Common Conviction

Just four months after facing a potential government default, Washington is again talking about a government funding deadline.  As always it is a political question – will Congress pass spending resolutions to keep the government operating?  U.S. government default is not on the table this time, but the long-term issue of creditworthiness remains unaddressed.

Behind the questions of debt ceilings, deficit spending, depleted FEMA resources in the wake of wildfire on Maui and hurricane in Florida, arms for Ukraine, rising interest rates and the roles of fiscal and monetary policy – are we competent to govern ourselves?  Is our electoral system and economic institutional order capable of reconciling spending with resources?  If not, is there a case that democracy simply licenses irresponsible behavior?

Of course responsibility in government is a loaded concept, and our two political poles will find ways to blame each other for any financial disorder, and/or for any shortfall in government performance.  But, even after the brush with default, and even a downgrading of US government credit ratings, the question of US financial credibility disappeared from media and political discourse.  Even this blog, after calling for a conscientious approach to debt and deficits, has let the matter drift.  While the current question is less urgent than the debt ceiling panic, the repeating cycles of neglect and crises should remind us of a deeper problem. 

The issues go beyond weighing what we want from the U.S. government against the costs of taxation and borrowing.  Those issues also include the effects of spending and of deficits on the nation’s economic performance.  More remotely but more consequential, would our policy choices destabilize the financial system?  Put another way, at one level, do we want more than we can pay?  At another, will deficits raise interest costs and how will the mix of stimulus and debt affect the economy?  And at yet another level, if US government creditworthiness erodes too much, could we get economic chaos?  The rise of government debt, not just currently but over the generations, has brought us to where always face this last possibility.

Every debt and budget question is subject to competing and conflicting analysis and debate.  Complexity in the actual economics is confusing enough.  What’s worse is that public and political discourse do not take sincere analysis and thought seriously.  One faction wants to trigger default to pin blame on the other.  Fiscal spenders blame restrainers for denying resources to certain populations.  Any analysis becomes suspect as our politics reduce the question to partisan tropes.  

In and of itself, regardless of economic outcomes, this mode of economic management discredits our system and risks moral as well as material setback.  Only when politics finds a way to operate at a higher plane of public spirit will we have reason to feel confident in our prospects, economic and otherwise.