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BOOK REVIEW: ‘The Public Debt Problem’
THE PUBLIC DEBT PROBLEM: A COMPREHENSIVE GUIDE
By Pierre Lemieux
Palgrave Macmillan, $30, 212 pages
Would it surprise Washington Times readers to learn that the United States has held public debt since 1789? Well, it’s true. For more than two centuries, federal government securities such as Treasury bills and notes have been heavily borrowed from the general public. The total amount of public debt can increase or decrease depending on whether the country is running a budgetary deficit or surplus.
Alas, Washington has acquired an unfortunate infatuation with growing the public debt rather than systematically reducing it. To provide some perspective, the United States owed the public a mere $37,000 in 1836. That figure is nearly $16.8 trillion today. Although wars and economic crises have certainly contributed to this massive rise, there’s no question the federal government has a public debt problem.
Pierre Lemieux, an economist in the Department of Management Sciences of the Universite du Quebec en Outaouais, obviously has no love for public debt. A libertarian by political persuasion, he serves as a senior fellow for Canada’s Montreal Economic Institute and research fellow for America’s Independent Institute. He has written on everything from taxes to gun ownership, from the perspective of increased individual rights and freedoms. When it comes to the government’s excessive borrowing habits, Mr. Lemieux’s critical eye and poignant analysis would surely help bring a permanent smile to Lady Liberty.
In Mr. Lemieux’s new book, “The Public Debt Problem: A Comprehensive Guide,” his quest is to make the public debt “understandable for the intelligent layman and the student, as well as for the more seasoned journalist or academic.” That’s not an easy task, because public debt isn’t a sexy topic. Yet the author succeeds through a combination of strong writing and straightforward explanations of economic terms and situations. Mr. Lemieux’s intelligent and thoughtful style is very similar to great economists like Thomas Sowell, Milton Friedman and Friedrich Hayek. Many readers, be they economic geniuses or novices, will surely appreciate this technique.
The book is divided into various chapters that explain public debt and how the United States got to this point. As Mr. Lemieux correctly points out, “Deficits and a growing public debt is not a completely new phenomenon. What we are seeing today is the culmination of a process that started several decades ago.” Beginning with John Maynard Keynes, the old theory of self-correcting deficits gradually disappeared from mainstream thinking. Rather, the British economist believed “recessions could be better tamed with deficit spending,” and “could be easily financed by borrowing and building up the public debt.” The vast majority of economists thereby shifted to a top-down approach of emphasizing more public borrowing and paying less attention to escalating debt levels.
Europe’s inefficient approach to debt and deficits is also examined. During the end of America’s Great Recession, the European Union experienced a “sovereign debt crisis” that tore apart many member state economies, including Greece’s. At the time, many observers twisted themselves in knots attempting to analyze these two major financial declines. Mr. Lemieux takes a refreshingly realistic approach by stating, “[I]n both Europe and America … the debt was not created by the 2007-2009 recession, which merely revealed the depth of the problem.” In fact, “most of the public debt was accumulated before the Great Recession” during the mid-1970s obsession with public expenditures, “which pushed European countries above the debt crisis tipping point, which in turn worsened the debt further.”
Sadly, the United States hasn’t learned lessons from the European nightmare and is falling into the same economic trap. An important chapter in “The Public Debt Problem” on America’s hidden welfare state will raise many eyebrows. Consider Mr. Lemieux’s revelation that “American governments spend 50 percent more of their budgets on the health function than the Euro 10 governments.” Even more shocking, while the United States is “less welfare-statist” than Europe, “the richest 10 percent pay a higher proportion of income tax revenues in America than in all major European countries” and the “effective tax rate on corporations is higher in the United States than in many of the major countries in Europe.” Maybe it’s time for Americans to stop laughing about socialist Europe, and start taking a closer look at their own financial backyard.
Mr. Lemieux’s excellent book has some provocative solutions to tame the public-debt monster, including lower taxes, cutting expenditures and even a risky “open default.” None of his wise ideas will work until America gets its financial house in order, however. With President Obama in the White House until 2016, the long-awaited return of economic liberty won’t be in the cards anytime soon.
Michael Taube is a former speechwriter for Canadian Prime Minister Stephen Harper and a contributor to The Washington Times.
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