Following my post last night about the debt crisis in the USA, a former head of the General Accounting Office has reminded us of the sobering truth, yet again.
The former U.S. comptroller general says the real U.S. debt is closer to about $65 trillion than the oft-cited figure of $18 trillion.
. . .
“If you end up adding to that $18.5 trillion the unfunded civilian and military pensions and retiree healthcare, the additional underfunding for Social Security, the additional underfunding for Medicare, various commitments and contingencies that the federal government has, the real number is about $65 trillion rather than $18 trillion, and it’s growing automatically absent reforms,” Walker told host John Catsimatidis on “The Cats Roundtable” on New York’s AM-970 in an interview airing Sunday.
. . .
“If you don’t keep your economy strong, and that means to be able to generate more jobs and opportunities, you’re not going to be strong internationally with regard to foreign policy, you’re not going to be able to invest what you need to invest in national defense and homeland security, and ultimately you’re not going to be able to provide the kind of social safety net that we need in this country,” he said.
He said Americans have “lost touch with reality” when it comes to spending.
There's more at the link.
Mr. Walker is absolutely right, of course. Anyone with two brain cells to rub together can see the impending debt implosion staring us in the face. The only ways to avoid it will be to default on payment; inflate the debt out of existence by making its dollar amount meaningless in terms of the value of the currency; or simply ignore reality and carry on as we have for the past few decades.
The latter seems to be the course currently being followed by our political leaders . . . and we're all going to pay the price for their fecklessness when the bill eventually comes due.
Peter
What cannot continue will not continue.
ReplyDeleteAll it will take is a slight increase in the interest rate on government debt to make it all crash and burn.
At this point the only explanation that makes any sense at all is that our elected officials are either in a state of abject denial or are hoping to postpone the crash until they can retire to some tidy little off shore getaway.
Uncle Lar. What choice do they have? The US economy cannot generate enough wealth under any circumstances to pay off the national debt.
ReplyDeleteNo scheme of deregulation, no economic policy is capable of making the required amount of wealth and GDP growth and you can't cut enough either.
The USG can in general at take in at most 20% (give or take 1%) or the GDP , its an expression of the Laffer curve called Hauser's Law.
So if the USG could increase the GDP by 20% while maximizing taxes and just keeping spending at current levels, we could in 65 years eliminate the debt.
As for cuts, every penny we take in now is spent on the Military, Medicare and Social Security.
Where do you cut?
The optimum plan would be to deport 50 million or so immigrants legal and illegal to raise wages, lock the borders from new immigration and trade , than cut the military in half, remove social security for the rich and cap it for the future.
This would free up about 1 trillion in spending.
If you could maximize taxes during this period, allowing for GDP shrinkage you probably could pay off the debt in 35 years or so. Maybe.
I can't see even the farthest right members of the USG supporting this plan and of the plan was implemented they'd be at risk of a military junta or being removed from office by the Left since until the recovery happened (in a decade or so) a lot of people would be out of work in hungry
Roosevelt got elected by a similar crisis, the Great Depression would have been over in 2-5 years but people need food and work now not in 5 years when as Treasury Secretary Mellon though when the "rottenness was out of the system." They cannot wait.
The reason we can't grow our way out either isn't one of lack on ingenuity though that is part of it but a lack of demand. Everybody has goods and services to offer now and we are past the point of diminishing returns on innovation. Also a lot of services and jobs are highly automated which provides little work for average folks and chokes demand
Simply, wherever the world has demand they also have supply
So the political class being lazy SOB's does nothing knowing the really can't do anything anyway.
The best long term option is economic nationalism and distributism , that is changing the incentives to favor closed borders and the American worker. However economic liberalism is the political religion of the powerful and as such, baring a takeover by reactionaries, its not going to happen.
"As for cuts, every penny we take in now is spent on the Military, Medicare and Social Security."
ReplyDeleteReally?
Nothing at all on social programs that don't work and in fact suppress their clients' ability to lift themselves out of the liberal poverty plantation.
The military budget is as lean as it's been since just before WWII, that fact in and of itself a sobering one.
Our current leader and his logical successor are hard core leftist socialists dedicated to the massive transfer of wealth. And the more they take the more they prove the truth of the parable of the goose and the golden eggs.
There is this terrible lie that government finance is somehow different from the same principles as applied to businesses or families. A business or a family falls on hard times and they tighten their belts, trim expenses, and struggle through, or they go bankrupt. A government does not have that last option and ours is refusing to even consider the first batch. So ultimately the US will default on its fiduciary promises thus destroying what once was the full faith and credit of a once great nation.
Lar,
ReplyDeleteEvery nation defaults and its a good thing being the best way to get out from under onerous debt. Its better to have a debt jubilee as was done historically but if you can't, default works too.
A bad system like ours built on premise that isn't working has to be rebooted.
Cutting social programs might have policy benefits not as much as divorce reform and stopping single motherhood but they are just part of the problem and making it so seniors have no back up for retirement has major issues.
Also the assumption that somehow automagically people will do just fine without support and jobs will magically appear is wrong. They won't or at least you won't have the kind of jobs where people are paid well enough to sustain a complex society
Good jobs gave you Detroit 1960, bad ones Detroit 2015
Now does the Right w want President Bernie Sanders or someone far to the Left of him? If they keep pushing people into poverty, they'll get him since it is always in their interest to vote redistribution. Always.
You can disenfranchise them but the US is full of guns and they can simply shoot you or make the USA into the USSA
Its like this, I see a picture of some moke gloating about replacing his $11 an hour low skilled labor (adjusted for cost of living less than minimum wage in 1968 in many areas) with a kiosk and I see the next guy voting for the left. He should.
At no time in anyone here's lifetime, would an elderly Socialist Jew been a viable candidate. And this is the results of the War on Wages, the 50% decline in wages since 1973.
Honestly of the american Left didn't hate White Christians so much we'd already be Socialist.
Also re: demand . Frankly to compensate for the automation and its improved efficiency and increase the demand for labor and goods you need to make sure people move aside around 65-67.
This is so that people below them can be promoted and younger people spend more than older people
You need to make sure that they don't save so much that it reduces demand for goods and that they don't put off having children since people don't want to have kids poorer than them in the good old USA
And really that what it is about, since the 1930's we've been able to produce more than we can use and more than we have jobs for people to buy it with.
This leaves you two options, quick impoverishment and collapse or a bigger state.
The system we have tries to buffer both, reduce the growth in impoverishment and prevent a collapse.
Its doing both poorly but that's caused by immigration and the greed of the elite for more warm bodies at any cost. Kick people out. lower the work week to 32 (4 days) or maybe lower and let the population decline and you'll do fine with less socialism
You'll still have some so long as you have automation and computer advances but its a workable balance
Otherwise you continue on the path to import millions of incompatible people and end up with systemic problems that can end the Union.
Some thoughts on spending...
ReplyDeleteA couple little math problems I worked on a while back. If anyone bothers to look, and you see a flaw in my thinking - please let me know. There's enough wrong information on the web, I'd rather not add to it.
Where is that entitlement money going?
http://rickscafe45.blogspot.com/2014/08/more-math-and-little-deconstruction.html
The cost of Federal Government
http://rickscafe45.blogspot.com/2014/08/lets-do-some-math.html
I don't have any figures for state and local government costs - but they're not free.
So if we're using up a third of our workforce to support just the federal government, how much more are we using to support the rest of it? Whatever is left, is all there is to support all the entitlement programs, foreign aid, general maintenance and supply costs, military and law enforcement hardware and maintenance, (assuming that US military is included in the numbers for federal government employees - which it might not be, in which case, there's the expense of our armed forces personnel). Then there's the interest payments.
Every time we add another government department - the number of people available to support entitlements decreases. I suspect we're not far from the end.
If there is any logic behind the excessive world wide debt, I think it is an attempt to create the One World Government. The only potential beneficiary of such a scheme would be a totalitarian state. Even the most short sighted of bankers and the current crop of short sighted CEOs will not benefit with all their wealth when the entire economy collapses; or when WWIII arrives. What benefit is there to monetary wealth when there is no economy to support it? The State does not need an economy, it simply needs those in power, enforcers, and serfs. Anything else is counterproductive. There is however always the possibility that it is simply a combination of malfeasance, shortsighted greed, and stupidity.
ReplyDeleteIf however your intention is to create a world of serfdom - massive debt is an ideal method. I doubt that I'll be alive to see it; but it would be... interesting. The harder they try to disarm the American populace, the more it slips through their fingers. Attempting to turn an armed population into surfs may prove more difficult than they imagine.
In any case, I don't think it's a fixable problem.
Great comments but here's the rub. I do not think anything will happen until the bottom falls out. Krugman says we can keep spending until forever so why not? Like a cartoon I saw recently. Repubs offering veggies, Dems offering free candy. Who do most vote for?
ReplyDelete