published Wednesday, August 8th, 2012

The fiscal reality

A nation can play financial make-believe for a long time. Right up until the moment when it can't.

The moment when:

• It can no longer fund even well-established entitlements. This is coming for unreformed Medicare in a few years and for Social Security a bit further down the road, in case anyone is interested. (Our elected federal officials apparently aren't.)

• It can no longer borrow money at reasonably affordable rates. America's credit rating has been downgraded once already -- for the first time in our nation's history -- and additional downgrades seem increasingly likely, which means we'll pay higher interest rates on all that borrowing that Washington keeps doing. If you think the few hundred billion dollars we're currently dishing out in annual interest on the national debt is a lot, wait just a few years.

• It at last has to slash bloated government payrolls because excessive taxes and regulations have destroyed private-sector investment and therefore tax revenue, and government can no longer cover up the destructive effects of those taxes and regulations by borrowing from other countries to make up the difference.

Erstwhile Republican presidential candidate Ron Paul captured the essence of this painful charade with a remark he made back in 2010 about the prospects for repealing Obamacare.

Congress might or might not manage to undo that law, he said, but "the bankruptcy of this country is going to repeal it. . [G]overnment won't be able to pay anything out."

And that brings to mind a wry, disturbingly accurate observation by James Burnham, one of the early voices at National Review magazine.

"When there's no alternative, there's no problem," he said.

How dreadfully true.

When the money is gone, the money will simply be gone. And there will be no "problem" -- at least not in the sense of deciding what path to take. The spending will stop because it will have to stop. There will be no choice, no matter what the consequences.

Oh, there will be pain, to be sure. In particular, those who have come to rely on the federal government as Lady Bountiful will wail and demand that somebody do something - anything.

But it will be all over but the shouting. And then there will be an honest, if grim, return to something resembling reality.

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EaTn said...

Last year when the right-wing had the govt nearly shut-down over the national debt, this year they are fighting to keep the wealthy tax breaks from the Bush era. Don't rebuke this with all the jobs they've created either--the tax breaks have built wealth, not jobs.

August 8, 2012 at 7:10 a.m.
raygunz said...

From his first day in office, President Obama has tried to get the economy right for most Americans. Though sometimes too tepid, badly sold, or disappointingly weakened in an attempt to get non-existent Republican support, Obama has in fact pushed policy after policy to turn the economy around. He needs to do even more.

But like Destiny’s Child, Republicans have taken every opportunity to say “No, No, No”: “no” to the stimulus bill, “no” the health bill (which will create 400,000 jobs a year when fully implemented, according to the Center for American Progress), “no” the climate change bill (1.9 million jobs over 10 years, according to University of Berkeley researchers), and “no” to the jobs bill (almost 2 million jobs in 12 months, according to Moody’s Chief Economist Mark Zandi).

Three out of four of these bills received not one Republican vote. The stimulus garnered just three Republican votes in the Senate.

The GOP answer to the jobs crisis is, instead, a retread of the policies that broke the economy in the first place. They center on trickle down economics, which: 1) have concentrated wealth amongst the top 5 percent through tax cuts and 2) rolled back government oversight of key areas of the economy, such that Wall Street was able to transform itself into a ring of trillion dollar betting casinos.

The Republicans are so committed to their orthodoxy of lower taxes for the wealthy that they were willing to take the country to the brink of default last summer—and risk another recession—to extend Bush-era tax cuts for millionaires. Facing united Republican opposition, the president agreed.

The Republicans and their wealthy backers won that battle, but the country lost. Their antics cost the country its “AAA” debt rating for the first time in history.

August 8, 2012 at 10:18 a.m.
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