By Stephen Smoot
During the presidency of Lyndon Baines Johnson, the resources of the United States were deployed to fight two wars. One raged halfway across the world in Vietnam, the other at home against poverty.
Both military deployments for warfare and programs to alleviate and fight poverty cost money. Johnson used newly printed United States currency to purchase United States government debt in the form of Treasury notes.
The process, called monetizing the debt, is a novel way to pay for immediate needs, but with just as good of a financial effect as intentionally overdrafting the debit card when the bank account is empty.
While it helped the government pay for both wars without raising taxes – but with desirable outcomes in neither – it also increased the money supply. That plus the shock of the early 70s oil crisis pushed the United States economy into a condition that economists prior to it said was impossible.
Inflation rose while the economy remained stagnant or declined, a condition called “stagflation.” Efforts to help the economy naturally spur inflation. Efforts to combat inflation dampen the economy. Neither Richard Nixon nor Gerald “Whip Inflation Now” Ford, or Jimmy Carter could find solutions to fix both problems simultaneously and the national economy merely tread water throughout the 1970s.
Then came President Ronald Reagan with promises to fix the economy. He quipped during the 1980 campaign in response to a question asking him to define key terms that “Recession is when your neighbor loses his job. Depression is when you lose your job. Recovery is when Jimmy Carter loses his job.”
Reagan’s fix lay in appointing Paul Volker to the Federal Reserve. He raised interest rates sky high to clear the economy of “too many dollars chasing too few goods,” which is the typical definition of inflation.
Through 1981 and 1982, Reagan withstood a hurricane of condemnation. The economy dipped into recession as high interest rates killed demand for items such as new houses and cars.
Meanwhile, many sectors of the American economy started to benefit from significant reduction in federal regulation of many agencies. Representative Harley Staggers of West Virginia, a Democrat from Keyser on the old Baltimore and Ohio Railroad line, led the charge to deregulate the rail sector and saved it in the process.
By 1983, the economy had rebounded significantly. By election year 1984, Reagan could confidently look voters in the eye and challenge them to cast their votes based on one question, “Are you better off than you were four years ago?”
It took Reagan two years to clean up the mess.
President Donald Trump has to address problems that have slowly extended their tentacles through the government, the economy, and society for about 112 years.
The Republic changed significantly in 1913 with the passage of the amendments allowing for income tax and popular election of Senators. This removed the budget and policy restraints enjoyed when state legislatures selected United States Senators.
Since 1913 the income tax, originally promised to only be collected on the top two percent of wage earners, has expanded the financial resources of the government considerably. With more funds and more incentives to expand government to give taxpayers “goodies” or remove the financial discussion from foreign military expeditions, the United States Government found itself in a position to do pretty much anything it could conceive of doing.
This produced a reenvisioning of the purpose and role of government beyond fundamental needs and priorities. Federal dollars until January fund everything from humanities projects to local infrastructure on top of what is needed to defend the nation, run the government, and take care of the most vulnerable.
At the same time the national debt has not only expanded, but accelerated. The debt set at just under $5.7 trillion a quarter century ago will soon top $37 trillion with the nation still running substantial yearly deficits.
Meanwhile in 2033 the complete erasure of the Social Security reserve fund will first torpedo that program, then also Medicare. Medicare relies on the Social Security reserve fund to loan it money to stay afloat and pay those whom it owes.
President Donald Trump came into office with unexpected popularity and even affection. He could have followed the same path as every president since the 1930s and spend enough to keep everyone satisfied and work toward accomplishments to burnish his legacy.
Trump could have left office in four years one of the most popular presidents since Reagan, but he set himself to right the ship rather than let it drift closer and closer to the rocks and leave the problems for a future “captain.”
All of the controversial efforts launched in his Hundred Days have worked to move the country toward financial – and by extension – national security.
First, the Department of Governmental Efficiency.
D.O.G.E. does not exist because heartless Republicans hate children and kick puppies. To sustain itself in the next hundred years, the federal government needs to downsize and prioritize. This approach follows the painful steps taken by American corporate giants in the 80s and 90s to retool for profit and success.
IBM, for example, spent much of the 20th century as “Big Blue,” the alpha and omega of American computer technology. By the 90s, however, IBM had extended itself into too many fields to retain its dominance. They cut back drastically, not just in personnel, but also in reducing their mission back to doing what IBM does best.
No one today thinks of IBM first in terms of computer technology, but they remain a behind-the-scenes innovator and power player because they selected priorities wisely. That selection had a cost, however, in the layoffs and early retirements of thousands of personnel who believed that they had a lifetime career with IBM.
Had they not downsized, as the practice was called at the time, there might have been no IBM by 2010 and everyone working there would have lost their jobs.
The federal government’s debt is too substantial to pay off by raising taxes. The entire gross domestic production in 2024 totaled less than $30 trillion. A GDP less than debt represents a massive red flag flapping in the wind and a signal to the world of a coming American crisis.
Addressing this problem means once again creating a new vision of the United States Government, one that focuses on doing what must be done well and leaving the rest to state and local governments or the people at large.
That means enduring some pain now through hard choices because the pain will only get worse if the issues are left to some vague point in the future. It will get much worse if American leaders wait until vital programs like Social Security and Medicare collapse entirely – the first of many potential collapses that unsustainable debt will cause.
And as great of a Senator as Shelley Moore Capito has been, one cannot support the effort in general across the nation, but oppose it when it causes pain at home such as in the case of NIOSH in Morgantown.
Trump’s moves all work toward the same end, putting the United States on a path to stability by the end of his term.
Cutting not just the cost of the federal government, but reducing its scope and mission significantly, serves as the only path back to financial sustainability.
Reorienting the global trade market back toward American manufacturing through tariffs will increase the kinds of jobs that can sustain a family and also generate more business and individual tax revenues.
Removing millions of illegal immigrants from the public dole ensures that those resources are saved for citizens and those who abided by the law to find their American Dream.
Even acquiring Greenland has a purpose. If ownership, or at least the leasing of mineral rich lands, falls into the hands of the United States, revenues generated will help reduce deficits and debt as well.
If the United States does not transform its government and quash unreasonable expectations of it, the pain point will be far worse than what Trump is trying to accomplish now.
Does it have to happen all at once? William Shakespeare, whose literature contains real wisdom, gives as his answer “there is a tide in the affairs of men/ Which taken at its flood, leads on to fortune;/ Omitted, all the voyage of their life/ Is bound in shallows and miseries.”
Does it have to hurt? Unfortunately there is no escaping the pain at the moment, but if Trump succeeds, it will ensure that the nation can get back to a position of security both financially and vis-a-vis the revisionist powers trying to knock American off the top of the mountain.
And, frankly, no one else has a better idea.
