Perspective 81
Deficits: "If They Cannot…Then Who Will?"
Greetings,
Today with the government shutdown I write on the larger issues of our economic and political troubles as they relate to the government deficits. Seems timely.
It’s homecoming at Grace, and I was pleased to meet the alumni who were recognized at a banquet last night for their ministry and impact over the years. These are good days for Grace College and Seminary in many dimensions. I’m honored to serve here.
Thanks for reading,
Blessings,
John
In a world constantly on the threshold of panic and surrounded by loud, even screaming voices, we can get confused about the basics because they seem silent, invisible, trivial. Today with the government shut down, I write about our eminently fixable economic issues. As I read about the problems of the British economy, I thought I was able to see a new clarity about the U.S. by looking at someone else’s troubles. Rather than paraphrase, I’ll give selected quotes from the Economist (Sept 27, 2025. Leader: Is Britain Going Bust? p 11).
“The infrastructure and housing projects that were supposed to be the engine of British growth are turning out to be a sorry disappointment.
Britain can look to continental Europe and count its blessings except, that is, for public finances.
Britain’s net public debts have risen from 35% of GDP in 2005 to 95% today. At current bond yields and growth rates, the belt tightening needed to stabilize debts is about 2% of GDP. In one sense the problem is eminently fixable.
Fixability would normally be a good sign. However, in Britain, as in France, the inability of the political system to grapple with the solvable problem is itself a symptom of decline. The labor government has the majority and four years until the next election. If they cannot put the budget on a sound footing, then who will?
The political failure is all the greater because it is abundantly clear that the fiscal adjustment should start with pensions and the welfare budget. Britain spends about 6% of GDP supporting pensioners, up by over one third this century. Generous automatic increases to the state pension have become unaffordable. So have benefits to the 15% of Britain’s working age population who now claim jobless allowances. The scale of the increase is impossible to justify. The system has been gamed.
If Britain cannot budget responsibly by choice, then markets will force it to do so by necessity -- thereby damaging the entire economy.”
My Comments:
Watching the news is a bit like watching waves breaking on a beach. Nice. You don’t learn about oceans.
The louder the comments and accusations the farther from the real issues. Theater is not governing.
The political system is vital, but (as noted above) has an inability to grapple with solvable problems.
Good efforts have failed: Clinton-Gingrich balanced budget. The “end of welfare as we know it.” The Simpson-Bowles proposals. These efforts addressed the tides instead of each wave and were ignored.
We add massive new priorities such as climate change with great enthusiasm and great deficits.
Crises like the Great Recession 2008 and Covid and the Social Security and Medicare deficit threats have not been enough to actually grapple with the problem. And, worse, “the system has been gamed.”
Essential Issues:
One party wants Feds to spend about 20% of GDP. The other prefers larger role for government at 25%.
The difference between the two views is fading, but the gap is filled with deficit spending at 6% of GDP.
Essential #1. Economies must grow to prosper. Redistribution and spending are secondary issues.
Essential #2. Entitlements must match the number of employed people to the number of beneficiaries.
Europe has both essentials wrong: low economic growth and few workers for each dependent.
The U.S. has it only half wrong. We have economic growth, but we insist on covering more dependents.
I could comment about the Fed and our stock markets, but when we can no longer find the money to sustain all the debts then the (bond) “markets will force it to do so by necessity”
Let me add here that we Christians can learn to embrace the common grace of God: Charlie encouraged the family. Let’s find ways to help rather than mostly condemn those in dire need. Can we do it well? We do not think that money and regulations solve everything. We have relied on the waves of politics. Let’s learn to sail on the ocean.