“Simply put, unsustainable debt is helping to keep too many poor countries and poor people in poverty.” Bill Clinton
It is remarkable that Bill Clinton, who was feared to be just another tax and spend Democrat, was the last president to lead Congress to enact legislation that not only reduced our debt and balanced the budget, but produced a surplus. When he came to office, few thought he would embrace Reagan’s economic policies, which even Clinton’s immediate predecessor, George H. W. Bush, failed to do. Reagan was not even as successful as Clinton in addressing what was at the time considered to be unsustainable debt and the most pressing existential crisis.
Through tax and welfare reform, free trade policies and deregulation, fiscal and foreign policy restraint, from 1998 to 2001 Clinton’s administrations produced a balanced budget, surpluses and reduction in debt, and not surprisingly, sustained economic growth, increased employment and reduced poverty. The unfortunate but ridiculous episode of his sexual misconduct and impeachment is more representative of political pettiness and tabloid sensationalism than anything else. I do not say this out of partisan loyalty as I’m neither a Democrat nor a Republican, just an objective observer of lessons we should learn from history.
Further, considering the fact that Clinton was faced with a Republican controlled congress, the fact that he was able to accomplish these things is also testimony to his trade craft in avoiding gridlock. That has not happened since then, and the lessons learned were all but forgotten as we can see by the various crises that have occurred since.
Since then we have engaged in never ending wars with one ill-conceived military intervention after another, bloated entitlements, regulation of just about every facet of the economy, created the worst fiscal crisis since the Great Depression, instituted trade wars with tariffs and sanctions, shuttered our economy and increased debt to the worst level of any nation in the history of the world; not exactly a great legacy to leave our future generations who will inherit the sins of their predecessors for many years to come.
The Federal budget deficit for 2019 was nearly a trillion dollars; for 2020 it will be more than three trillion dollars. We can point fingers all we want about things like the pandemic, tax cuts, bloated entitlements, etc. but we elected Trump who spends like a drunken sailor, and we then we elected Biden who promises to spend even more. We did that, not some Russian hackers or a viral disease, we get to empower those that do these things to us; we have met the enemy and it’s ourselves.
I say that because I suspect the answer to this question is an emphatic no – would the American people elect a politician today who promised to do the kind of things that Reagan and Clinton did? Would we elect a president who would cut entitlements, pull our troops out of foreign countries, propose a Federal Reserve leader who would reduce its balance sheet, or even better, dismantle that tool of monetary corruption altogether, abolish fiat currency, push for legislation, or even better a constitutional amendment, for a balanced budget and fiscal restraint? Think about that and ask yourselves if Americans today are willing to accept what it takes to get off the addiction of debt.
Clinton knew that debt is the worst poverty and that you can’t spend your way out of a recession or borrow your way out of debt. He rose above partisan politics to do the right thing. True there were also things he did that caused the housing bubble that some economists say was one of the main contributors to the 2008 Financial Crisis, but the way that crisis was addressed only made things worse; Quantitative Easing is just stealth financial engineering to spend our way out of a recession and borrow our way out of debt, a policy that saw the slowest recovery since the Great Depression; inexplicably, we are still doing it.
Due to the ever expanding money supply with the freakish creation of fiat currency, and the expanding issuance of US Treasuries, much of it held by foreign governments who are not exactly friends of America, the US debt is now approaching thirty trillion dollars. So when you hear that the Federal Reserve intends to keep interest rates repressed for years to come at less than one percent, think about who is really the beneficiary of such accommodation?
It obviously benefits those in debt, and none more so than the US Government. It also provides the private sector easier access to the credit market by facilitating loans, which in effect increases debt for business and consumers. This is how the financial virus of debt spreads through the economy until we reach a crisis as in 2008 with massive defaults causing credit markets to shut down. Consider what the government’s solution to that crisis was with Quantitative Easing and other accommodations to actually provide even more liquidity for even more credit availability. In effect, their solution was to do more of what actually got us in to trouble to begin with.
While you also hear that inflation is low, even if you believe the big lie that it’s only two percent, do the math and you know that when the Fed says it will not consider negative interest rates, we are already there. Now consider all those retirees on fixed income from pensions and savings and you have a glimmer of how destructive such manipulations are.
So how is it that we now find ourselves in even a worse situation than what Reagan and Clinton faced, but solved and not that long ago? There was a time when Americans made fun of countries we called Third World and Banana Republics; today we can look in the mirror and ask if we have the hubris to say such things anymore. We have become a caricature of what we used to disdain, yet we are apathetic to the problem and unlike Reagan and Clinton, cowardly avoid the solution; kicking the can down the road will only work for a while and only as long as there is road, but what happens when you run out of road?
Where are the leaders who will get us off the debt addiction and on the path to recovery? No one appears on the near horizon; while Democrats rightfully blame Republicans for their wretched fiscal stewardship of our treasury, they come to power with a platform to do even worse. How is it lately that our political system comes up with a government whose solutions are to expand the problem? Is it the system, or the culture of its participants? I believe it has become more of the later and that presents even a greater problem we need to solve.
So the next time you hear a politician proposing anything that creates debt, remember Emerson’s advice that “A man in debt is so far a slave.” Well what then would you call a nation in debt?