The Debt Bomb Threat
(March 18, 2014)
Sometime last month, the U.S. passed an important milestone without much notice or fanfare. Most Americans have no idea that in February our nation crossed a financial Rubicon of sorts, a point of seemingly no fiscal return.
In February 2014, the flood of federal debt silently crested $17.5 trillion, exceeding the value of the entire U.S. economy (the most recent estimate of GDP was $17.1 trillion in the third quarter of last year).
Any homeowner underwater in their mortgage knows that Bad Things happen when the amount they owe is more than the value of their home. Yet most of us seem unconcerned about crossing this dubious economic milestone, especially those in Congress, or at least most of them.
This odd situation reminds me of a scene from the 1964 movie Dr. Strangelove. A rogue Air Force general launches a squadron of B-52s armed with nuclear bombs to attack Russia. The communications system between central command and the bombers is severed, leaving B-52 commander T.J. “King” Kong, played by the late Slim Pickens, flying over Soviet Russia determined to drop his apocalyptic payload. When the bomb bay doors malfunction, Kong gets in the bay and manually opens the doors, mounts one of the nuclear bombs like a horse and rides it all the way down to Russian soil, waving his cowboy hat like bull rider at a rodeo. The blast triggers a doomsday device, developed by the good Dr. Strangelove to ensure Mutually Assured Destruction, which now activated will destroy all life on Earth within ten months.
Like B-52 commander T.J. Kong, our elected representatives are waving their wedge issue “hats” around like rodeo cowboys to distract us from the debt bomb they have dropped on the economy, which holds the potential for economic and political crisis. In fact, the debt bomb crisis has the potential to do more damage to the U.S. economy than a terrorist attack, yet our lawmakers ignore it.
The federal debt has already reached crisis levels.
I hazard a guess that citizens and their representatives in Washington DC are unconcerned because the federal debt is an abstraction, and has yet to have an immediate impact on their lives. The potential negative effects of fiscal irresponsibility are hard to grasp when they aren’t happening right now.
This analysis, however, demonstrates that the Day of Reckoning may be closer than we want to believe. I wrote this post to explain why you should care, and provide reasons why the shadow of the looming fiscal disaster may be darkening your doorstep right now, and it might just hit you harder than you ever imagined.
The U.S. Economy is Underwater
In my previous post Committing Fiscal Arson, I revealed what so far no journalist, at least to my knowledge, has yet to report: that the federal debt now exceeds GDP for the first time since the end of World War 2. The chart below illustrates how quickly debt has increased since 2008.
If America was a homeowner, her mortgage would be considered “subprime” and as a risky borrower, she would have to pay a much higher interest rate to the lender, and tighten her budgetary belt to make the higher payments. The United States government, however, does not have to play by the same rules as individual borrowers, at least for now.
When confronted with the fact that the U.S. economy is underwater, it seems that everyone has a finger to point. Democrats tend to blame the Bush tax cuts and his twin wars in the Middle East, while Republicans look at the past six years and lump all the responsibility onto Barack Obama.
To paraphrase a quote from John F. Kennedy, “Success has a thousand fathers, but failure is a bastard orphan.”
There is no lack of people willing to assign blame for running the national debt up to $17.5 trillion, but very few willing to take responsibility.
The chart below illustrates how the federal budget deficit has fared under administrations since Ronald Reagan took office in 1980 (source: White House Office of Management and Budget).
Past administrations, both Republican and Democrat, have willingly heaped more debt upon what they inherited from their predecessors. An honest observer has to admit that everyone shares some responsibility for getting us to this dangerous place. When the federal debt was only a small percentage of GDP, however, it did not seem like a big deal, because frankly it wasn’t.
In response to my last blog post on debt, many Democrats were quick to crow about how Bill Clinton left us a budgetary surplus, and indeed that is true. He benefitted from a growing economy, rising tax receipts and did not have a global financial crisis to steady or multiple wars in far-off lands to pay for. To be fair to both major political parties, overspending has a long and bi-partisan tradition.
In the 114 fiscal years from 1901 to 2013, the federal government has managed to eke out a surplus in only 34 of them, or about 30% of the time.
Bi-partisan responsibility nice talk aside, the debt did not become a critical issue until the past six years, when we witnessed the largest run-up of federal debt in history. The chart below makes the point. The blue wedge in the area chart shows the amount of federal debt that Barack Obama inherited on his first inauguration day, just over $10 trillion.
There is no getting around the fact that the federal debt under the current administration has skyrocketed.
Since Obama’s first inauguration, the national debt has soared by $7.4 trillion, which is more than had been accumulated by every preceding administration from the founding of the Republic to 2004.
These are big numbers, and it is hard to imagine just how big a trillion is. A “trillion” dollars is a million millions. Here is what it means to you.
Based on the February 2014 population estimate by the Census Bureau, every man, woman and child in America owes $55,000 each. However, if you consider that there are only 145 million taxpayers, each taxpayer owes $120,000!
The thought of getting a payment demand from the IRS for $120,000 puts things in perspective, especially if that agency unilaterally decides to garnish your wages or slap a levy your bank account. That is not current policy, but the day may come when extraordinary measures will be required. More on that later.
Some have pointed out that the federal debt has exceeded GDP before, and the sky did not fall. They are correct. In 1945, 1946 and 1947 the national debt was 115%, 119% and 108% of GDP, respectively, followed by a growth cycle. However, in brushing off the current crisis they gloss over the fact that in 1945 America was engaged in World War 2, a bitter struggle to defeat Germany and the Axis powers.
As a consequence of the war, defense spending as a percent of total federal outlays was 90%, 77% and 37% in 1945, 1946, and 1947, respectively. Once the war ended, the U.S. military demobilized from a war footing and defense spending naturally declined. Sending the troops home to start families after years of stagnation initiated a growth (and baby!) boom.
To put defense spending in perspective, in 2013 the federal government spent only 18.3% of total outlays on defending the nation, the lowest level since 2000. Defense spending is projected to decline both in absolute and relative terms by 2019 in the White House budget (if the White House GDP assumption holds, more on that later).
Where Did The Money Go?
We can attribute $831 billion of the $7.4 trillion debt that has increased since 2009 to the American Recovery and Reinvestment Act of 2009, also known as the “fiscal stimulus” plan that was designed to prime the pump of the economy and a return to growth. Unfortunately, most of the stimulus did not go into building much needed infrastructure, but instead went to the states to keep government employees on the payroll. There is nothing necessarily wrong with that, but avoiding government layoffs does not create infrastructure that will generate returns and benefits to the economy for decades to come.
Some attribute the increase to TARP, or the Troubled Asset Relief Program, that was put into place to buy the so-called “toxic” derivative investments (complex hybrid investments based on subprime mortgages) at the center of the credit crisis back from the banks that created them. By the end of 2012, almost the entire $431 billion that was authorized under the program had been paid back by the banks who benefitted from it. So, TARP is really a non-issue.
We can also attribute some of the debt increase to the wars president Obama inherited from George W. Bush, but as we will see, even increases in defense spending pale in comparison to the skyrocketing rise in non-defense outlays. So, we may be able to attribute a trillion or so to defense spending.
At this point it really does not matter how we got to $17.5 trillion in debt, what matters most is to recognize the problem and take action in the present to avoid a future disaster. When they learn that federal debt has swamped the economy, most thoughtful citizens get a knot in their stomachs, because they know something is wrong. When asked for solutions, however, most people reflexively offer measures based on their political bias.
To balance the federal budget, Democrats are quick to prescribe cuts to national defense, while Republicans look to cut social programs to stem the flow of funds going to those often-demonized “welfare queens” and eliminate waste, fraud and abuse. Both parties offer generalizations and poisonous caricatures to blame the other side, which obscures the real problem and puts up barriers to cooperation.
As we will learn later in this post, neither approach is sufficient to resolve the daunting problem. Right now, the only ideology we need is simple math.
The chart below illustrates plainly which costs are driving federal spending, and debt, to stratospheric levels.
It is true that defense spending increased when America went to war in Afghanistan and Iraq, and then maintained a military presence in those countries for an extended period (we still have boots on the ground in Afghanistan, nearly 14 years after ousting the Taliban post 9/11).
Yet, there is no denying that it is the rapid rise of non-defense spending that is driving the annual budget deficits, and the federal debt, ever higher. Even if defense spending were cut to zero, the federal government would still outspend tax receipts and the debt would continue to rise.
The following chart illustrates that the explosion in federal spending driven primarily by safety net programs, such as Social Security, Medicare, Income Security and other social programs. America is getting older as the Baby Boom generation retires and begins to draw on Social Security and consumes more healthcare services through Medicare. These are important programs popular with most Americans, yet they are at the heart of the issue.
Turning our focus to the most recent past, the chart below illustrates where the federal government spent our money in 2013. The vast majority of federal spending, or 70%, went to social and safety net programs. There is nothing inherently wrong with that, but it illustrates the point that defense spending is not the core issue.
Not dealing constructively with federal spending and the debt threatens the integrity of social programs, and reform is needed to keep them strong for future generations.
The Federal Debt Has Reached Crisis Levels
Let me make the case for that headline by offering a global perspective. The chart below plots central government debt as a percentage of national GDP for 63 nations, as of 2011, the most recent date for which complete data is available and as reported by the World Bank.
The green bar plots U.S. federal debt in 2011 at 78% of GDP when the World Bank collected the data. The yellow bar at 102% shows where the U.S. would have stacked-up using the actual data as of February 2014. The red bar shows where American debt is headed, based on White House budget projections, assuming GDP growth of of 2% annually. The 2% GDP growth rate assumption is based on work from the Economic Cycle Research Institute (ECRI), one of the more accurate economic forecasting firms.
America’s federal debt has already reached crisis levels most commonly associated with nations that have experienced currency devaluations and/or economic stagnation, like Greece, Spain, Ireland, Japan and Iceland. We know where the fiscal road we are traveling leads, and it is not a destination where most Americans want to go.
Money is not Democrat blue or Republican red, but the debt owed by the taxpayers regardless of political affiliation must be repaid in legal tender green. It is time for Americans of all political sensibilities to demand their representatives focus urgently on fiscal responsibility.
Who’s Your Daddy (Who Owns the Debt)?
It is important to understand who has been financing American budgetary largesse. The chart below illustrates the major foreign holders of U.S. debt, and the relatively new phenomenon of the Federal Reserve Bank becoming the largest owner of Treasury securities with holdings of $2.3 trillion as of March 2014.
If we follow the “Golden Rule” of finance, that he who owns the gold rules, our government is susceptible to foreign influence over its policies. Having 34% of federal debt in the hands of foreign governments has the potential to warp our policy priorities. Not often mentioned is the potential policy influences by the largest holder of U.S. debt, the Federal Reserve, who controls the value of the dollar and is owned by big money center banks (contrary to popular belief, the Fed is not a government agency).
Too much debt, combined with a material amount of debt in the accounts of nations and organizations with competing interests to the people of the United States, weakens our negotiating position with players in the global economy and is a potential threat to our security.
“Interest-ing” Times Ahead
So far, we have been fortunate that interest rates over the past several years have been at historic lows. In response to the global credit crisis and ensuing Great Recession, the Federal Reserve, has employed a variety of policies to keep rates low, ostensibly to stimulate economic growth. Low interest rates are supposed to encourage businesses to borrow and expand, and consumers to borrow and spend, both resulting in economic growth.
Yet, attitudes towards debt have changed in the wake of the Great Recession, which in large part was caused by too much debt. The lack of demand from businesses and individuals to borrow, combined with higher credit standards and strong corporate profitability (companies flush with cash do not need to borrow to expand), traditional Fed monetary policy isn’t working very well.
Here is the evidence that Fed policy is not working like policymakers hoped it would. The chart below plots the velocity of M2 money stock from 1959 to October 2013, the entire data series available as of this writing, as reported by the Federal Reserve Bank of St. Louis. The velocity of money is a simple calculation, simply divide GDP, the value of the economy, by the money supply (the amount of funds available to make purchases, investments, etc.), and you get a measure of how quickly a dollar moves through the economy. The faster, the better.
Unfortunately, the velocity of money continues to hit new all-time lows, indicating that Fed policy is not working like it used to. Despite the tidal wave of liquidity (money supply) the Fed has flowed into the financial sector, very little of it is making its way into the Main Street economy. Consequently, we continue to see record numbers of people leaving the work force rise and unemployment is stubbornly stuck above 6%.
Much of the money that has been injected into the financial system has been invested by banks into financial assets, such as oil, gold and other commodities, instead of loans to Main Street businesses and consumers. To an extent, Fed policy has helped juice the values of financial assets, but that has yet to reduce the rising ranks of the long-term unemployed.
Before the Quantitative Easing (QE) program, interest rates have been pinned at or near zero since 2008. Low rates have helped keep interest expense on the mounting federal debt manageable. Since 1991, interest expense on the federal debt has averaged approximately $200 billion per year, averaging approximately 11% of total federal outlays between 2000 and 2013.
The implied interest rate during the 1980 to 2013 period was 4.3%, but if we exclude the years from 2007 forward, when the Fed pushed rates to all-time lows, the average implied historical interest rate on the federal debt is 5.0%, which is significantly higher than the White House projection of only 1.8% on average for 2014 to 2019.
The White House assumption of continued low interest rates is critical, now that the Fed has begun to “taper” its QE policy, which necessarily means that interest rates are on their way up. Readers of my blog will know that I got QE wrong in my 2014 predictions post, when I emphatically suggested that the Fed would not raise interest rates in 2014. Oh well, predictions are made to be broken.
How high rates will go is unknown, but let’s assume for discussion purposes that they return to the 5% historical average. Five percent doesn’t seem like very much, but that is nearly three times more than the implied rate projected in the White House budget, and that has profound fiscal consequences.
The chart below helps illustrate the danger.
The dark orange slice of the chart above represents actual interest expense on the federal debt from 1980 through 2013, and projected interest expense from 2014 to 2019 as provided by the White House budget. The light orange wedge shows the incremental interest on the federal debt, if the average interest rate returned to the historical 5% average.
Under this scenario, outlays to pay interest on the national debt increase from $2.2 trillion during 2014 to 2019, up to approximately $6.0 trillion, a rise of $3.7 trillion!
No big deal? Think again. Total federal outlays in 2013 were $3.6 trillion. The chart below illustrates actual and projected federal spending (White House budget estimates). The dark red wedge shows the proportion of the budget that would have to be diverted to interest payments, should rates rise to their long-term average of 5%.
If interest rates were to return to their pre-recession average of 5%, the additional interest expense would exceed the amount of the entire defense budget in every year forecasted by the White House.
You read that correctly, the additional interest expense at “only” historical rates on the federal debt would exceed the amount of money paid every year to field the most powerful military force the world has ever seen.
Under this modest rate forecast, the federal government would pay more in interest expense to foreign governments, Wall Street banks, investors and the Federal Reserve than it would to protect our nation during a time when threats to American security have not diminished.
You don’t believe interest expense can rise that quickly? Take another look. The majority of the federal debt has a maturity of only a few days to less than a year.
As a result, billions of the debt must be refinanced every week, meaning that in an environment of rising interest rates, higher rates would be factored into the debt very quickly, which would increase the average interest rate, and interest expense, faster than most people imagine.
Under the historical 5% rate scenario, approximately 25% of the entire projected federal budget would have to be diverted to interest expense. Since non-defense spending composes the largest portion of the federal budget, benefits will have to be cut.
Imagine how you will feel when 25% of all your hard-earned tax dollars go to pay only the interest on the federal debt, instead of healthcare, food stamps, education, national defense or the myriad of federal programs. If the national debt becomes a permanent and growing feature of the fiscal landscape, it is possible that a big chunk of your tax dollars will be needed to pay back the very banks and Wall Street speculators that helped get us into this mess in the first place.
That Sinking Feeling
We can avoid the worst impact of budget cuts, of course, if we simply borrow more, which is what we have been doing for the past 30 years, and that is the policy reflected in the current White House budget projections.
Currently, the White House budget projects the federal government will run a deficit for the foreseeable future and the national debt will reach $21.7 trillion by 2019. If the economy grows at an annual rate of 2%, the federal debt projected by the White House budget will rise to 113% of GDP by 2019. If interest rates return to their pre-recession average of 5%, then the federal debt is likely to increase to 115% of GDP by 2019.
Even though the White House is projecting that the national debt will continue to increase through 2019, it forecasts that the national debt will be “only” 98% of GDP in 2019, as compared to 115% in my model. The difference is explained by the optimistic growth assumptions made by the White House Office of Management and Budget. The chart below illustrates the difference between the White House GDP growth estimate of 4.5% on average from 2014 to 2019, as compared to the 2% growth estimate made in this analysis.
If the White House economic growth assumptions pan out, the economy would generate an additional $8.5 trillion in value from 2014 to 2019. That is a highly optimistic scenario, given the outlooks of leading economists today. Recall the previous section on Fed policy and the velocity of money, and it is clear that GDP growth is trending nowhere near to the 4.5% average assumed by the administration.
No matter how you look at it, using even the rosy projections from the administration, the U.S. economy will continue to sink under waves of more federal debt if reforms are delayed or ignored.
The key assumption, of course, is that there will be someone there to buy the Treasury notes to finance the projected deficits, and right now that assumption is probably a good one. With each percentage point increase in debt above GDP, however, investor confidence falls and the potential for catastrophe increases.
In the corporate world, most lenders require borrowing companies to keep debt at four times cash flow, or less. In 2013, the federal debt was six times the level of tax receipts, far above the typical corporate ratio of four-to-one. The White House projections indicate the situation is not going to materially improve without fundamental change.
Here is the thing that most people outside of the financial markets do not appreciate. The relationship between rising debt levels and financial risk, as manifested by higher interest rates, is non-linear. Once a certain debt threshold is surpassed, perceived risk and rates tend to rise at an exponential rate.
In the corporate world, that threshold is reached when debt amounts to 45% of market capitalization (stock market value). The federal government blew by that level a long time ago. The implication is that when rates change, they are likely to change unexpectedly and very quickly.
What worries me and many others, is the lack of worry. At this level, each additional dollar in federal debt sinks the U.S. economy farther underwater, pushing financial risk exponentially higher, which increases the probability of an economic crisis. Bad Things happen when the debt of a nation exceeds the value of its economy, and some of those Bad Things include:
- Higher interest rates, as discussed previously, will result in more federal outlays going to pay interest on the debt, which cuts into national defense and social programs. This is almost a certainty as the Fed winds-down its QE program.
- Currency devaluations, making imports more expensive and sapping purchasing power. Since American consumers purchase a lot of imported goods (i.e., clothing, toys, cars, computers, smart phones, etc), they would not be able to buy as much of it, and the prices of necessities would increase, especially gasoline and fuel costs, which are denominated in dollars. A devalued currency makes people poorer, and reduces the value of retirement and savings accounts, right at the time the Baby Boom generation is going to need that money.
- Rising inflation drives real household income lower, and higher interest rates erode home prices. If the prices of imports rise and reduce disposable income, then home affordability declines, which would have a negative impact on home values at a time when tens of millions of Baby Boomers are entering retirement. For most Americans, their single most valuable asset is their home, and higher interest rates will hit not just home buyers, but the quality of life for millions of retirees stuck with falling home values.
- Reduction in Social Security and Medicare programs. There is no possible way the two largest federal social programs can be left intact if the federal debt continues to increase and interest rates rise to historic averages. A debt problem has never been solved with more borrowing. Many have noted that the Social Security “trust fund” is large enough to pay benefits for many years to come, only what they miss is that the trust fund cash has already been spent. Other federal agencies via the Treasury have “borrowed” the trust fund cash in exchange for Special Issue bonds. The thing that is “special” about them is that they are owed by a federal agency and are not available for purchase by the public. All that means is that at some point the agencies that borrowed the trust fund cash will have to pay it back. That means more debt, higher taxes or spending cuts in other parts of the federal budget.
- China and Russia fill the security vacuum left by the American retreat. America will no longer be able to maintain the security umbrella that has enabled global trade and commerce, which means other nations will have to take on the burden. The most able to fill the military and security vacuum left by a retreating United States are China and Russia, two nations that do not share American cultural values or care much for individual liberties (i.e., freedom of speech, freedom of worship, etc.)
- Significantly higher tax rates for all Americans, including the so-called “99%”, because even if the rich were taxed at 100%, it would not raise enough revenue to cover the forecasted $648 billion federal deficit in 2014. Raising taxes is counterproductive, because it will reduce economic growth, which is currently bouncing along the bottom near 2%, and would only exacerbate the problem.
The French example offers a cautionary tale, as the socialist government of Francois Hollande imposed a 75% tax rate on salaries more than 1 million euros. Initially declared unfair and confiscatory, a higher court has upheld the 75% rate, provided it is paid by employers and not individuals (a dubious distinction, one that will only raise prices for all people living in France). The French government raised taxes again in 2014, for the fifth consecutive year, and now even the French people are beginning to complain. It remains to be seen what will happen in the long-run, and no matter what the French government does, it does not change the the facts on the ground here in the U.S. – that taxing the rich in America will not come close to plugging the deficit or reduce the debt.
If rates run-up as expected, the government will not be there to take care of you, as it is more likely the government will be looking to your bank account to take care of itself. Congress will have to raise your taxes, even on the 99%, and the Treasury will consider ideas that if implemented in 1776 would have caused a revolution, such as putting a surcharge, or other fee, on your savings account or wages to pay for spending that may or may not have helped you.
So far, none of the Bad Things have manifested, and the rising federal debt has yet to make a visible impact on the budgets and lifestyles of ordinary Americans. Investors, and increasingly the Federal Reserve, have been willing to purchase U.S. debt, not necessarily because it is a good investment, but because the alternatives are just so much worse. Even though Treasury securities pay very little interest, at least they hold the strong likelihood that they will be repaid (through higher taxes and/or spending cuts). The current situation gives us a fortuitous window of opportunity to put our fiscal house in order, so let’s not squander it.
The worst case scenario is if investors decide that America’s ultra-high debt loads are too high, then they might simply stop buying government debt altogether. If investors stop buying U.S. debt, then deep budget cuts will have to be made primarily to non-defense spending, and taxes will have to be raised. Americans will be paying more and getting less. Both are bad policy choices when the economy is growing at a lackluster 2%, because a large tax increase will slow growth, destroy jobs and make a bad situation worse.
We should not assume the U.S. is immune from fiscal gravity. At some point, the Law of Economy will reassert itself and interest rates will rise, increasing the possibility of at least some of the Bad Things happening.
Call To Action – Defuse the Debt Bomb Threat
This is probably not the first time you have read about the dangers of the rising tide of government debt at the federal, state and local levels, but this may be the most important time. The federal debt surpassing the value of the entire U.S. economy is a wake-up call to do something.
The rapid increase in federal spending combined with the short-term maturity of the debt and the strong likelihood of a return to historical average interest rates means Bad Things are likely to occur within our lifetime, and not to some anonymous future generation we haven’t met yet.
The debt bomb threat is potentially more devestating to our nation and economy than a terrorist act. The world becomes a more dangerous place if America’s economy stumbles, forcing a U.S. retreat from the world stage.
Action is needed today, in this election cycle, to send a message to our elected representatives of all political stripes in Washington DC and in the states — they must cooperate now to reform government spending and put the federal government’s fiscal house in order. There is still time to avoid the worst, and no matter how difficult the choices appear today, future cuts will be much harder to swallow if we do nothing.
The purpose of this post is not to recommend a specific plan of action, that is for another time. More importantly, this Call to Action is to advocate a process of analysis, negotiation and compromise leading to a durable solution. Ideally, the process should:
- Put everything on the table – defense spending, Social Security, Medicare, tax policy and even money creation. There can be no sacred cows in a crisis. Lawmakers, taxpayers and citizens must go into the process with eyes wide open, knowing in advance that everyone will be unhappy. In fact, comprehensive dissatisfation is evidence that the process is headed in the right direction.
- Commit to an outcome that reduces aggregate debt, and not just a cut in the rates of spending increases.
- Commit to an outcome that is pro-growth, to provide opportunities for Americans to improve their economic standing and preserve the rungs on the socioeconomic ladder.
- Commit to a solution that involves every American – rich, poor and middle class. If we are in this problem together, then we all must participate in the solution.
- Do not negotiate in front of the cameras. Take the media out of the equation, report to them once a month until a deal is done. There is no need to position in the press, negotiate in public or grandstand for political benefit. Approach the problem in a professional, business-like manner and demonstrate maturity. Adult conversations will have to be made.
The rising federal debt threatens the prosperity of all Americans, including Democrats, Republicans, Libertarians and those unaffiliated with any political party. It will require cooperation and courage, but it is necessary to keep America strong and avoid the worst Bad Things.
If you agree that America is facing a fiscal crisis and want to do something about it, please share this blog post with your friends, family, colleagues, representatives and favorite candidates. Tweet it, post it to your Facebook page, email it to people you know. It is not too late, we can make a change!
Responsible citizens, businesses and lawmakers need to get this message into the political conversation before it is too late, and overwhelmed by the wedge-issue ads that have already begun.