Wednesday, February 23, 2022

The Strategic Value of a Balanced Budget

By Kevin D. Williamson

Tuesday, February 22, 2022

 

I am a debt worrywart, but I try to avoid the “every issue is ultimately my issue” mode of analysis, the kind of thing that causes Senator Rubio to insist that protecting Florida sugar barons is a matter of national security.

 

But public debt is a matter of national security. It is for the Russians, anyway.

 

Perhaps I am wildly off-base and Andrew Stuttaford or somebody else could set me straight on this, but the Biden administration’s targeting the sovereign debt of Russia — a country whose government routinely runs small surpluses and has no urgent need to borrow money — doesn’t seem likely to accomplish very much, especially if oil prices continue to rise. Moscow has many vulnerabilities, but an inability to balance the books does not seem to be one of them — upsides of being a vicious police state and all that.

 

As ING runs the numbers, 42 percent of the Russian population is directly reliant on government spending, which accounts for 34 percent of Russian household income. Reducing Moscow’s income would put real pressure on the Putin regime, but it seems to me that the way to do that is by cutting off Moscow’s access to the oil markets, not cutting off its access to the credit markets.

 

Do you know whose government would be crushed by losing access to the debt markets? Ours. That isn’t going to happen, but Washington is vulnerable to rising interest rates, something to bear in mind when there is problematic inflation to be dealt with.

 

Perhaps I am making too much of this, but the relative fiscal situations of the two countries — Russia’s debt-to-GDP ratio is about 25 percent, ours is about 133 percent — have real long-term consequences, and maybe short-term consequences, too.

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