The lesson elsewhere: Deficits do matter

 
Posted6/8/2021 1:00 AM

Actions by our past and current president and Congress have led to borrowing 50 cents on every dollar of federal spending for this fiscal year and proposed for next year.

Deficit spending has become a habit with our country's debt topping $28 trillion and trending upward for another decade. Where is the Tea Party movement when we need them?

 

Brazil experienced a currency devaluation in the '90s as work ethic at all levels of government became a misnomer and hyperinflation took hold. Greece over-promised public sector workers allowing them to retire at an early age with rich retirement benefits. The European Union had to step in to begin to restore financial order to a failing government that threatened the euro currency.

Puerto Rico, an unincorporated territory of the United States, grew ownership in troubled companies, like utilities and built an army of well-paid public employees. Employee payrolls and pension obligations were funded by budget imbalances (deficits) supported by bonds. The Puerto Rican government debt-crisis started in 2014 when government bonds reached "junk status" in 2017 with $123 billion in bonds and unfunded pension liabilities.

To help Puerto Rico, our federal government passed a law known as PROMESA which appointed a Financial Oversight and Management Board to the territory. Board actions led to an increase in revenue (taxes) and decreased spending on government programs. Social distrust and unrest set in with many Puerto Ricans fleeing their homeland. Seven years later Puerto Rico remains financially challenged.

Why open the door to potential '70s style double digit inflation in the U.S.? Why put the dollar at risk of losing its position as the world's currency? Let us learn from the experiences of Brazil, Greece and Puerto Rico for the sake of our children and grandchildren.

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Deficits do matter.

Mike Tennis

Sleepy Hollow

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