simplistic?
Bill White: Yes. Spending more without more tax revenue or cutting tax revenue without reducing spending is like cutting the price tag off political promises and waiting to send the bill. People should expect no more from government that tax revenues can pay for.
RR: Many Americans currently carry significant personal debt, and accept it as a reality of life. Do you think our increased comfort with personal debt influences the way we see the national debt?
BW: Certainly people realized the dangers of high levels of personal debt after the near financial collapse in 2008. Polls show people are worried about rising national debt, as they were whenever debt rose sharply throughout American history.
RR: Which of the historical instances of national deficit mentioned in your book do you find most instructive to our current situation?
BW: After World War II the nation built up debt equal to total annual national income, as it has today. People balanced budgets to avoid raising debt. Democrats and Republicans fought fiercely in 1946-1950, but leaders in both parties realized the risk of piling on additional debt and deferred various spending and tax relief priorities.
RR: Are there any particular debt repayment policies from our history that you think should be enacted today?
BW: After prior spikes in debt federal leaders balanced the budget immediately. Today’s incumbent federal leaders propose to balance the budget slowly, over decades, to avoid hard choices. Balancing the budget requires hard choices.
RR: Any historical figures who you wish were still sitting at the table?
BW: Harry Truman, Dwight Eisenhower, and Thomas Jefferson come to mind. President Clinton and Speaker Gingrich fought during 1995-1997, but they shared the common goal of balancing the budget and managed to pull it off.
RR: Outside the four precedents for incurring debt (to preserve the nation, to expand and connect the nation’s borders, to wage war, and during severe economic downturn), can you think of other valid reasons for national borrowing?
BW: Personally, no. However, if the majority of people want to continue to borrow for Medicare, it would be better to debate that issue and decide it in a national referendum, like a local bond issue. Many people are unaware of borrowing to pay for Medicare. Debt-financed Medicare simply adds another layer of cost to pay for the program. Most Americans would probably support a tax increase to pay for it, but only if they thought the funds would not be diverted for some other purpose.
RR: Help us understand the risk of NOT dealing with the national deficit.
BW: The day of reckoning will not come immediately or in the form of a default. Every year, as interest rates rise and debt increases, more of each tax dollars will be used for debt service and less will be available for major federal programs such as national defense and Medicare. If they nation just borrows more and interest compounds, then the US will find itself unable to deal effectively with future threats to international security or respond to try to put a floor under the next severe recession.
Bill White will be featured at the San Antonio Book Festival during a talk moderated by Evan Smith, editor-in-chief and CEO of The Texas Tribune, about his work at 10 a.m. in the Central Library Auditorium.
Click here to check out the schedule online. Download the full festival schedule as a PDF here. For a more interactive approach, download Eventbase from the app store on your phone (iPhone or Android) and customize your own schedule for the day by choosing your favorites.