Posts published in “National Newspapers”

Debt, Not the Debt Limit, Is the Real Fiscal Crisis

By Red Jahncke on Jan. 20, 2023

Debt, Not the Debt Limit, Is the Real Fiscal Crisis

Washington is now consumed by the question of whether to raise the ceiling on the national debt. That ceiling currently stands at $31.38 trillion, barely above the $31.34 trillion of outstanding debt subject to the ceiling, according to the latest Daily Treasury Statement.

January 20, 2023

The so-called responsible faction in the impending debt debate says that the ceiling should be raised without any risk of default. The nation’s creditworthiness, they argue, shouldn’t be held hostage by conditions of fiscal discipline. The White House falls into this faction, insisting on a higher ceiling without any strings attached.

January 21, 2023

A group of about 20 House Republicans—many of whom originally opposed Kevin McCarthy’s speakership—announced their opposition to raising the ceiling without spending cuts. On Bloomberg TV on Wednesday, Representative Andy Ogles of Tennessee said he was “unwilling to give Biden a blank check.” His emerging faction is being called irresponsible and worse.

But who’s really irresponsible? This small group of Republicans who want to reintroduce fiscal discipline or the Biden administration and congressional Democrats, who have been borrowing and spending like drunken sailors for two years. Since President Biden’s inauguration alone, the national debt has soared by over $3.6 trillion.

Was this spending responsible after $4.4 trillion that had already been borrowed and spent between February 2020 and January 2021 as part of a necessary and sufficient response to the pandemic and the ensuing economic shutdown? Many economists warned that Mr. Biden’s first spending initiative, the $1.9 trillion American Rescue Plan, was unnecessary and would unleash inflation—and it clearly has.

It’s hardly irresponsible to suggest that we return to fiscal sanity. Indeed, any increase in the debt ceiling should be matched by an equal reduction in this slew of post-pandemic domestic spending.

Yet the Biden administration’s irresponsibility in its domestic spending isn’t the primary reason it should be reversed.

Germany Must Rearm, American Business Should Re-shore

By Red Jahncke on Oct. 21, 2022

Germany Must Rearm, American Business Should Re-shore

Recently, I was seated at a dinner party beside a young lady whose life has spanned the globe. Let’s call her Amy.

October 21, 2022

Amy is an American who lived overseas for a significant stretch of her childhood, before returning to the U.S. for college. After graduation, she left again to attend graduate school.

Along the way, she met and married a European, who had hopscotched Europe and then traveled to the U.S. in his career pursuits.

Now, Amy and her husband live and work in Berlin.

The couple seem citizens of the world, their lives an idyl of globalism and their horizons limitless in an interconnected and interdependent international system.

Yet, today, we are seeing more of the downside of globalism. Beware any phenomenon embraced so passionately that it becomes an “ism.”

The Silent Price You’ll Pay for Our Mounting National Debt

By Red Jahncke on Sep. 29, 2022

The Silent Price You’ll Pay for Our Mounting National Debt

After an unexpectedly hawkish Federal Reserve raised interest rates by 75 basis points for the third consecutive time last week, all eyes were on markets and the economy. Few, however, paid attention to the effect persistent inflation and higher interest rates will have on Uncle Sam.

September 30, 2022

That’s surprising. Gross interest expense on the national debt hit $88 billion in August according to the Monthly Treasury Statement. That’s a stunning annualized rate of $1.06 trillion. Interest on the national debt is exploding and heading toward what economists refer to as a “doom loop”—the vicious cycle in which the government’s borrowing to pay interest generates yet more interest and yet more borrowing.

The August numbers barely reflect the impact of the Fed’s interest-rate hikes between March and July, much less last Wednesday’s increase and the additional 1.25% by year’s end implied by the Fed’s new guidance.

The Fed’s more-hawkish guidance calls for “higher rates for longer,” even if it brings on recession.

Not only are rising interest rates driving up federal interest expense dramatically; inflation is propelling growth in government spending on Social Security benefits, Medicare and other government healthcare programs.

Naturally, if we do slip—or plummet—into a serious recession, federal income tax revenue will erode. Even before recession, the last nine months of declining stock and bond markets virtually assure an almost complete collapse in capital-gains-tax revenue.

The national debt is working like a cancer sapping the nation’s long-term economic vitality.

Not An Isolated Incident

By Red Jahncke on Sep. 7, 2022

Not An Isolated Incident

Recently, an assistant school principal in Greenwich, Connecticut was caught on video avowing that he hires only progressive teachers. He explained that he won’t hire Catholics because they are too rigid, nor older teachers since they are too set in their ways, for him to be able to bend them to his mission of progressive teaching.

September 9, 2022

In Greenwich, he is probably an outlier. I live in Greenwich, and I have a second grader in the school system. He has had two great teachers and is just starting with a third of apparent great promise. Yet, most of the progressive education mischief occurs in higher grades, so I will reserve judgment.

September 7, 2022

The reality is that this is not a Greenwich issue. It is a national issue, more precisely a Beltway issue. The national teacher unions headquartered in Washington DC and the Biden Administration are very clearly pushing a left-wing agenda. The unions and Biden are doing everything possible to inject critical race theory (CRT) into the nation’s public schools, despite all their protestations to the contrary.

Rising Interest Rates Will Crush the Federal Budget

By Red Jahncke on Jun. 30, 2022

Rising Interest Rates Will Crush the Federal Budget

The Federal Reserve’s policies of increasing interest rates and quantitative tightening—reducing its $8.9 trillion balance sheet—will increase the volume and cost of federal government borrowing, slamming the federal budget and exposing the consequences of decades of deficit spending.

June 30, 2022

The impact will be felt even without a recession, but if the economy does contract, the government will have limited capacity to spur a recovery with fiscal stimulus.

Since February 2020, publicly held U.S. Treasury debt has exploded, growing from about $17 trillion to $24 trillion. Almost half of the increase has wound up at the Fed, whose Treasury holdings have ballooned from $2.5 trillion in February 2020 to $5.8 trillion.

Quantitative tightening is a big initiative. In May the Fed announced plans to reduce its Treasury holdings by $330 billion by the end of the year, and by $720 billion annually thereafter until its balance sheet shrinks to a yet-to-be-determined size. The Fed can reduce its balance sheet, but that doesn’t mean the federal government can reduce its balance of outstanding debt.

Falling Markets Will Crush Government Budgets

By Red Jahncke on May. 16, 2022

Falling Markets Will Crush Government Budgets

Investors are painfully aware of the plunge in stock and bond markets so far in 2022. Are federal and state officials aware of the damage plunging markets will soon do to public budgets and finances? Tax revenue from capital gains is about to fall off a cliff.

May 17, 2022

The Monthly Treasury Statement for April indicates that capital-gains tax revenue reached record levels in 2021. The markets are telling us capital gains will shrink dramatically in 2022.

If what the statement and the markets are signaling is correct, the reversal of fortune for federal tax revenue could be as much as $250 billion. In states like New York and Connecticut and others which are heavily reliant on individual income taxes, the reversal could be devastating.

In Belated Observance of Lincoln’s Birthday

By Red Jahncke on Apr. 6, 2022

In Belated Observance of Lincoln’s Birthday

We cannot change history, but we can explore different courses it might have taken.

March 3, 2022

We can learn from counterfactual history perhaps as much as actual history.

Imagine Booth had not shot Lincoln.

The West Should Establish a No-Combat Zone in Western Ukraine

By Red Jahncke on Mar. 16, 2022

The West Should Establish a No-Combat Zone in Western Ukraine

The U.S. and key NATO members should occupy western Ukraine and establish a no-combat zone. They should take action despite Putin’s nuclear threats, and they should act immediately, because the window of opportunity is closing.

March 16, 2022

A full NATO occupation of western Ukraine would preserve a free and independent nation in the west, while diminishing chances of Ukrainian success in the east. Yet those chances seem low at present, despite President Zelenskyy's incredible leadership.

March 16, 2022

In order not to provoke Vladimir Putin into direct conflict with NATO/U.S. forces, it would have to be a two-sided no-combat zone, off limits to both Ukrainian and Russian aircraft and ground troops and the transit of arms supplies to Ukrainians fighting in the east. It could not be a protected zone from which Ukrainian troops and planes could launch attacks on Russian forces to the east.

March 16, 2022

Suspension of arms support for Ukrainian fighters in the east would be a bitter pill for President Zelenskyy. Yet in the absence of any NATO action, the crisis is likely to end in total defeat for Ukraine (and the U.S., NATO and the West).

The east-for-the-west dynamic might offer a welcome off-ramp to Putin who has bitten off a lot, if not too much, to chew.

Putin’s Nuclear Threat Has Worked So Far – What Now and in The Future?

By Red Jahncke on Mar. 8, 2022

Putin’s Nuclear Threat Has Worked So Far – What Now and in The Future?

On the first day of his invasion of Ukraine, Russian dictator Vladimir Putin warned Western nations not to intervene lest they face “consequences greater than any you have faced in history.” Three days later, Putin put Russian nuclear forces on some kind of elevated status.

March 8, 2022

No nations are intervening.

Five days into the war, Putin launched a long-range missile with near-nuclear destructiveness. What looked like a thermobaric missile hit Freedom Square in the center of Kharkiv, Ukraine’s second largest city.

Putin’s nuclear threat has succeeded in scaring off the West, allowing him to employ non-nuclear weapons that are nearly as horrific.

March 9, 2022

While the West cannot ignore the risk of a nuclear confrontation, it should not be frozen by fear of it in face of Putin’s monstrous acts, those already committed and those in prospect.

With his invasion of Ukraine, Putin has changed the Post-World War II strategic calculus. Until now, nuclear powers have followed the rationale of mutual assured destruction (MAD), namely that, if no one can survive nuclear war, much less win it, then no one will engage in it or even threaten it. This reality has served to channel military confrontations into conventional warfare for three-quarters of a century.

March 9, 2022

Putin has changed that. He is using nuclear threats and blackmail to create an umbrella under which to conduct one-sided conventional warfare, with his threats immobilizing any conventional military response by opposing nuclear powers.

Ned Lamont Plays ‘Hide the Pension Bailout’

By Red Jahncke on Feb. 15, 2022

Ned Lamont Plays ‘Hide the Pension Bailout’

State governments can do many things with the federal aid they received under last year’s $1.9 trillion American Rescue Plan (ARP). One thing they are expressly prohibited from doing is pouring that money into pensions for well-paid public employees. Connecticut is doing it anyway.

February 14, 2022

Gov. Ned Lamont’s just-released $48 billion two-year budget proposal funnels $2.9 billion in special deposits into the state employee and teacher pension funds. This is an amount equal to the federal aid the state received under ARP. These special deposits are over and above CT’s regularly scheduled $7.2 billion in state contributions to the two retirement systems.

February 16, 2022

Mr. Lamont outlined his plan for the federal stimulus money in February 2021, before ARP became law. “If additional federal aid for state and local governments is not enacted,” Lamont's budget proposal last year read, the state would draw down its rainy-day “budget reserve fund” (BRF) to fund its budget. But if “unrestricted” federal assistance came through, the state would use that money—rather than the BRF—to shore up the general budget. That would leave the BRF overstuffed. Under state law, when the BRF exceeds 15% of the annual budget, the excess must be moved into the pension funds.