February 23, 2009
Clinton Grovels at the Panda's DoorBy Lee Cary
Hillary Clinton, Presidential Candidate, March 2007:
Hillary Clinton, Secretary of State, February 2009:
While visiting China recently, Secretary of State Hillary Clinton groveled for more money at the Panda's door, and got it.
Two years ago, presidential candidate Hillary Clinton voiced concern that the Bush administration was leaning too heavily on foreign nations to underwrite the federal debt.
Today, though, China's purchase of U.S. Treasuries is welcomed news to the Obama administration.
Clinton's shift in attitude symbolizes a federal government that, through several administrations, resembles an alcoholic who repeatedly promises to cut back on drinking. Then, in the wake of a personal challenge, rushes to the bar to order a double, on credit.
For the purposes of this article, there are three layers to the public debt. (1) The total amount. (2) The portion of U.S. Treasury Securities owned by other countries. And (3) the leading foreign holder today of those Securities - the Panda, as in China.
(1) Growth of the public debt is largely a result of historically out-of-control Human Resources (social services programs) expenditures.
The total public debt number is growing beyond comprehension. Imagine you're in Colorado Springs, Colorado looking up toward the top of Pike's Peak. That's the slope of the upward trend line of America's public debt.
The preface to the 206-pages document entitled "The 2008 Financial Report of the U.S. Government," an analysis compiled by the Department of the Treasury, is a 12-pages summary entitled "A Citizen's Guide to the 2008 Financial Report of the United States Government." (Go here to view only the Guide.) Page 3 of the Citizen's Guide displays a line graph version of the slope up Pike's Peak. Its visual impact will command your attention.
The overall message from the Department of the Treasury is summarized in the subheading, "An Unsustainable Fiscal Path" under the heading "Where We Are Headed." (p.7)
We're headed up, and then over, the cliff.
According to an historical study of the federal debt by Robert E. Kelly entitled The National Debt of the United States, 1941 to 2008, this unsustainable fiscal path is on autopilot. It's being directed by an ever-increasing portion of the federal budget allocated to legislated entitlement programs (Human Resources) that began, in earnest, not with FDR, but with LBJ.
Kelly summarizes the historical evolution of the public debt by focusing on the major categories of federal expenditures:
Politically, the Human Resources portion of the budget constitutes the Lazarus of federal fiscal policy. We're even now watching a reversal of President Clinton's welfare reform happen through President Obama's economic stimulus bill.
Here are just three examples of out-of-control growth in elements within the Human Resources cost center (Source: Executive Office of the President of the United States, Fiscal Year 2009, Historical Tables, Table 8.5 - Outlays for Mandatory and Related Programs: 1962-2013, pp. 138-149):
Medicaid in 1962 was budgeted at $0.5 million (all numbers in FY 2000 dollars). The estimated 2009 expenditure is $215,662 million.
Federal employee retirement and disability was $9.1 million in 1962. Estimated for 2009 - $113,681 million.
Food and nutrition assistance: $1.3 million, 1962; $56,336 million, 2009
Legislatively mandated entitlement programs are consuming the federal budget and driving up debt and the interest necessary to service that debt. Again, quoting from Kelly's book,
In the current political climate, we can anticipate a raid on the largest remaining discretionary budget item, defense budget, in order to maintain out-of-control spending on Human Resources. Why? Because, long ago, the federal government's budgeting emphasis shifted away from providing for the common defense and toward providing a myriad of social services. And that emphasis promises to accelerate during the Obama administration.
LBJ's Great Society has become the Dependent Society. With more to come.
New York Times columnist Paul Krugman recently wrote an op-ed piece entitled "Franklin Delano Obama?" A more accurate title would have been "Barack Hussein Johnson."
But in case you're tempted to blame only Democrat administrations, consider this:
Under Presidents Nixon, Ford and Carter, the average increase in Human Resources for four years was 76.5%. During that same period, the average increase in revenue was 47.1%. In a nutshell, that is the basic explanation for rising debt. (Kelly, p. 201)
Culpability for growing the public debt is truly bipartisan. One parent is named Democrat. The other, Republican.
(2) The importance of the role of foreign nations in underwriting our public debt through the purchase of U.S. Treasury Securities is increasing.
In 1997, foreigners owned about 38% of U.S. Treasuries. In 2007, the percentage had risen to 52%. The trend is tracking steady upward as increasingly the U.S. Government looks to other nations' monies to underwrite budget deficits.
(3) China has become the leading foreign underwriter of our public debt.
The Panda is our favorite bartender, now holding approximately 22% of foreign-owned U.S. Securities. Japan, once in first place, is second at 18.7%; the United Kingdom third at 11.7%.
Even before our Secretary of State became a presidential candidate, she warned about a risk to American sovereignty posed by our indebtedness to China. Back in 2005, she took this position:
That was then. This is now. And now, more than ever, we need to be nice to the bartender so he'll keep filling our glass, as we run up the tab. And since we're among his best customers for exported goods, he needs us to keep drinking, for now anyway.
Conclusion: America's foreign policy is becoming a lap dog to a federal debt that grows heavier by the year.
I don't worry about my children or grandchildren paying off the public debt. It's won't happen. It can't happen.
I do wonder how their America will be able to merely pay the mounting net interest on the public debt. That's the most imminent challenge.
The projection for the growth in net interest on the public debt is displayed on page 9 of the 206-pages Department of the Treasury document here.
If you have young children, or grandchildren, you might want to visit an actual bartender before looking at it. It will sober you up.