Sobering Dose Of Economic Reality
The University of Hawaii’s fall semester began last week, and the thoughts of professors and students alike turned to syllabi and reading lists. I no longer stride the halls of academe as I once did. I’m now a lowly lecturer at the University of Hawaii-West Oahu, distributing a syllabus and reading list for just one undersub-scribed course.
I admit to feeling a certain emptiness despite my exalted title: Professor Emeritus of History. (“Emeritus” for a professor means, I believe, “old and burnt out.”)
That said, I don’t despair, for, as my 11 regular readers know, I have always considered “Mostly Politics” not an under-subscribed class, but an intimate upper-division seminar for what the poet Milton called “a fit audience, though few.”
So listen up, scholars. Here’s your reading list for the fall:
Our text is David Wessel’s Red Ink: Inside the High-Stakes Politics of the Federal Budget (New York, 2012.). It will cost you just $22 in hardcover. And who knows what cut-rate price you can get it for on your Nook or Kindle?
You’ll like its length: short, a mere 162 pages. You’ll like its style: clear, clear, clear. And if fright is to your taste, Red Ink will make your hair stand on end as no textbook ever has.
Wessel is a Pulitzer Prize-winning economics editor for the Wall Street Journal, and his subject is “where the trillions (of dollars) come from, where they go, and why inaction imperils our future.” As recently as a dozen years ago, the country’s fiscal future looked sublime. In January 2001, on the heels of three successive years of budget surpluses, the Congressional Budget Office projected surpluses each year from 2002 through 2011, totaling $5.6 trillion and sufficient to erasing the national debt.
They weren’t. The nation’s debt in February 2011 was $12 trillion. What happened?
According to Wessel, several things: “a lousier than anticipated economy, some big tax cuts, two wars that weren’t paid for, an expansion of Medicare to cover prescription drugs that wasn’t paid for, and – later – the damage done by the worst recession since the Great Depression.”
To be exact, slower economic growth cost the economy $3.3 trillion; tax cuts $2.8 trillion; the wars in Iraq and Afghanistan and Medicare’s prescription drug benefit $4.3 trillion; and interest on the public debt $1.4 trillion more. And so it continues to go.
Well, not quite. When this aging professor was an undergraduate, my economics professor dismissed the national debt as unimportant because “it’s money we owe ourselves.” He was right. In 1970 a minuscule 5 percent ($14 billion) of our national debt was held by foreign lenders. Today, 46 percent of our national IOUs ($4.6 trillion) are kept in foreign vaults, most of them in China and Japan.
That means, of course, enormous leverage over the economy of the United States by people who do not live within our borders.
So what do we do? Nobel Prize-winning economist Paul Krugman of The New York Times argues that the deficit is a problem, but right now unemployment is a far larger one. Stimulate the economy.
U.S. Rep. Paul Ryan, Mitt Romney’s GOP running mate, would cut spending on Medicare, Medicaid and practically everything else.
Former Secretary of Commerce Pete Peterson argues that the only way to return to fiscal sanity is by bringing spending on entitlements under control and raising taxes.
Now remember, students, you must finish reading Red Ink by Tuesday, Nov. 6.