As I’ve said before, the Old Testament would read a lot differently if Joseph, having been summoned from prison by a Pharaoh who was troubled by dreams, had acted like today’s politicians in Washington.
That is, if he had said what Egypt needed to do was to eat all its food during times of plenty and borrow money for even more of it. Then, when a famine or, heaven forbid, pandemic, comes along, the nation could just go on borrowing more to help the people because, you see, interest rates are low and, well, studies have shown that over time economic growth will outpace the cost of interest, anyway.
Joseph might have been elected to public office with a plan like that. He might even have retired from office before the bad times hit. But he wouldn’t be remembered well. But now imagine this twist. After seven years of plenty, a pandemic comes, and Joseph suddenly tells the Pharaoh he was wrong. Egypt needs to cut spending and eat less, after all.
Sunday school lessons today might focus on how moral authority can be lost through foolishness, rather than on how a prophet convinced a political leader to do something counterintuitive to save his people in the long run.
Which brings me to Republicans under President Joe Biden. A lot of them suddenly seem to have embraced fiscal austerity again. It started just after the election when The Hill quoted Sen. John Thune, a high-ranking Republican from South Dakota, saying it was time for his party to focus on spending because “I think that’s kind of getting back to our DNA.”
Recently, at Janet Yellen’s confirmation hearing for Secretary of the Treasury, he warned again about “an ever-growing debt and no apparent interest in taking the steps that are necessary to address it,” according to The Washington Post. Other Republicans echoed the same concerns, with Sen. James Lankford, R-Okla., calling the nation’s debt “frightening.” That’s the right message, absolutely. But it sounds a little off key from a party that seemed to abandon these warnings when it was in power.
When Republicans controlled the Senate and the White House under Donald Trump, they agreed with Democrats on spending bills that added $2 trillion to the national debt, after passing tax cuts that had added yet another $2 trillion. This was before the pandemic hit leading to stimulus bills that added trillions more.
When Trump took office, the national debt was roughly $21 trillion. Now it is $27.8 trillion and growing rapidly. For the most part, Republicans in Congress said little as this was happening.
Frankly, there were few political reasons to do so. With interest rates low, interest payments owed on the debt actually dropped by 8% in recent years despite a 25% increase in borrowing, according to The Wall Street Journal. As long as that holds, it seems as if deficit spending can go on forever. The only remaining question is how long forever really is.
Which brings me to the prevailing viewpoint among many that this doesn’t really matter. As The Wall Street Journal noted recently, a study by the International Monetary Fund looked at 55 nations over 200 years and found that interest rates were lower than economic growth rates, on average, more than 50% of the time.
However, the same publication quoted University of California San Diego economist Valerie Ramey, who cautioned that this gap was small over time, “and now is trivial compared with the growth of U.S. debt.”
More to the point, the former chair of the Council of Economic Advisers under the first President Bush told the Journal, “At some point we’ll start paying a price for this.”
That price starts with an eventual return to higher interest payments, then continues to lower incomes and savings rates, the loss of ability for the nation to respond to crises, and finally a fiscal crisis, as the Congressional Budget Office outlined seven years ago.
A lot of economists support more federal stimulus measures to counteract the effects of the pandemic. A lot of politicians say this is not the time to worry about the debt.
Maybe that’s right. These are dire times. The only problem is, no one seems to know when it is time to worry.
As much as Republicans have lost some moral authority on this issue, it is good to see them — anyone, really — warning about debt. Without that, it might be hard to find anyone willing to talk about pumping the brakes on more large spending plans.
Regardless of political convenience, someone needs to speak up and, when the pandemic ends, take action before the nation faces a crisis of Old Testament Biblical proportions.