WASHINGTON – The Gallup poll has recently released a bi-, or tri- furcated survey which appears to show that Americans are not responding to this recent burst of prosperity by going on a mad spending spree – the way their governments have. Not yet at least.
That's very good, because some experts are warning that we may be facing a financial crisis. No one is using that term, or even "recession." Wall Street uses other language, like a whistle that only dogs can hear. And clearly, hardly anybody in political power here wants to spoil the fun.
The sharpest warning came from the economists at the nation's most powerful banking and money house: Goldman Sachs & Co.
Goldman – in a public report that didn't make the evening news – said deficit government spending is sending everybody into financial "uncharted territory." That's a polite term for never-never land, a balance sheet that matches President Trump's personality.
But it also reflects the behavior of House Speaker Paul Ryan, R- Wis., House Minority Leader Nancy Pelosi, D-Calif., Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Charles E. Schumer, D-N.Y.
All of them are performing under a new model – a fancy term is paradigm – that the public doesn't understand, and that popular culture including the 24-hour media and hand-held news doesn't care about. The model, too, is about money – unlimited special interest, union and corporate cash – loosed on Washington in the 2010 Supreme Court Ruling Citizens United v Federal Election Commission. It rendered enforcement of federal campaign finance laws virtually unenforceable.
As a result, Washington behaves as an island insulated from the public by luxury hotels, lodgings for government officials subsidized by lobbyists. One result is that members of the House and Senate don't meet with constituents any more. The members send staff. Another is the egregious White House Correspondents Association, a celebration of drunks, lobbyists and minor celebrities posing as a journalism event.
Nobody, but nobody in the press is asking where all the ticket money goes.
So what would be more natural in this environment for the president and Ryan, Pelosi, McConnell and Schumer to pass the most reckless, the most dangerous federal spending plan in our history? One friend in the financial sector said the budget will produce dangerous trends, perhaps a crisis. A lot of us know this is coming, he said, but nothing's going to be done until there is a crisis.
The last was a decade ago. Brokerage houses collapsed, municipalities slipped into bankruptcy, financiers went to prison, unemployment spiraled. President Obama spent $900 million on stimulus programs, the Federal Reserve devalued our currency, adjustments were made to save the auto industry.
What Washington did this winter, in a moment of prosperity, to build in future deficits is unprecedented. To be fair, estimates are all over the place. TheBalance.com said government interest payments take 7.4 percent of the fiscal 2018 budget. The only expenditures that are larger are Social Security, $987 billion; military, $874 billion; Medicare, $582 billion, and Medicaid, $400 billion.
Because of Trump's corporate tax cuts, and the Democrats' insistence that welfare payments like food stamps, and temporary assistance to needy families grow apace, the amount of government cash going to repay our debt will grow exponentially.
When Obama took over, interest payments were 5.3 percent of all spending. With the arrival of Trump, it rose to 6.8 percent. In 2020, it will be almost 10 percent, and 12.5 percent by 2025. An analysis by CNN said the annual, year-to-year deficit could reach $1 trillion next year. We are already in "uncharted territory."
In 10 years we will be paying holders of government securities $1 trillion a year – that's just for interest payments – forget about buying down the debt. That annual deficit dwarfs what we are now spending on the military. For the present, all this is good for Wall Street - as long as investors like buying American debt.
Even if their confidence in America continues, the interest costs squeeze out spending for other needs like schools, law enforcement and roads and bridges. The non-partisan Committee for a Responsible Federal Budget said that in 10 years, the total federal debt will be equal to all the goods and services produced annually by the American economy. That's within 5 percent of what our government owed investors in the wake of World War II.
Meanwhile, New York continues in its role as one of the highest tax states in the country, and the national leader in per capita costs of state and federal interest payments.