National debt

So the big question is: will it work? Will Trump’s protectionist policies, announced with some fanfare at a Rose Garden event at the White House yesterday, increase American prosperity? Or will they harm the economy?  Opinion on that matter is sharply divided. In one corner we have the free traders. They are wringing their hands and warning about higher prices, disruption of international trade and a trade war no one can win.  In the other corner are – what to call them? Most are not “anti-free traders” or “economic protectionists” (though some are).  Let’s call them “fair traders.” They like the idea of free trade – in theory. What they don’t like is the ethic of “free trade for thee but not for me.

The stock market, traditionally a leading indicator, entered correction territory last week. But does that indicate that a recession is coming? Well, it’s an old saying on Wall Street that the market has predicted ten of the last three recessions. Markets hate uncertainty, and no one knows how President Trump’s efforts to use American tariffs to force our trading partners to lower theirs will turn out. But foreign trade is increasingly important to all countries, so it’s likely that, after some political Sturm und Drang, deals will be struck and international trade will continue the strongly upward path it has been on since the end of World War Two. By definition, a recession is two consecutive quarters of contraction.

Amid the much-anticipated debt ceiling imbroglio, it’s become clear that our national debt can't keep growing like this. To tackle this issue, we need to start by admitting the problem: about 70 percent of federal spending is mandatory, meaning it grows automatically without congressional input. Unfortunately, most of this is Social Security, Medicare, Medicaid, and other politically popular entitlement programs. Cutting the benefits these programs dole out is a political third rail most self-interested political actors won’t dare to touch. Luckily, we don't need to eliminate these programs. What entitlement reform supporters want is to secure these programs’ solvency and make sure they’re there for future generations.