The World’s Biggest Tab: Banqueting upon borrowing in the nation’s capital
(Harper’s, January 2004)
Washington is a city where the parents of public-school children have found it necessary from time to time to donate toilet paper to the student lavatories, lest pages of Shakespeare and Melville be applied for primitive purposes that those geniuses would have understood and perhaps even endorsed as a natural use of clean little rectangular sheets. Clearly the citizens of this capital are not averse to pitching in, to taking on a few hardships and challenges in their lives of dignity and freedom, even if it means digging into their own pockets for new johns and stall partitions at the local elementary. This is the business we’ve chosen. Where did the $745 million education budget go? I didn’t ask who gave the order. Why can’t Keyshawn read? Because it had nothing to do with business.
That new four score and seven billion for Iraq sounded high, though, albeit an obvious underestimate to anyone who ever priced a complete bathroom renovation. Nobody swallowed it whole, especially not the young Republican “Pork Buster” congressmen from districts in Florida, Tennessee, or Arizona, where bringing Jesus to darkest Africa and breaking real-estate sales records are still top-shelf preparations for national office. “The old [Iraqi] regime built palaces while letting the schools decay,” the president left town to tell the U.N. General Assembly, who ignored him and then went wild for a man from the land of la minette who later pressed his bare lips upon the first lady’s fingers. “The old regime built up armies and weapons while allowing the nation’s infrastructure to crumble.” Fortunately the lights did not arc out up there on First Avenue as he spoke, but there were still hundreds of thousands of voters in and around the District of Columbia who read the news by candlelight, their deregulated infrastructure in tatters after Hurricane Isabel, their schools a chronic pile of chraa, their natural-born American instinct to cut the welfare rolls extending now to this panhandler in the White House.
Unlike a strapped homeowner, however, the president essentially has no credit-card limit, so the $87 billion will simply be added to the $480 billion he’s already borrowing to make ends meet in 2004. The fact that this money does not come out of anyone’s pocket–that the money for Iraq does not displace domestic programs on a dollar-for-dollar basis–but is just appended to the nation’s jumbo mortgage note, turns it into a political abstraction, which in Washington means it can be finessed for the near future, which is the only kind of future that matters here. Samuel Johnson once advised an old friend’s wayward son that “great debts are like cannon; of loud noise, but little danger,” a counterintuitive notion that helps explain, for example, why TimeWarner and Argentina continue to exist. Unless Congress either cuts the president off (freezes the deficit) or puts hard cash into his account (raises taxes), he’s free to keep living in a Skull and Bones brat’s dreamworld, running up the largest tab in history. There is no sign that Congress as currently composed will do anything of the sort, of course.
The few legislators of recent vintage who possessed the strict-father instincts to accomplish this were largely flushed out of town by 1995. One of the most prominent, former New Hampshire Republican senator Warren Rudman, decamped to the L Street office of 500-member international corporate law firm Paul, Weiss, Rifkind, Wharton & Garrison. As one of the namesake sponsors of the 1985 Gramm-Rudman-Hollings Act, which forced presidents to slash or “sequester” appropriations across the board if deficits exceeded statutory limits, he has continued to play scold regarding the national debt. (The law was ditched in 1990 as the deficit went through the roof anyway and a 32 percent sequester of defense spending loomed.) That Paul, Weiss is longtime counsel to TimeWarner, whose perennial $20+ billion debt burden would feel the upward pressure on interest rates from a U.S. Treasury hogging the bond market, is one of those background details that tend to go unmentioned when Rudman speaks in public.
Astronomical deficits are an “amorphous” issue, he admits, but in the mid and long term they are “very deleterious” and have a “sinister effect,” especially on international trade. His ideal is the “small New England town” where residents convene once a year to add a few pennies to the property tax if they want new police cruisers. He seems aware that this kind of sentimental imagery has less than zero impact in Washington, lamenting that his recent morning press conference about the deficit crisis wasn’t held in the evening so listeners could hit the Press Club bar afterward for solace. Rudman also happens to be lead director of the Raytheon Company, one of the chief beneficiaries of myriad billions poured into the Pentagon’s “Star Wars” anti-missile scheme during the last two decades. He is therefore well paid to be sensitive to even the most featherweight brake on so-called discretionary spending by the government, such as weapons development, due to skyrocketing debt.
Nonetheless, his budget computations do shock, at least in the Kantian sense of the mathematical sublime. Last summer, the Congressional Budget Office projected $1.4 trillion in deficits over the next ten years. Using more realistic economic assumptions than the CBO’s rather rigid model, Rudman and his researchers at several nonprofits that analyze such matters figure a cumulative deficit of $5 trillion, with annual federal interest payments alone reaching $470 billion, or 15 percent of revenues, by 2013. And this is far from a worst-case scenario. A similar exercise by number crunchers at Goldman Sachs easily reached a figure of $5.5 trillion. According to the Rudman groups, to balance the budget by 2013, even under the fairly optimistic assumptions behind their calculations, would “require raising individual and corporate income taxes by 27 percent; cutting Social Security by 60 percent; cutting defense by 73 percent; or cutting all programs other than defense, homeland security, Social Security, and Medicare by 40 percent.”
The Treasury’s authority to amass debt is limited by Congress, but only in the way that extramarital sex is limited by the Sixth Commandment of a forgiving God. Last February, the government rammed against the legal ceiling, which then stood at $6.4 trillion. For the next three months, accounting legerdemain was used to keep Washington running until Congress enacted a new limit of $7.384 trillion. The CBO forecasts that yet another higher click will be needed by late summer 2004, and on and on, world without end, amen.
Perhaps this is why young Republican fiscal conservatives in Congress such as Tom Feeney of Florida, Zach Wamp of Tennessee, and Jeff Flake of Arizona, who dared to question, however fleetingly, the president’s request for Iraq, are ridiculed as “green-eyeshade types” by their own party’s ideologues. One either takes the numbers seriously–even half-seriously would do–or resorts to name-calling.
If this is all so obvious to an old Capitol Hill warhorse like Warren Rudman, why isn’t anybody currently in power up there doing something about it? Part of the explanation rests in the general decline in consensus-building debate in favor of slash-and-burn rhetoric that now characterizes politics from coast to coast. (Whether he comprehends it or not, Herr Doktor Schwarzenegger faces the same ice jam in California, with its whatever-billion-dollar deficit, boilerplated spending, and no-new-taxes mantra.) There is a pervasive understanding from suite to suite in the congressional office buildings along Independence and Constitution avenues that the sea change of 1995 flowed over the dead bodies of deficit-reduction deal makers. Moreover, Bush the elder probably had to leave town because of deals he made in 1990. In other words, there is fear of permanent exile.
Former CBO director Robert Reischauer, one of Rudman’s occasional allies, sets the probability at nil that circumstances such as those that evaporated the huge deficits of the 1980s–legislative cooperation between Congress and the White House, deaccelerated military spending after the Soviet Union’s collapse, tax windfalls from a supercharged stock market–will happen again. Even if Wall Street were to roar back and blow another doublebubble as big as the Ritz, the president has cut taxes on the very top brackets who would rake in the surge. And the nation now faces a demographic wave of codgers with unprecedented retirement and health-care expenses, who will be reaching out for entitlement programs long funded by IOU’s that represent off-the-books liabilities of roughly $25 trillion.
“Deficits, of course, don’t dampen the pace at which new problems needing public-sector responses emerge,” Reischauer says. “But when you lack resources to deal with these problems, several things happen. First, the proposed solutions are more symbolic than substantive. The public is then discouraged.”
There is no shortage of Democrats in Congress willing to chat at length about how the philosophical agenda behind big Republican deficits–the “starve the beast” strategy–is to play a kind of brinkmanship that pushes public services into the private sector. Downsizing government means upsizing enterprise if you want the same amenities. But this is an abstraction, too, until nature expresses itself in the form of pageless copies of Macbeth on the boys’-room floor or a lot of old baby boomers with no money in the bank who love to vote.
“I think we shouldn’t be surprised if the American people are not ready to take vigorous action if they’re endlessly told by the politicians that the [Social Security] trust fund will take care of everything until 2037,” says Pete Peterson, a Nixon-era secretary of commerce who chairs the New York Federal Reserve. “The trust fund is neither funded nor should it be trusted. It is a fiscal oxymoron, and whether you have a trust fund or don’t, you’re still going to have to do the same three things you do without a trust fund: you’re going to have to suddenly and probably cut benefits to millions of Americans that have very little savings; you have to increase taxes dramatically; or you have to try to go out and borrow this money.”
Therein lies the political utility of not telling anyone, young or old, what the cost of rebuilding Iraq will be until right before that money is needed. Last summer the CBO published an updated analysis of the long-term costs of the president’s military programs. Besides finding that his plans are about half a trillion dollars more expensive than the Department of Defense has budgeted for, the CBO spelled out plainly that “they exclude costs for continuing operations in Afghanistan and Iraq and for other activities conducted as part of the global war on terrorism.” With what must be a very large tongue in its cheek, the CBO added that “DoD does not expect spending for such contingencies to be unnecessary.” Rather, “it expects to request funding for them using annual emergency supplemental appropriations, as needed.” In other words, we’ll let y’all know when the time comes, but not a moment sooner.
The legions of green-eyeshade types with double-digit GS ratings on the CBO’s payroll are not trained to embrace uncertainty. They churn their software forward and project a cost of $59 billion in 2004, “based on the assumption that maintaining an occupation force of 200,000 troops in Iraq and Kuwait would cost $3.8 billion per month,” plus another monthly $1.1 billion thrown in by the Pentagon for Afghanistan and those “other activities.” As long as buildings in Baghdad are being blown up faster than they are rebuilt, these numbers are fluky, too, but better than none.
Buried in the CBO analysis are some dazzling factoids that demonstrate why even the sharpest green-eyeshader never quite knows what the U.S. military is for, except that whatever it is will cost more than expected. For example, the Navy intends to maintain fifty-five attack submarines over the next two decades, at a cost of $5 or $6 billion a year, for which there has been no opponent whatsoever since the Soviet fleet’s demise. While Annapolis grads are busy avoiding collisions with whales and Japanese trawlers in these fine subs, West Pointers will be deposing despots with tanks and helicopters whose average age will approach thirty years, because of an ongoing inability to define the type, cost, and delivery pace of new equipment. Small wonder that such a force is deployed eagerly against Afghanistan and Iraq but with infinite caution against North Korea.
“The Administration was asked over and over again [about postwar costs in Iraq], and the number was always zero,” Rosa DeLauro, a Democrat on the House Budget Committee, said recently. “There is no plan for postwar Iraq. There is no plan for the U.S. economy. They want to turn this all into patriotism.” As long as the president can sell his Orwellian message that the nation is engaged in a perpetual war of survival against terrorism, he will not have to address the red ink of his make-believe budget, because the American people have always rallied behind huge deficits during wartime.
Reaching warily toward the bookshelf for a timeworn copy of 1984 seems unavoidable here. The attorney general’s relentless enthusiasm for expanding the Patriot Act while the president appears endlessly on the tube at one military rally after another–this is the stuff that used to jolt English departments to life! But the White House has no more to fear from their deconstructed asses than from an ex-senator’s. The president need fear only nature itself, the dynamic sublime of whirlwinds that spin across the equator from Africa and then right smack up the Potomac, the electrons that bust out of a brittle high-tension line along Lake Erie and then cascade at the speed of light toward Camp David, the tick-tock of 77 million biological clocks winding down toward the golden years, the wrath of voters sick of being fleeced for foreign aid on behalf of a 2,000-year-old religious conflict in Araby.
“These things are connected, they don’t exist in a vacuum,” said DeLauro, referring to Medicare and Social Security and war and taxes and education and the rest of the humongous glorp called the U.S. government. Green-eyeshade types are starting to bite their nails all over town, an activity far more familiar to many debt-loaded Americans than the president who wanted his $87 billion now may think.
illustration by Christian Vincent