“The federal government owns a little more than one-fourth of the total land area of the United States. The time is long overdue to consider whether that is the best economic arrangement.” Those are the words of the great Thomas Sowell. How to argue with Sowell? Think of the freedom and economic progress that would emerge from the federal government owning quite a bit less of the U.S.’s total land area. The difficulty has to do with how Sowell proceeds.
He writes that the sale of federal lands is “especially needed at a time of urgent fiscal problems.” Perhaps Sowell could be persuaded otherwise? Soaring debt is not the same as “urgent fiscal problems.”
More realistically, the debt is an effect of the federal government taking in too much tax revenue now, and much more dangerously, the market expectation that Treasury will take in exponentially more (see Treasury yields) tax revenue in the future. Markets are a look ahead, and rising U.S. debt is a market signal that the U.S. surely has fiscal problems, and they’re related to too much tax revenue now and in the future. The debt is a logical consequence of this truth.
Instead of acknowledging the message of the market, Sowell surprisingly engages in partisanship. He writes that the “incoming Trump administration will confront some huge financial challenges,” including “the vast increase in the national debt created by the Biden administration’s reckless spending.” On this, if we ignore that Republicans had control of the House during the second half of President Biden’s one term, and if we similarly ignore that President Trump had every intention of doing as Biden did with more Covid relief if re-elected in 2020, we can’t ignore that debt increased over $8 trillion under Trump versus 4 trillion+ under Biden.
Beyond partisanship, a much more urgent future realization will be that “reckless spending” that reveals itself with sizable borrowing is once again an effect of excessive taxation. Whether an individual, a business, or a government, what is expected to have lots of incomings now and in the future can borrow with ease.
Rather than focus on the problem of too much tax revenue, Sowell proceeds as though there’s too little. He writes that the Trump administration “will also need to maintain the solvency of the Social Security after decades of financial irresponsibility by politicians of both parties.” No, it won’t. See Treasury yields once again.
Better yet, the surest sign that Social Security’s recipients will easily be paid is the program’s looming insolvency. Everyone knows about it, but other than pundits and actuarial scolds, no one cares. And they don’t care because there’s never been a Social Security lockbox, and there hasn’t been because the markets (and future Social Security recipients most notably) know that just as Social Security’s past revenue excesses went into general revenues, so will general revenues pay any future Social Security shortfalls. None of this is to defend Social Security, but it is to say that its looming “insolvency” was priced long ago, and as Treasury yields yet again indicate, the very markets that exist to worry for us aren’t worried at all.
Back to Sowell, while the federal government selling land is bullish, generating yet more revenue for the federal government isn’t. And it doesn’t sound like Sowell.
Really, why must the federal government be the always and everywhere winner? Sowell would ideally be asking that, all the while remembering that more revenue inflows into the federal government won’t shrink its debt as much as they’ll logically encourage more of it.
