“There are real problems with America’s student loan system. But they mostly involve people who take on debt to pay for expensive graduate degrees.
Those problems are rooted in a little-known 2005 law that eliminated a cap on the amount of federal student loan debt that graduate students were allowed to take on. In the following decade and a half, the amount students borrowed for graduate school climbed.
Students weren’t just borrowing to pay for high-quality graduate programs. Some of the graduate programs that saw students take on the largest debt burdens were those that provided the least value in terms of quality instruction or earnings.
Graduate students, in other words, weren’t just taking on more debt. They were taking on more debt for less lucrative degrees, offered by programs eager to absorb federal loan dollars. Even as undergraduate degrees largely held their value, a bevy of newly subsidized graduate degrees have lured students into expensive programs of dubious quality.”
“While some nations tremble at the thought of high indebtedness, we Americans bask in the warm, comforting glow of $34 trillion in government IOUs. Why worry about a debt crisis when everyone wants to buy U.S. debt?
Those of us who advocate fiscal prudence have been asked that question repeatedly in the past 15 years. We would point to the host of unfunded liabilities looming in our future. They would respond by pointing to the trend of declining interest rates over time. Low rates, they said, meant we should be able to handle interest payments on outstanding debt while growing the economy with smart investments. Indeed, thanks to low interest rates, payments on federal government debt as a share of GDP dropped from more than 3 percent in the early 1990s to 1.5 percent in 2021. Debt seemed cheap and manageable, so why worry?
As the 10-year Treasury rate hit 5 percent this year, with interest payments on the debt rapidly increasing and bondholders’ interest in buying U.S. debt declining, it’s tempting for us fiscal hawks to simply say, “We told you so.” But it’s more productive to understand how we ended up in this quagmire, in hopes of avoiding similar mistakes in the future.”
“A new audit of Georgia’s Film Tax Credit program found that the state “loses money” on the program. A lot of money, actually: about $160,000 for every job the program creates. Georgia is now spending about $1.3 billion annually on the program, but it generates a return on investment of just 19 cents per dollar, the auditors conclude.”
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“There’s no doubt that Georgia’s program has influenced where movie and TV production takes place. The new audit concludes that the program has induced “substantial economic activity in Georgia,” but that’s simply evidence of the fact that lighting a lot of money on fire will eventually produce some heat. The underlying numbers suggest that Georgia’s subsidies are doing a poor job of generating economic growth or creating jobs.”
“Abbott..signed another bill into law…Senate Bill 3 devotes $1.54 billion in taxpayer funds to the continued construction of the border wall—which comes in addition to the $1.5 billion worth of contracts the state has already devoted to building about 40 miles of wall in the last two years—and shells out some $40 million in funds for state troopers to patrol hotspots where illegal immigrants are likely to be.”
“The move is part of a growing trend. Over the last decade, other large police departments in Chicago, Baltimore, Washington, D.C., and Portland have all encrypted their radio communications or are planning to do so. Departments say broadcasting in the clear gives criminals advance warning. Beltran said encryption would also protect the information of crime victims and block pranksters who jam up NYPD frequencies. (The NYPD regularly leaks information on arrestees and even victims for political purposes.)
However, scanner enthusiasts, news organizations, and elected officials complain that encrypted radio is cutting off a longstanding and useful source of information on police activity.”
“In the last 50 years, when the budget process has been in place, Congress has managed only four times to pass a budget on time and through the regular process. Seventeen times, members of Congress haven’t bothered to pass a budget at all. That hasn’t stopped them from spending money they didn’t have, or from making promises to voters they wouldn’t be able to fulfill. I doubt I need to remind you that it’s gotten worse. In the last half-decade, Congress added $5 trillion to the already elevated and growing federal debt with no plan for repayment.
Nor should I need to remind this column’s readers that government interest payments are growing quickly, propelled by higher interest rates applied to an expanding debt level. That’s the result of years of excuses that interest rates would remain historically low.
While you might see how legislators chose to believe that inflation and high interest rates were things of the past, there’s no excuse for ignoring the upcoming insolvency of programs like Medicare and Social Security. This looming calamity has been warned of for decades in government reports and scholarly publications.”
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“At the heart of the commission’s charge must be a commitment not just to reduce some deficits but to put the government back on a sustainable track. As my colleague and former CBO Director Keith Hall convinced me, the commission will fail if it doesn’t have a clear target from the start.”
“Inflation has fallen from the shocking highs that were reached last year, but the Federal Reserve’s efforts have not successfully returned the beast to its cage.
If rising prices are to be fully tamed, it increasingly looks like Congress will have to get the deficit under control first.
Prices are up 3.7 percent over the past year, according to new inflation data released by the Bureau of Labor Statistics on Thursday morning. But so-called “core inflation,” which filters out the more volatile categories like food and fuel prices, rang in at 4.1 percent in the newest report. Some smaller categories have seen considerably faster price hikes over the past 12 months—shelter prices, which include rents and hotel costs, are up 7.2 percent.
In an attempt to control inflation, the Federal Reserve had raised interest rates at 11 consecutive meetings starting in March of last year. Since July, the central bank has left interest rates unchanged—the Fed’s current base rate is 5.5 percent, up from 3.25 percent a year ago. Higher interest rates seem to have brought inflation down, but prices are still rising nearly twice as fast as the Federal Reserve’s target of 2 percent annually.
It’s possible that we’ve reached the limit of what the Federal Reserve can accomplish in terms of taming inflation through monetary policy. The federal government’s $33 trillion national debt and rising budget deficits are creating inflationary pressure in ways that remain underappreciated.
The big problem is that, while higher interest rates are helping curb inflation, they are worsening the federal government’s deficit. Writing at CNBC, Kelly Evans gets at the heart of this conundrum: “If we don’t quickly close the gap between spending and revenues, the debt load will keep growing, and interest costs will keep on rising, and the deficit will thus stay elevated, which grows the debt load even more.””
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“Changes to monetary policy have brought inflation down from last year’s near-record highs, but the monetary theory upon which that policy is built assumes that fiscal policy will finish the job by reducing deficits. Congress, so far, doesn’t seem interested in cooperating—so expect prices to keep rising at an annoyingly fast rate.”
“The yields on U.S. Treasury bonds are now hitting levels not seen in decades. The 10-year Treasury bond is nearing 5 percent, while the 20-year bond has already crossed that threshold—and some analysts expect higher yields to be coming”
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“Unlike most mortgages, which have fixed interest rates, much of the U.S. government’s debt is tied up in short-term bonds which periodically “roll over” into new bonds with updated interest rates. As a result, higher interest rates mean higher interest payments—and those funds come directly out of the federal budget, leaving less revenue for everything else the government might aspire to do, whether funding welfare programs or buying more fighter jets.
“That debt, borrowed at low rates, is now being rolled over into Treasuries paying interest rates between 4.5 and 5.6 percent,” the CRFB explained last month. “Though borrowing seemed cheap during those periods, policymakers failed to account for rollover risk, and we are now facing the cost.”
Interest payments on the debt will be the fastest-growing part of the federal budget over the next three decades, according to the Congressional Budget Office’s (CBO) projections. In the shorter term, interest payments are set to triple by 2033, when they will cost an estimated $1.4 trillion—a total that will only grow higher if more unplanned borrowing takes place before then, or if interest rates rise higher than the CBO expects.”
“While controlling discretionary spending is important for fiscal responsibility, for reducing government waste, and for negotiating the proper size and scope of federal activities, the current shutdown debate is largely symbolic. America’s biggest fiscal challenge lies in the unchecked growth of federal health care and old-age entitlement programs. Repeated shutdown fights and a slew of temporary continuing resolutions have gotten us no closer to reforming Social Security and Medicare.”
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“The longer Washington waits to fix autopilot spending, the more damage they’ll do. The Congressional Budget Office’s latest long-term budget outlook projects that U.S government spending will consume nearly 30 percent of the economy by 2053—almost 40 percent higher than the historical average. Congress is expected to rack up more than $100 trillion in additional deficits over those 30 years—more than four times what the U.S. government has borrowed over its entire history. Who will lend the U.S. government such vast sums?
The main drivers of this increase are heightened interest costs and the growth in health care and Social Security spending. With Medicare and Social Security responsible for 95 percent of long-term unfunded obligations, according to the Treasury Financial Report, there’s simply no way any serious fiscal reform effort can leave these programs untouched. Every other part of the budget will either stay steady or decline slightly. Other so-called mandatory programs, including various welfare programs, retirement benefits for federal employees, and some veterans’ benefits, are projected to decline as a share of the economy. Discretionary spending depends on what Congress decides to spend each year; if historical trends hold, this part of the budget will decline by one-sixth. And yet this is the part of the budget that all this shutdown fuss is about.”
“Ron DeSantis had just been sworn in as a member of the House in 2013 when he voted against sending $9.7 billion in disaster relief to New York and New Jersey, two states still reeling from the damage of Hurricane Sandy.
“I sympathize with the victims,” the Florida Republican said at the time, but objected to what he called Congress’ “put it on the credit card mentality” when it came to government spending.
Now, a day after Hurricane Idalia pummeled Florida less than a year since Hurricane Ian’s destruction, DeSantis is not objecting to federal borrowing when it’ll help his disaster-stricken state. As Florida’s governor — and a 2024 White House contender — he is in regular contact with President Joe Biden as the state seeks dollars from Washington to rebuild from the storm wreckage, assist rescue efforts and aid displaced residents.”
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” DeSantis’ vote a decade ago was based on his opposition to the Sandy package’s “additional pork spending,” a spokesperson for his presidential campaign said”