I think the chart in an earlier blog (Debt by the numbers) is somewhat misleading. First it is in nominal dollars, therefore not expressing the debt to the size of the economy. But the main misleading feature is that it presents Government gross debt not net debt. According to the US Treasury and OMB, gross debt in 2013 stands around $16.7 trillion or 106 per cent of GDP. By contrast, government net debt (ie: netting out the Government’s financial assets) is around $11.6 trillion or 73.6 per cent of GDP.
Now the real result is likely to be somewhere in between those two figures. First what of the quality of the financial assets netted out of the gross debt figures? Second, what of contingent liabilities of government which are not accounted in the debt figures? Both of these will increase the ‘real’ net debt figure, although it is unlikely to be anywhere near the gross debt figure of 106 per cent of GDP.
Some people responding to my earlier blog about the constitutional challenges facing Obama chastise me for daring to suggest that the fiscal problem is not all Obama’s fault but the Congress should take a fair share of blame. After all, government debt has been rising under many presidents, both GOP and Democrat.
Sure, I would like to see a President taking a stronger role in repairing the US’ precarious fiscal position, but at least he has the support of the majority of Americans. I don’t agree that the public has been duped by the media in electing Obama over Romney. I maintained all along that Romney was a poor choice by the GOP – he was unelectable as was proven. A competent candidate with a disciplined campaign would have seen the defeat of a weakened and relatively unpopular Obama, but that was not to be. The GOP dug its own grave.
Be that as it may, Obama can legitimately claim support from the majority of Americans. That is far from the case in the Congress, where many congressmen and senators enjoy tenure with little threat to their positions. The overwhelming gerrymandering of districts in the US has resulted in a Congress which is hardly representative and does not act in the national interest.
Instead, Congress marches forward with wacky proposals and pork barrelling that worsens rather than repairs the budget situation.
Sure, there are some exceptional people in Congress who are keen to repair the fiscal ill discipline. But they are a small minority.
But as an institution, Congress has failed the people of the United States badly. It has been, in my view, the principal villain for fiscal ill-discipline.
Like him or loathe him (I loathe him), Obama did receive the majority of the votes cast in the 2012 election. His medical care program (“Obamacare”) has the support of the majority of Americans.
The behaviour of the Congress to thwart this legislative program, now law, has been, frankly outrageous. They had the opportunity to argue against Obamacare and failed to convince the people of the merits of their argument.
I personally do not like Obamacare, but it is extremely reckless to act as some members of Congress presently do. Although I admire Rand Paul, I object to his recent actions to shutdown the Government and threaten the stability of its borrowing.
It is for the advocates of the repeal of Obamacare to make their case and take it to the people. Behaving like petulant school kids is not likely to endear them to the voting public.
The power of the presidency has waxed and waned over time. But I continue to consider that it is a weak institution by design (certainly that is what the founding fathers wanted). Congress’ apogee was when Andrew Johnson was President, and then when Gerald Ford took over from Richard Nixon. The administration’s apogee was under FDR. Presently the President is relatively weak and the Congress relatively strong.
It is time for the Congress to step up and embrace fiscal reform, including making significant cuts to their pork barrelling projects, and to bring forward a more just and efficient tax system that can ensure the fiscal stability of this great nation.
As for the chart in Steve’s blog, I think that per cent of GDP using net debt is the correct presentation. Here is the chart (using Congressional Budget Office data) looks in that context. Alarming, yes, but far less bad than many European countries.
I have great hope in the United States. It remains the predominant world power. Its people are enterprising and efficient (even if its public service is a hallmark of inefficiency). And it will repair its fiscal situation one way or another, hopefully earlier rather than later.
As for Obamacare – well it is very complicated as this diagram shows