Categories: Business

America's out-of-control spending problem

Why are no U.S. leaders willing to tackle the fiscal crisis?

by Jason Kirby on Tuesday, February 8, 2011 9:11am - 63 Comments

The important thing to understand, Ferguson noted, is that empires don’t gradually decline. Instead, they collapse quite suddenly once foreign lenders perceive a state has become weakened and overextended by its profligacy. Many people think of the decline of the Ottoman Empire as something occurring over generations and ending with the First World War. Ferguson notes that in the span of only 15 years, the share of Turkey’s revenue going to cover the debt jumped from 15 per cent to fully half in 1877, around the time the empire defaulted and began to fall apart. The decline of the British empire can also be seen in terms of a sovereign debt crisis, says Ferguson. By the middle of the 1920s, nearly 45 per cent of every pound London spent went to debt charges. By 1954, the nation owed 21 billion pounds, with 3.4 billion of that owed to foreign lenders—an amount equal to one-third of Britain’s economy. At the end of the war, Britain still thought of itself as a mighty nation, but as the Suez crisis a little over a decade later proved, it could no longer exert its will abroad without the support of the U.S., its biggest creditor. “In a historical perspective, unless something very drastic is done very soon, the U.S. is heading into Hapsburg Spain territory, it is heading into Ottoman Turkey territory, it is heading into postwar Britain territory,” said Ferguson.

Some believe the issue will come to a head in March, when the U.S. national debt bumps up against the debt ceiling. That’s a legislated cap on how high the debt is allowed to rise, and it currently sits at US$14.3 trillion. As of last Friday the debt was just US$211 billion shy of that, according to the National Debt Clock. (It’s been said that in the 62 minutes it took for Obama to give his speech, the debt rose by another US$100 million.) Congress could vote to raise the debt roof, but Republicans have said they may refuse unless Democrats agree to outright spending cuts. But to do so would threaten the ability of the U.S. government to fund itself and could trigger an immediate crisis. The debt ceiling has already been raised more than 70 times since that first Soviet satellite orbited the Earth.

There is hope, however faint. Eugene Steuerle, a fiscal policy expert with the Urban Institute, believes the current political climate may make it impossible for Washington to continue on its destructive fiscal path. “The deficit issue is becoming so big, it’s no longer the 500-lb. gorilla in the corner,” he says. “It’s the 800-lb. gorilla in the middle of the room and it’s becoming harder to ignore.”

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  • harebell

    How do Conservatives say that they are the people who are fiscally responsible when they are clearly the party of "Spend,spend, spend and somebody else will pick up the tab?" This hot on the tails of the news that Harper has increased the size of government and continues to spend, spend, spend.
    We cannot afford to let this profligate ideologue obtain a majority.

    • Olivier

      We're talking about the United States of America here.

      The debt problems in Canada are of an entirely different nature.

  • Thwim

    Over the past few decades people have somehow come to believe that money rules the world. They've forgotten the old maxim that all power stems from the end of a gun.

    Over the years, the U.S. has used this massive credit granted to them by other countries and investors to build up the world's largest military juggernaut. 20 times the size of it's nearest rival, and backed by nuclear weapons, any investor who thinks that won't be put to use when the American people start to get hungry or energy starved is going to get a sad lesson in reality and the old means of a country handling it's expenses — expropriating the resources of conquered lands.

    Hell, if you've been watching, they already set up the legal means to do so within their own country back during the invasion of Iraq.

    • http://my.opera.com/ZakMichigan/blog/ Jean Chicoine

      Agreed. If the US of A can't buy their needs anymore, they will simply grab them by force, in the name of Freedom and Democracy to boot.

  • Aberhart

    "The Harvard University historian Niall Ferguson has detailed how, throughout history, any empire that comes to rely overwhelmingly on lenders to finance its spending programs is doomed. "

    What a tease! To come so close to the solution and then to fall back into confused misantrophy.

    Listen. The United States government does not spend money by taxing or 'borrowing' from others. The Treasury has sovereign money power: as the monopoly holder of the means of payment (i.e., $US) the US does not need to borrow to spend. Federal taxes 'retire' money from circulation, and public and private (i.e, bank credit) investment emits money into circulation. Bonds are non-monetary liquid assets. There purpose is derived from the needs of the economy, not public finance.

    Much of the United States (and our) problems derive from this confusion about how our monetary/fiscal system works. This notion that we need to tax before we can spend. That surpluses are 'good' because they 'pay down the debt'.

    The solution is understanding and acting on our monetary sovereignty. What Abba Lerner called "functional finance." Check out Milton Friedman's 1948 essay 'A Monetary and Fiscal Framework for Economic Stability'. The basic ideas of which are also in Dennis Kucinich's (D-OH) recent bill National Employment Emergency Defence act (NEED).
    http://www.cfeps.org/pubs/wp-pdf/WP22-Wray.pdf
    http://market-ticker.org/akcs-www?singlepost=2323…

    • Thwim

      Basically you're simply saying that they can print all the money they need to meet their bills.

      Works fine, so long as all their bills are internal to the country. Unfortunately, they're not. Take a look at post WWI Germany to see where what you're suggesting gets you.. you may not like where it leads.

      • Aberhart

        What I am saying is that the US already does "print money" to spend. When it spends it creates 'High Powered Money' (which is the crediting of bank reserves), and when it taxes it destroys HPM (debiting of credit reserves).

        The USA does not have "bills in other countries." Other countries simply have checking accounts in the US central bank (just as the Treasury does), where it owns assets denominated by the USA's sovereign unit of account ($US). There isn't a gold standard system anymore when anyone can convert $US assets into a commodity at whim. So the Chinese or whoever else can either spend their $US, leave it in their checking account or buy treasury securities and gain interest in more $US in their checking account. It is there prerogative. But there is no liability for the USA as by definition the monopolist cannot be in debt to what he has a monopoly power over.

    • Olivier

      You seem to have a fundemental misunderstanding of the simple concept of debt.

      • Aberhart

        Please enlighten me.

        Because I do not understand how a monopolist can have debts to what he has a monopoly in. Or do you think that sovereign states are analogous to households?

      • Aberhart

        "The debt hawks are to economics as the creationists are to biology."
        http://rodgermmitchell.wordpress.com/2009/09/07/i…

        All money comes into existence as debt. The deficit is simply a measure of the net amount of money the US government has created. If the budget is in surplus, and the trade deficit is negative, then the private sector must be running deficits.

    • noob_goldberg

      Now why would they even have taxes if they can just print all the money they need?

      The flow of funds is important, and provides the USA with much more leeway than a country that does not print the international reserve currency, but that leeway has limits. And no one is quite certain just what happens when a country in possession of the reserve currency runs into difficulty protecting the value of that currency. What happens when a bond auction fails?

      I personally believe that the USA is not going to fall as dramatically as Ferguson suggests and, even if it does, it would not be the first country in the line of dominoes. But I do believe that we've been deluding ourselves if we think that the explosion in debt financing over the past number of years is not rapidly approaching an upper bound.

      • Aberhart

        "Now why would they even have taxes if they can just print all the money they need?"

        Taxes are for demand management. Primarily for controlling inflation/deflation. In the words of Milton Friedman (1948): "Another reason sometimes given for issuing interest-bearing securities is that in a period of unemployment it is less deflationary to issue securities than to levy taxes. This is true. But it is still less deflationary to issue money."

        See also: Henry C. Simons, "On Debt Policy," Journal of Political Economy Vol. LII (December, 1944)

        "What happens when the bond auction fails?"

        Like taxes, bonds are not for generating revenue. The purpose of bonds are derived from the needs of economic actors not the public state. This is obviously different for non-sovereign governments who do need to balance their budgets or face defaults. But the conventional wisdom is simply not the case for sovereign governments.

        • noob_goldberg

          Your response is only accurate if the state does not care if anyone actually uses the fiat they're issuing. The government can pretend that their debts are meaningless, but they'll soon find that no economic actor within the system will place any value whatsoever on the fiat that is issued if they dilute the value of it.

          If none of the government's employees place any value on the currency, if none of the government's contractors accept it in trade, if none of the government's citizens use it in circulation, the fact that they can issue fiat is irrelevant.

          And that snowball leading to the above situation occurs when people purchasing debt decide that there is too great a risk that the value of the currency will decrease during the period in which they are holding it.

          To make a short story shorter, it's irrelevant if the government actually owes itself a debt; what's relevant is that they act like they owe themselves the debt. As soon as that facade breaks down, the currency becomes meaningless.

          • Aberhart

            "The government can pretend that their debts are meaningless, but they'll soon find that no economic actor within the system will place any value whatsoever on the fiat that is issued if they dilute the value of it."

            First of all, I am not advocating for an unlimited supply of money. Money is the unit of account by which economies are measured. The 'value of money' is only relevant to the relative ability of the community to produce and consume goods. Treating money as a 'store of value' in of itself is part of the problem –– the monetary/fiscal system should be designed to provide an effective value of money as a means of payment and means of exchange (that is relative to the real economy). Bill Gross said something along these lines recently:

            "Financiers have lost their high ground and, if truth be told, we began to lose it a long time ago when we figured out that money was more than a medium of exchange or a poor substitute for a store of value. We figured out a turbocharged way to make money with money and proclaimed ourselves geniuses in the process."
            http://www.ctv.ca/generic/generated/static/busine…

            The processes in which Finance is able to 'make money with money' (as opposed to investing in the production of commodities for exchange on the market) is our principle source of inflation, not government deficits. Which, as you say, are irrelevant in of themselves.

            "And that snowball leading to the above situation occurs when people purchasing debt decide that there is too great a risk that the value of the currency will decrease during the period in which they are holding it. "

            On the other end, money lenders will be even less willing to provide credit when prices are falling because the entrepreneur-debtor will not be able to recoup enough profit to pay back the interest.

          • noob_goldberg

            I appreciate your posts, as they're causing me to serious contemplate something I frequently don't give enough thought to.

            While the sovereign abilities of a country do permit activity that differs from a non-sovereign entity, within the context you describe, I'm still trying to reconcile just how the interaction of sovereign currencies on foreign exchange markets would factor into that process.

          • Aberhart

            Thanks. Really, my only objective is to see how these problems can be looked at through a different lens. Friedman's model might be dated. For one, he is a strict monetarist and presents fiscal questions in terms of the quantity of money in the system rather than government spending per se. That is probably the main reason that his economic philosophy stresses "rules based" over "discretionary" measures. Because he doesn't trust governments to allocate spending, in 'A Fiscal and Monetary Framework' he spends a lot of time tackling with social spending and "transfer expenditures" (welfare) in the way that they are required to work in the model (as economic stabilizers) without being arbitrary and overly interfering with the market.

            This was his main conceptual problem at the time: how do you balance large-scale government spending with a "competitive order". And as far as I'm concerned, the essay is more relevant today then ever. The first link I posted by Missouri-Kansas economist Randall Wray introduces it in a contemporary setting and shows how it describes how our system works better than I ever could.

            As for Forex markets… I think you can only really answer that question in terms of a normative judgements of who the economic system is meant to work for. If you want a system designed to benefit "people making money off of money" that might have detrimental effects for other economic actors who are in the productive economy.

          • Aberhart

            This is probably one of the most succinct document on monetary reform as a means for economic stability out there. It was drafted in 1939 by six preeminent American economists. The fundamental concern is with the quantity of money in circulation. And the moral belief that purely fiat money (and one with monopoly power as the legal means of payment) should be created and regulated by a democratic state with full accountability. The market should operate in a "competitive order," but this can only be achieved positively through proper state action. Peace, order and good government.

            "The great task confronting us today is that of making our American system, which we call “democracy”, work. No one can doubt that it is threatened. However, the danger lies less in the propaganda of autocratic Governments from abroad than in the existence, here in America, of ten millions of unemployed workers, sharecroppers living barely at subsistence level, and hundreds of thousands of idle machines. On such a soil fascist and communist propaganda can thrive. With full employment such propaganda would be futile."
            http://www.economicstability.org/wp/wp-content/up…

    • Dmitri

      Citing an essay from 1948 as a reference point for building current economic policy is like citing the covered wagon as a reference point for manufacturing current automobiles. It’s absurd beyond words. I think it’s safe to say that not only has technology made just about every concept from 1948 obsolete, but we’ve also learned from 70 years of mistakes since then which also makes most of those concepts obsolete.

      I’m not sure what is worse – that or the fact that you think the US should just randomly print money. You’re belief that the US does “not need to tax or borrow to spend” is ludicrous. The US dollar is nothing but ink on paper. It has ZERO value other than people’s belief that it can be swapped for the products or services they desire. Once you treat it like a child printing off coloring books from his parent’s printer, that belief will cease to exist – and with it – the value of our money. I strongly urge you to put down the manuals from 1948 and join us in the 21st century lest our money become like the peso and have more value in starting a fire than it does used as currency.

      • noob_goldberg

        While you're correct in saying that building current fiscal policy solely on a single sourced reference from 1948 would be irresponsible, I also believe it to be the absolute height of intellectual arrogance to assume that all previous knowledge is encapsulated within recent writings. Indeed, it is frequently necessary to revert to original texts of original ideas in order to gain insight into exactly what the author intended.

        Without revisiting original texts, academia becomes a fancy version of the old 'telephone game', where commentators summarize a previous authors work, and then–themselves–are summarized by subsequent authors work. After 30 years, an unsuspecting graduate student with a few moments on his hands revisits the original work and quickly discovers that it bears virtually no resemblance to the commonly-accepted interpretation.

        I'm not a monetarist, even though I'm enjoying the exchange of ideas with Aberhart. However, she/he appears to have put a great deal more thought into how the money supply works than is evident in your post. Virtually all of the argument points you raise are addressed by Aberhart elsewhere in this this thread.

        • Dmitri

          If you consider suggesting that a country does not need to tax or borrow to spend and that a government should print as much money as they want any time they want "a great deal of thought", well, there's not much I can say to you my friend. That's not a great deal of thought – that's the kind of thought you would get from your average second grader. "Just press the print button on the printer" is hardly a "great deal of thought". In fact, it's the exact opposite of any thought, much less a "great deal" of it.

          • noob_goldberg

            Dmitri, I'm certainly not saying, nor implying, what you suggest, and if you read Aberhart's posts you'll see the he or she isn't either. Government certainly has limits when it comes to the amount of money in circulation, and that's recognized by everyone here. Aberhart was simply relating Milton Friedman's concept about how government controls the money supply.

            The simplified perspective you've provided–"printing of money"–counts for only a tiny fraction of all "money" that's in circulation. Trying to understand how money is created and retired from the system is of vital importance to understand how money flows and how human psychology affects its valuation.

            My biggest concern is that the Federal Reserve is treating the current situation as a mathematical function, where they can put a certain strain on the system repeatedly, up to a certain 'safe' point, and never worry about collapsing the system. My fear is that changes in human psychology will cause that upper limit to drop without notice, and the whole system could collapse the next time it feels strain. I still firmly believe that the first cracks to appear in the power of the greenback will be witnessed in the bond market, and probably with a failed auction.

      • Aberhart

        I have never said that the "government should print as much money as they want any time." That is just putting words in my mouth. The government should create and regulate the amount of money in circulation so that it is stable relative to the needs of the economy.

        Operationally, the US government (or any sovereign state that controls its own money supply) does not need to tax or borrow from private capital to spend. The only "borrowing" that occurs is when the Federal Reserve credits the Treasury, just as it credits private banks. In Milton Friedman's 1948 money/fiscal reform proposal the private Federal Reserve would formally be brought under the Treasury as an independent Monetary Authority. The United States would then emit what Irving Fisher called "positive money," or United States Notes akin to the 'Greenback notes' that Abe Lincoln spent to fund the Civil War. The whole intention of this would be to control the quantity of money to prevent the excessive deflation and inflation caused from our money and banking system above and beyond the effects of the business cycle.

        If you think the 21st century manuals are taking us down the right path, than I strongly urge you to reconsider what you believe to what is obsolete. It took a pretty severe and on-going recession for Alan Greenspan to learn that he no longer trusted the market's promise of self-regulation. Furthermore, Mervyn King, the governor of the Bank of England, last year described our current finance system the as "worst designed possible" and advocated for measures based on these reform ideas.

        • Dmitri

          "The government should create and regulate the amount of money in circulation so that it is stable relative to the needs of the economy" – don't they already do that? The US government has been doing exactly that for over 60 years.

          My apologies for misunderstanding that you weren't implying just print more money.

  • Emily

    End the wars.

    Cut the Pentagon down to a Triangle at least.

    Close the thousand bases around the world.

    Otherwise 'Imperial Overstretch' will take out the US, just like it did Rome, Britain, the USSR….etc

    • Keith in Brampton

      The irony is, the cold-war tactic that ended the USSR (push them to compete in military spending with the US until their finances collapse) is coming back to bite them; they never reined in the spending after the Soviet collapse, and now they are headed down the same path.

      And sadly, they'll likely take much of the western world with them.

      • Emily

        It was game-over for the Americans then too…..they just kept borrowing to sustain it. Sad.

      • Dmitri

        Spending on the military didn’t collapse the USSR anymore than it is hurting the US. In both countries cases, the problem is SOCIALISM. The USSR believed the government should control people and provide all needs to the people. That is simply an unsustainable concept. Sadly, the left in this country doesn’t believe in reading history or learning from it, and they think their new wave of Communism/Socialism is some fresh “idea” for a successful country. Of course, those that do study history and learn from it know that their spending on this failed concept is what collapsed the USSR and is what will collapse the USA.

        • Emily

          Dmitri….get real

          • Dmitri

            Emily…. what does that even mean?

          • Emily

            Socialism….you mean the thing the military, the police, fire dept, medicare and the education system amongst other things run on?

            Then you confuse the communism of the USSR with socialism, when they are two different economic systems.

            Plus you put the US….the most gung-ho capitalist, anti-communist, anti-socialist country on the planet…in the same boat!

            You have confused politics with economics, and then confused the 3 economic systems!

            Well, here's a thought. All 3 economic systems are dead.

            What most countries are doing now is a Third Way version….a combination.

            The only hold-out is the US….and it's outdated 'capitalist' system is broken….

            Spending a trillion dollars on Iraq alone, will do that….but it certainly isn't socialism…a socialism they don't even have.

            I don't like any of the systems….we need something new, for this new globalized world.

          • Dmitri

            My dear – YOU are the one who is confused. Apparently you are not aware that the USSR stands for Union of Soviet SOCIALIST Republics. SOCIALIST. Economically, the USSR was Socialism. Politically, they were a dictatorship.

            The term "Communism" is neither an economic nor a political system. It was a blanket term the US created to describe countries that were politically dictatorships and economically Socialists. So you were not really informed on that, yet here you sit advocating all kinds of crazy ideas. There is NOTHING broke about Capitalism. It is a system the creates nothing but innovation and wealth. The only thing "broke" with the US is the Socialist non-sense you are peddling here that is dragging down all the innovation and wealth being created by our capitalism.

          • Dmitri

            By the way, military, police, and fire are NOT socialism. The only thing you actually got right in your post was about Medicare. THAT is Socialism, and that is what is bankrupting the US.

            I love how you liberals try to lump in infrastructure items with Socialism to help you make an argument for an idiotic concept. You cannot privatize the military Emily! Who would decide when a missile gets launched – the private military I’m funding or the private military my neighbor is funding? That MUST be government run and was indentified as a fundamental responsibility of the federal government in the Constitution.

        • Thwim

          If you support democracy, you support socialism.

          Democracy means that most people get what they want.
          Socialism means that few people are much worse off than their neighbours.
          Most people don't want to be much worse off than their neighbours.

          Once you understand that concept, you understand that democracy without socialism is unsustainable. Either it will eventually lead to socialism, or the democracy itself will be replaced. (In our case, it looks like we're moving toward a corpocracy.. hey, at least it'll be new)

          Incidentally, some socialist countries do just fine. Check out the nordics. Perfect? No.. but they muddle along pretty much as well as anybody else.

          • Bruce C.

            I was surprised to read that the fall of an empire taking 15 years is considered rapid. My idea of rapid was more like a few months. Therefore, if the rate of change is typically that slow, then the US probably does have years left to address the debt issue. At that rate, I don't think the bond market will care if the debt ceiling is raised this spring. Japan is twice as indebted as we are percentage wise and they're still standing, so I may be way too pessimistic about the US's fiscal problems.

          • Emily

            It's always taken a long time for an empire to fall….Rome, Britain, USSR….the US has managed it in a very short time.

            Actually about a hundred days into Iraq.

            What you're seeing now is dust clouds.

            Japan is a country, not an empire.

          • Dmitri

            “If you support democracy, you support socialism”. Ok……??? That’s like saying if you support marriage, you support rape. If you support freedom, you support Al Qaeda. It’s so nonsensical, it’s tough to figure out where to begin.

            But lets start with this – Democracy is a political system. While Socialism is an economic system. Since they are not even of the same category of systems, supporting one in absolutely no way causes you to support the other.

            Second, I love how you frame your comments from the perspective of the “loser” (ie “Most people don't want to be much worse off than their neighbors”). Well how about this – most people DO want to be BETTER off than their neighbors. And you can’t be better off than anyone in Socialism. And America was built on being better.

            The bottom line, those that support Socialism fall into one of two categories. Either those that are too lazy to work. Or those that are too afraid to compete because they might fail. And that in a nutshell explains why Socialism fails. It’s made up of people who are too lazy are too scared to compete.

          • Thwim

            <sigh> I was hoping perhaps you were intelligent enough to be able to handle the short-form explanation. Reality reasserts.

            At any rate, let's see if you can follow:

            1. We do not have unlimited resources.
            2. Resources pool — it takes money to make money and all that.
            3. If resources are limited, and resources pool, it's fairly obvious that the majority of resources will end up being concentrated among a minority of people.
            4. A democracy gives power to the majority of the people.. starting to clue in here yet?
            5. If a majority of people want more resources, where are those resources to come from? Hint: The minority with the abundance.
            6. Socialism is an economic system where resources are redistributed from those with abundance to those in need.
            7. Democracy, then, will drive a society to socialism.

            Now, to address the rest of your crap:
            Of course Democracy is a political system and socialism is an economic one. To say that the two have no relation, however, is to be completely ignorant of the basis for economic systems — hint: it's people's beliefs.

            I frame the arguments in terms of the loser for two reasons, first, as outlined above, the majority is more often those in need than those in abundance because of limited resources. Second, and perhaps more important, because I don't believe that most people *do* want to be better off than their neighbours. They want to be better off, true, but only selfish, insecure pricks such as yourself judge their level of success by whether they're better off than their neighbours.

            Your bottom line is complete bunk. Take a look at Argentina.. those are socialists who wanted to work so much that they took over the closed factories from the capitalist owners so that they could start working and producing. Not to mention, you still obviously haven't looked at the nordic countries as I suggested. Not that I'm terribly surprised. The idea you might extend yourself beyond your comfortable ideological blinders is probably too much to hope for.

          • Dmitri

            I would have responded sooner, but I've been on the floor laughing hysterically that you point to Argentina as a great example of the "success" of Socialism. I think Argentina's entire GDP is less than my household income. They operate like a 3rd world country when it comes to healthcare, technology, and most other aspects of life. By the way, the USSR completely collapsed under the complete IDIOT concept of Socialism. I don't care about your Nordic examples – any stupid system can survive for a few decades by running up trillions in debt. But eventually the bill has to be paid and that's when the collapse comes. In the 50's, the USSR was thumping their chest about being a "super power". Fast forward a few short decades, the country has completely collapsed and people are waiting days in line for a single loaf of bread. That's how Socialism ends. And what did the USSR do to get out of the poverty created by Socialism? They turned to Captialism. Game…Set…Match my friend.

          • Thwim

            Oh good grief.. here I had a vague hope that somebody who commented on socialism might at least have a basic understanding of what the system is. Calling the USSR socialist blows that out of the water.

            Come back when you've learned.

          • Dmitri

            Like Emily, you have ZERO idea what you are talking about. Why don't you Google USSR and learn that it stood for Union of Soviet SOCIALIST Republics. SOCIALIST.

            It's pretty sad that you don't even know that much.

          • Thwim

            And I suppose you believe that North Korea is a democratic state as well because it has that in the name?

    • EeeOar

      Close the thousand bases around the world.

      Thought I heard Ron Paul advocating some close variation of that within the last week or so….

      • Emily

        Yes, it's his other cork-brained ideas that are the problem

        • EeeOar

          Sure.

          Just goes to show that no corner of the political landscape has a lock on all the good ideas nor are any of them immune from some dubious ideas.

          Which is why I try to at least contemplate ideas no matter which corner they come from.

        • Dmitri

          Yeah, advocating freedom sure is a "cork-brained idea". Advocating that we actually follow the Constitution sure is a "cork-brained idea". Advocating low taxes so that people actually get to keep what they earn sure is a "cork-brained idea". Gosh, how "crazy" is it to call for low taxes, small government limited in their powers by the Constitution, and maximizing the freedom of Americans?

          Emily….. get real

  • madeyoulook

    It was hard-nosed stuff, yet the types of spending he (Ron Paul) attacked account for just 20 per cent of the total federal budget, and would do nothing to solve the real fiscal crisis facing America—bloated entitlement programs like Medicare, Medicaid and Social Security.

    And just look at the hits he is taking from *cough* progressives *cough* for even this inadequate opening bid. It is a colossal shame that people still actually listen to the likes of Paul Krugman, take notes, and nod their heads.

    But hey! This is the perfect time to start up a high-speed rail network, right? (But will it reach Montreal?) Let's throw in Obamacare while we're at it. That oughta finish off the superpower even faster.

    Great civilizations are not murdered. They commit suicide.

    • Emily

      So….you'll be giving up your pension, and healthcare then I take it?

      And yes, if the US wants to HAVE a future, it's way overdue for high-speed trains.

      • Dmitri

        This is my favorite argument of the progressives! Force me into a program, take my money against my will, but then ask if I’ll “give up” what little benefits are left after you forced me into it.

        Here’s a better question for you Emily: Why don’t you make Social Security, Obamacare, etc. OPTIONAL (you know, choices/freedom/etc. – what this country was founded on) and see how many of us sign up? Imagine that – having the choice to be a part of a program or not! I know, I know, choice and freedom goes against everything your liberal/progressive/communist/government controlling the people beliefs were built on, but try to think outside of the box for a moment!

        Let’s make a pact right here and now Emily. I promise to give up Social Security, Obamacare, etc. if you promise to stop taking MY money to pay for these things? Deal? Yeah, I didn’t think so…

      • Dmitri

        “if the US wants to HAVE a future, it's way overdue for high-speed trains” – LMAO!!! How exactly does a fast choo-choo train provide a “future” for the US?

        If there were a need for high speed trains, we would already have high speed trains. See, that’s how the free market works. When there is a demand for something, people fill that demand because it brings them a profit. For instance, we have automobiles because there is a demand for automobiles. We have computers because there is a demand for computers. There is no demand for new choo-choo trains Emily because we have no use for new choo-choo trains Emily.

  • madeyoulook

    America is not taxing enough? Shall we look at that?

    Let's round DOWN the current deficit projection to one trillion US dollars. Just how many dollars is that to be taxed? Well, the government could identify the one million wealthiest Americans, send armed guards to their front doors, and take a million from each of them. Phew. Trillion-dollar deficit solved. Uh-oh. Then there is next year. And the year after that. And the year after that. Good thing public pension liabilities are fully funded (ahem…) and Social Security is a huge rich vault of… Uncle Sam IOUs…

    A million million dollars. MORE than a million million dollars. EVERY YEAR. And that's just the deficit.

    • Emily

      Well, this is yer famous capitalism.

      • Poker Face

        This isn't the fault of people manufacturing goods and services based on economic demand and turning a profit – these entities are called taxpayers, like you and me. This is the fault of people who spend far beyond their means, with no necessity to fund it with income (see: government)

  • Ariadne

    Their staggering IOUs are held by other countries, mainly by China. If it does not mean a thing, I do not know what does. The interests alone eat much of their budget. Unless of course, if they work underhandedly by working underground to undermine other countries' interests to keep US economic interests supreme. They have done it many times in the past, there is no reason to believe that they have nor will stop doing it, specially when push comes to shove.

    • Ariadne

      In addition, US is a victim of its own might. As a superpower, rightly or wrongly, it has to show itself as such to the World to keep their much vaulted placement (or ego/vanity?), keep the world's interests fix on them, and to protect their economic interests as well. In a way Enron, Madof, their Banking, investment, housing, car industries, and many more are partial (to be fair) reflections of what US is. The other part of that reflection is its citizens or its people, these I believe, is where its true hope and wealth comes from. In comparison to many socialize countries, many Americans are known for their grits, for winging it along in tough times without waiting and depending on their government for handouts (Hopefully, this has not changed yet). So even with this economic grim picture and their politics (or politicians) America can't be written off yet. Or is this why their politicians are dragging their foot, for they are expecting their people to rescue them from their foolishness when it counts. Is there a call from politicians to its citizens yet to buy US bonds?

  • http://www.kathymm.com AgentHomes

    The problem with the US is that it's government is incapable of taking decisive action even when one party controls the house, senate & executive. As a result they always end up with watered down solutions. This system may have been ok when they were a rising power with growing tax revenues which allowed them to ignore these problems but it will kill them now.

  • Tokalosh

    Why should anyone tackle the spending problem? It's not their money. You only stop when there is no more money.

    • Poker Face

      That's the problem with socialism: eventually you run out of somebody else's money.

  • noob_goldberg

    I don't know if Aberhart is still in this thread, but I'll answer your question on Bernanke by stating that I think he's taking the only road open to him as he sees it, and that he probably knows as well as you or I that it's less than a 50-50 shot that it'll actually work without collapsing the entire system. All he hoped to do with this hail-mary was buy a few years respite in the hopes that something would miraculously rescue the system. But he could never say that publicly.

    The time to effectively address the factors that led to this current predicament needed to be solved a decade ago. We ran out of even unpleasant options the moment that the US Treasury took over the two GSEs, and we were all completely screwed the moment they nationalized AIG. But, if it makes you feel better, we would have been completely screwed if they didn't take over AIG, so the point is moot.

  • André

    I could see the US call back all its forces and military assets back to the home country and re-purpose superfluous equipment for economic means. Imagine having 10 Ohio class nuclear subs in New York's harbour to supply 1.5 Gigawatts of clean energy, as one example.

    We'll see what a decade of US influence in international affairs does. If peace ensues, then the US won't have recalled its assets for nothing and will pay down down its debt with all the money it saved. If chaos ensues then other country will literally pay the US to save their asses. It's a win-win situation.

  • noob_goldberg

    This is an excellent article.

    What I find saddest is that it's only solicited six comments in four hours, which indicates that people find the issue either boring or unimportant.

    This is unfortunate, considering it is undoubtedly the most important issue our generation will ever face.

  • M_A_D_world

    It's never good when the government and it's opposition lack the back-bone to be the bearers of bad news that the slush funds are over and things will cost more.
    Find a speech writer that can bring courage and a sense of purpose to financial responsibility. Then transplant one backbone into a leader to give it.

  • noob_goldberg

    I find your ideas intriguing and wish to subscribe to your newsletter.

    Indeed, such a speech writer would be worth his weight in gold.

  • taxslave

    Considering that our school system is obsessed with teaching fuzzy feel good classes and rejects personal responsibility when they should be teaching topics that will be of use in the real world, like balancing a bank statement and our governments spend like there is no tomorrow on the whim of the day, coupled with a steady media barrage of advertising for junk we don't need, what do we expect?

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