Washington's Unsustainable Fiscal Future

The United States Department of the Treasury recently released the 2023 year end version of the Financial Report of the United States which provides decision makers and citizens with a snapshot of the nation's fiscal health.  Needless to say and not overly surprisingly, the situation looks rather dire.  In this posting, I'll provide you with some summary graphics and commentary from the report and let you decide for yourself what the fiscal future of the United States looks like.

 

The first table outlines Washington's overall fiscal reality noting that the dollar amounts are in billions (i.e. $1000 billion equals $1 trillion):

 

The budget deficit for fiscal year (FY) 2023 increased by 23.2 percent or $319.7 billion to $1.695 trillion from the previous fiscal year.  Taxes and other revenues decreased by 9.3 percent or $460.3 billion to 4.466 trillion from the previous fiscal year. thanks to a decline in individual income tax and tax withholdings, a decline in corporate income taxes and decreased deposits of earnings for the Federal Reserve due to increased interest rates as you can see on this chart:

 

Total liabilities excluding Medicare and Social Security shortfalls grew by 9.9 percent or $3.876 trillion on a year-over-year basis, reaching $42.898 trillion.  Here is a chart showing the breakdown of Washington's liabilities:

Again, it is important to remember that this total liability of nearly $43 trillion does not include the shortfall in funding of both Medicare and Social Security which looks like this in the case of Social Security:

 

It also does not include intergovernmental debt which, when added to the total liabilities of $42.898 trillion would add an additional $7.09 trillion to the total debt as shown here (with a comparison to 2014):

 

 

Here is a chart showing the U.S. budget deficit and net operating costs (revenues vs. costs) for the past five fiscal years:

 

Here is a very sobering chart showing the projected federal spending and receipts out to 2098 observing that the analysis includes no recessionary periods in the future:

 

The growth in spending on net interest in the debt is frightening to say the least with net interest costs rising to roughly the same level as all other government spending over the next 75 years.

Lastly, here is a chart showing the historical and projected debt-to-GDP levels between 1980 and 2098:

 

 

At the end of fiscal 2023, the debt-to-GDP level was approximately 97 percent and, under current fiscal policies and the projections based on assumptions in the report, will reach 531 percent in 2098.  Here is a table showing the 75-year fiscal gap (i.e. how much primary deficits must be reduced or how much primary surpluses must grow over the next 75 years to make fiscal policy sustainable) and how delays will make the spending decreases and tax increases even more painful and time passes:

 

Let's close with two quotes taken directly from the report:

 

"The projections in this Financial Report show that current policy is not sustainable."

 

"The longer policy action to close the fiscal gap is delayed, the larger the post-reform primary surpluses must be to achieve the target debt-to-GDP ration at the end of the 75-year period.  Future generations are harmed by a policy because the higher the primary surpluses are during their lifetimes, the greater is the difference between the taxes they pay and the programmatic spending from which they benefit."

  

In other words, all that decision makers in Washington are doing today is kicking the federal debt crisis further and further down the road without making the difficult decisions necessary for responsible spending.  No one in bought and sold Congress is willing to do the heavy lifting and force the federal government to live within its means.  As the authors of the report note, Washington's current fiscal reality is nothing more and nothing less than unsustainable.

The United States Congress and its Inconsistent Approach to Ukraine

For those that are paying attention, it is pretty clear that those of us who live in the West are being subjected to war levels of propaganda when it comes to the ongoing conflict in Ukraine with the mainstream media carrying out their role as the "performing press poodles" for the anti-Putin and Russia/pro-Zelensky and Ukraine narrative.  That said, it doesn't take much of a search to find evidence Washington's previous narrative about Ukraine and, in particular, the nation's Azov Regiment aka the Azov Battalion, a far-right network which consists of military, paramilitary and political organizations.

  

As is typical of Washington, Congress has taken upon itself to rewrite history.  Here is a prime example; a letter from October 2019 from Democratic Representative Max Rose (New York 11) to then Secretary of State Michael Pompeo regarding the Azov Battalion and requesting its inclusion in the Foreign Terrorist Organization list as a violent white supremacist extremist group:

 

 

Here are the Congressional signatories of the letter:

 

 

A total of 40 Democrats requested that the Trump Administration list Ukraine's Azov Battalion as a terrorist organization, comparing it to the Islamic State of Iraq and Syria (ISIS) stating that it "....openly welcomes neo-Nazis into its ranks...".  

 

Not surprisingly, right now, when you click on the original link to the letter, this is what you get:

 

Apparently, Washington’s ruling class seems unaware that the internet never forgets anything.n

 

Here's what the Combatting Terrorism Center at West Point had to say about the far-right movement/Azov Regiment in Ukraine in April 2020:

 

"In recent years, some Americans and Europeans drawn to various brands of far-right nationalism have looked to Ukraine as their field of dreams: a country with a well-established, trained, and equipped far-right militia—the Azov Regiment—that has been actively engaged in the conflict against Russian-backed separatists in Donbas. Most of these ‘foreign fighters’ appear to travel as individuals and at their own expense, according to the author’s review of many cases, but there is a broader relationship between the Ukrainian far-right, and especially its political flagship the National Corps,1 and a variety of far-right groups and individuals in the United States and Europe.

 

Far-right groups remain strong in Ukraine, with the ability to marshal thousands of supporters for protests and rallies, some of whom carry Nazi and white supremacist insignia. The author witnessed one such rally in the Ukrainian capital Kyiv in October 2019. These groups have bitterly opposed any suggestion of compromise with Russia over Donbas through the Normandy negotiating process and were prominent at another rally witnessed by the author in Kyiv in the fall of 2019 to oppose concessions floated by President Volodymyr Zelensky....

 

Analysis of social media communications, court documents, travel histories, and other connections shows that a number of prominent individuals among far-right extremist groups in the United States and Europe have actively sought out relationships with representatives of the far-right in Ukraine, specifically the National Corps and its associated militia, the Azov Regiment....

 

In 2014, as pro-Russian groups began to seize parts of the Donbas, a neo-Nazi group that called itself Patriot of Ukraine formed a battalion to reinforce the beleaguered Ukrainian army. Few qualifications were required, and volunteers came from all walks of life. The group soon became better known as the Azov Regiment.

 

Since late 2014, with the gradual modernization of the Ukrainian armed forces and the attrition of the Donbas conflict, the Azov Regiment has become more formally organized, building on its formal affiliation with the Ukrainian National Guard.  This relationship gave it access to better weapons and training; Azov is equipped with tanks and other heavy armor. Azov Media now has 38,000 subscribers to its YouTube channel."

 

In the 2018 edition of the omnibus House spending bill, a provision was added that prevented United States arms from going to the Azov Battalion as shown in this article which appears on Congressman Ro Khanna's website:

..and on this tweet from March 1, 2018:

 

This begs the question.  With the Azov Regiment still very active in the ongoing battle against Russia in Ukraine, what has changed that would allow these same members of Congress to back sending basically unlimited arms to Ukraine since February 2022 which, in all likelihood have been and will continue to be delivered into the hands of what some members of Congress have already defined as a neo-Nazi group, one that 40 current and past Democratic members of the House demanded be declared a terrorist organization?

 

Washington has a pathological desire to see Vladimir Putin permanently relieved of his duties as President of Russia and an obsessional need to destroy Russia for once and for all particularly as the globe evolves into a multipolar reality.

Congressional Term Limits

In light of the House and its continuing moves to impeach Donald Trump, there is a factor of American political theatre that receives very little coverage.  Let's open this posting by looking at a rarely discussed American election metric.  Here is a graphic from Open Secrets showing the re-election rates for the House going back to 1964:

Over the five plus decades since 1964, the House re-election rate has never fallen below 85 percent, hitting that level most recently in the 2010 mid-term elections.

Here is a graphic showing the re-election rates for the Senate going back to 1964:

While Senate races clearly favour the incumbent, there are occasional years where the pendulum swings dramatically as we see in 1980 when the Reagan presidency began.  Since the early mid-1980s, the Senate re-election rate has never fallen below 79 percent (2000 and 2006 elections)

Now, let's look at how American voters feel about their Congressional representatives, the majority of whom are incumbents.  Here is a graphic showing the history of the approval rating for the members of Congress in the United States:

Here is Gallup's monthly Congressional approval rating since the beginning of the Trump Administration:

As you can see, the vast majority of Americans disapprove of the way that Congress is handling its job responsibilities.

Here is a table from Gallup showing how much confidence Americans have in Congress going back to 1973:

The percentage of Americans that have very little confidence in Congress has risen from between 11 and 23 percent in the 1970s to its current level of 48 percent (June 2018 data).  The percent of voters that have a great deal or quite a lot of confidence in Congress has fallen from 42 percent in 1973 to its current level of 11 percent after hitting a low of 7 percent in 2014.

We can break the data down further.  Here is a table showing the percentage of American that approve or disapprove of the way that the Republicans in Congress are handling their job responsibilities going back to 1999:

Here is a table showing the percentage of American that approve or disapprove of the way that the Democrats in Congress are handling their job responsibilities going back to 1999:

With this data in mind, let's look at another very rarely discussed metric, the length of time served by Congressional incumbents.  Here is a table showing the longest serving members of the House:

Here is a table showing the longest serving members of the Senate:

Let's put all of this together.  It is a basic rule of thumb that incumbents for Congressional election races are nearly guaranteed re-election, leading to a reality where certain members of Congress have been re-elected for decades and yet, the approval rating for Congress is pathetic at best.  

There is a potential solution to this conundrum - term limits for Congress.   An organization, U.S. Term Limits (USTL) based in Washington, D.C. is advocating for term limits at all levels of government.  Here's what they have to say about their organization and how the Constitution can be amended to reflect term limits:

"In 2016, USTL launched the Term Limits Convention, a new project to enact a constitutional amendment for congressional term limits. Under this approach, state legislators can enact term limits for the Congress in Washington and no member of Congress can stop them.

USTL continues to be at the forefront of the term limits movement. Using the citizen initiative as its most potent tool, the term limits movement is considered to be the most successful grassroots movements in American history. To this day, voters in states and municipalities across the country are enacting and reaffirming term limit laws one election cycle after another.

It can happen in one of two ways. First, Congress can propose the amendment with a two-thirds vote. Currently, Representative Ron DeSantis of Florida and Senator Ted Cruz of Texas are sponsoring the USTL amendment on Capitol Hill. It calls for a three-term (six year) limit on representatives and a two-term (12 year) limit on senators. USTL asks all candidates for congress to sign a pledge in support of this amendment.

If Congress refuses to pass term limits on itself, citizens and activists can use the Term Limits Convention. The Term Limits Convention allows 34 state legislatures to convene a meeting to write an amendment for congressional term limits. The process bypasses Washington and allows the people and the states to impose congressional term limits."

Here is the petition:

You can take action by signing the USTL petition here.  According to USTL, they have nearly one million signatures on their term limits petition.

Let's close with this quote from a blog posting on USTL:

"U.S. lawmakers face glaring conflicts of interest setting policy for companies they are supposed to regulate.

Although not illegal, there is a perception of impropriety because it is impossible to be impartial on issues affecting your own personal wealth or the wealth of family members, especially when millions of dollars are at play.

Most of the stocks owned by the fifty-one senators are in five key sectors:

communications/electronics;

defense;

energy and natural resources;

finance, insurance and real estate; and

health.

According to last week’s investigative report, ten members of the Senate banking committee own a total of as much as $8 million in stock in companies in the finance, securities, and real estate sector.

Other senators on the housing and urban affairs committee have millions vested in real estate.

The median net worth of a senator is approximately $3.2 million. According to Market Watch, the median net worth of the average U.S. household is $97,300.

US lawmakers are disproportionately wealthier than their constituents and growing wealthier. This inequity makes it impossible for members of the Senate to have any empathy in the average American experience.

It’s no wonder Americans overwhelmingly disapprove of Congress and don’t believe their representatives share their priorities." (my bold)

As is typical of politicians around the world, once they are elected to office, they start to feel as though government belongs to them and is for their benefit alone.  We need to send them a message to tell them that government is for the people, not for the select few.  Congressional term limits are a good place to start.

  

Americans Biggest Problems

A recent survey by Gallup looks at what Americans feel is the most important problem facing their nation, a question that Gallup has been asking Americans since 1939.  Let's take a look at the results which may not be a surprise some of my readers.

Here are the top ten problems facing the United States according to Americans:

1.) The Government/Poor Leadership/Politicians - 35 percent

2.) Immigration - 19 percent

3.) Healthcare - 6 percent

4.) Race Relations/Racism - 5 percent

5.) Unifying the Country - 4 percent

6.) Poverty/Hunger/Homelessness - 4 percent

7.) Environment/Pollution - 3 percent

8.) Ethics/Morals/Religious/Family Decline - 3 percent

9.) Federal Budget Deficit/Federal Debt - 3 percent

10.) Economy in General - 3 percent

According to Gallup, Americans have been increasingly likely to name the government and its leadership as the greatest problem facing the United States over the past ten years as shown on this graphic:

When breaking down the verbatim responses from the 35 percent of respondents who felt that government was the biggest problem, we find the following specific problems:

1.) Government gridlock and lack of cooperation - 18 percent

2.) Donald Trump - 11 percent

3.) Democrats/Liberals - 5 percent

4.) Congress - 1 percent

Since Gallup began asking respondents about the most important problem facing America back in 2001, few other issues have exceeded the 35 percent of Americans who currently feel that their government is the biggest problem facing their nation.  In fact, here three of the issues that have exceeded the 35 percent figure:

1.) After the attack of September 11, 2001, 46 percent of Americans believed that terrorism was the greatest problem (October 2001).

2.) During and after the financial crisis in 2008, 58 percent of Americans believed that the economy was the greatest problem (November 2008).

3.) In the aftermath of the Great Recession, 39 percent of Americans believed that unemployment/jobs were the greatest problem (September 2011).

Despite the political polarization that has gripped Washington and the nation as a whole, both Republicans and Democrats are likely to name government as America's biggest problem as shown here:

Some of the problems mentioned most frequently are Donald Trump (by Democrats and independents), Democrats/Liberals (by Republicans) and roughly half of both Republicans, Democrats and independents that point to the government as the biggest problem cite gridlock and a lack of bipartisanship and cooperation.

Unfortunately, the current occupiers of the hallowed halls of Washington believe that it is in the best interest of both themselves personally and their political party to ramp up the political rhetoric and further divide an already politically polarized nation.  Until Washington makes significant changes in its approach to the voting public, there will continue to be growing dissatisfaction with how politicians are playing the political game and growing distrust in the state as a whole.

The First Steps Back from the Nuclear Precipice

A recent development in the ongoing United States - Russia brouhaha received absolutely no attention from the U.S. mainstream media.  With the sudden departure of Rex Tillerson from the State Department, only time will tell whether Mike Pompeo, the Trump Administration's second attempt at imposing a Secretary of State on the world will take action on this key issue.

On March 8, 2018, a group of three Democratic and one Independent Senators, Jeff Merkley (Oregon), Dianne Feinstein (California) and Edward Market (Massachusetts) wrote the following letter to then Secretary of State Rex Tillerson:

"March 08, 2018

The Honorable Rex W. Tillerson

Secretary of State

U. S. Department of State

Washington, DC

Dear Secretary Tillerson:

We write to urge the State Department to convene the next U.S.-Russia Strategic Dialogue as soon as possible.

A U.S.-Russia Strategic Dialogue is more urgent following President Putin’s public address on March 1st when he referred to several new nuclear weapons Russia is reportedly developing including a cruise missile and a nuclear underwater drone, which are not currently limited by the New START treaty, and would be destabilizing if deployed.   There is no doubt we have significant disagreements with Russia, including Russia’s brazen interference in the 2016 U.S. elections; continued violation of the Intermediate Range Nuclear Forces Treaty (INF); invasion of Ukraine and illegal annexation of Crimea; and destabilizing actions in Syria.  However, it is due to these policy rifts, not in spite of them, that the United States should urgently engage with Russia to avoid miscalculation and reduce the likelihood of conflict.  

First, we encourage the administration to propose alternative solutions to address Russia’s violation of the Intermediate-Range Nuclear Forces Treaty (INF).  Russian Deputy Foreign Minister Sergei Ryabkov admitted to the existence of this ground launched cruise missile (GLCM), but contended that the system was INF Treaty compliant.  Senior officials from the United States and Russia have said that the INF Treaty plays an “important role in the existing system of international security.”  As such, we urge the State Department to resolve Russia’s violation through existing INF Treaty provisions or new mutually acceptable means.

Second, we urge the United States to extend the New Strategic Arms Reduction Treaty (New START).  The Trump administration’s own 2018 Nuclear Posture Review (NPR) references Russia’s robust nuclear modernization program as a main justification behind the U.S. need to recapitalize its three legs of the nuclear triad.  An extension of New START would verifiably lock-in the Treaty’s Central Limits – and with it – the reductions in strategic forces Russia has made. 

The New START Treaty, which entered into force in 2011, provides transparency and predictability into the size and location of Russia’s strategic nuclear delivery systems, warheads, and facilities.  New START’s robust verification architecture involves thousands of data exchanges and regular on-site inspections. The United States confirmed in February that Russia met New START’s Central Treaty Limits and it stated that “implementation of the New START Treaty enhances the safety and security of the United States.”  These same Central Treaty Limits could also govern two of the new types of nuclear weapons referenced by President Putin on March 1st – a case the United States can argue through the Treaty’s Biannual Consultative Commission (BCC). 

Lastly, as the 2018 Nuclear Posture Review notes, Russia maintains a numerical advantage to the United States in the number of non-strategic nuclear weapons. The Senate, in its Resolution of Ratification on New START in 2010, took stock of this imbalance and called upon the United States to commence negotiations that would “secure and reduce tactical nuclear weapons in a verifiable manner.” Attempts by the Obama administration to negotiate an agreement on this class of weapons met resistance from Russia.  However, even absent the political space for a formal agreement or binding treaty with Russia, we urge the State Department to discuss ways to enhance transparency on non-strategic nuclear weapons.

Extending New START, resolving Russia’s INF violation, and enhancing transparency measures relating to non-strategic nuclear weapons will also help quiet growing calls from many countries that the United States is not upholding its Nuclear Non-Proliferation Treaty (NPT) obligations.  The Treaty’s three mutually reinforcing pillars: non-proliferation, peaceful uses of the atom, and disarmament can only be advanced through U.S. leadership on all three.

There is no guarantee that we can make progress with Russia on these issues.  However, even at the height of Cold War tensions, the United States and the Soviet Union were able to engage on matters of strategic stability.  Leaders from both countries believed, as we should today, that the incredible destructive force of nuclear weapons is reason enough to make any and all efforts to lessen the chance that they can never be used again.   

Sincerely,"

Other than the finger pointing about Ukraine and election meddling in the first paragraph, this letter is an obvious departure from the "blame Russia for everything" mantra that has echoed through the sacred halls of Washington since mid-2016.  With Russia's recent announcement of new its new nuclear weapons in his March 1, 2018 Address to the Federal Assembly and the United States recent announcement in its 2018 Nuclear Posture Review that it is looking to expand and modernize its nuclear triad and increase its focus on low yield weapons, the threat of a potential nuclear war has not been higher since the end of the Cold War.

Let's look at the current nuclear weapons stockpiles of both nations from Arms Control Association:

Here is a detailed table showing Russia's nuclear forces as of 2017 from the Bulletin of the Atomic Scientists:

According to the Bulletin, Russia had about 4300 stockpiled warheads of which 1950 strategic warheads are deployed on ballistic missiles and at heavy bomber bases, 500 are in storage and 1850 are nonstrategic warheads.  In addition, there are roughly 2700 retired warheads which are largely intact awaiting dismantlement.

Russia's nuclear doctrine states that Russia: 

"...shall reserve for itself the right to employ nuclear weapons in response to the use against it and/or its allies of nuclear and other kinds of weapons of mass destruction, as well as in the case of aggression against the Russian Federation with use of conventional weapons when the state’s very existence has been threatened."

Here is a detailed table showing America's nuclear forces as of 2018 from the Bulletin of the Atomic Scientists:

Here's what has happened to America's nuclear weapons stockpile since 1962:

According to the Bulletin, the United States had a total of about 400 warheads of which 1650 warheads are currently deployed on ballistic missiles and at bomber bases in the United States along with 150 tactical bombs that are deployed in Europe.  The remaining 2200 weapons are kept in storage as a hedge against technical or geopolitical surprise.  An additional 2200 retire but still intact warheads are stored under the custody of the Energy Department while they await dismantlement.  

The United States doctrine which outlines its nuclear strategy is as follows:

"The United States would only consider the employment of nuclear weapons in extreme circumstances to defend the vital interests of the United States, its allies, and partners. Nevertheless, if deterrence fails, the United States will strive to end any conflict at the lowest level of damage possible and on the best achievable terms for the United States, allies, and partners. U.S. nuclear policy for decades has consistently included this objective of limiting damage if deterrence fails."

The lack of attention paid by the mainstream media to the letter suggests that this move is not playing into the all encompassing anti-Russia rhetoric that the U.S. media is largely responsible for.  Unfortunately, the civilian populations of both Russia and the United States appear to matter little to those in control of the world's deadly arsenal of nuclear weapons.

It will be interesting to watch how the newly minted U.S. Secretary of State handles the "Russia file" and responds to the letter from the four aforementioned Senators, however, I am not hopeful given this quote from July 2017:

"I am confident that the Russians meddled in this election, as is the entire intelligence community…I hope I didn't stop at 2008 [for when he says Russian began interfering in U.S. elections]. You can go back to the 70s. My point was simply this: This threat is real. The U.S. government, including the Central Intelligence Agency, has to figure out a way to fight back against it and defeat it. And we're intent upon doing that."

Imagine that, negotiating with the dreaded Russians, the source of all that is evil in the world.  What a novel concept.