On This Week this past Sunday, Jake Tapper hosted an interesting panel discussion entitled “Is the U.S. Headed Toward Bankruptcy?” Video is available here (Part I) and here (Part II).
As ever, I was frustrated in that the best approach to the fiscal and economic problems we face seems pretty obvious to me but nearly impossible to implement. It has three component parts.
- The top priority is a healthy and growing economy. All sides agree that economic growth is absolutely necessary to escape the morass we’re in. There will be lots of political arguing about this, but the unfortunate reality is that the government can’t do a lot to rescue the economy except at the margins and around the edges.
- We also desperately need fiscal responsibility which includes a comprehensive plan to deal with government spending and deficits. Our current path is simply unsustainable.
- That said, now is not the time to be cutting programs designed to help people in trouble and survive what is still a very lousy economic environment. Moreover, firing government workers when there are few job prospects for them in the private sector doesn’t strike me as a good plan for fixing things.
All of this suggests a pretty straightforward (if difficult to execute) solution — use governmental resources to keep things from getting worse in the near-term and go about doing those things that only governments can do (like fixing our collapsing infrastructure). Even though it is a monumental longer-term problem, we can borrow money today at extremely cheap rates to do so. When economics conditions improve, we can then attack the fiscal problems head-on.
But here’s the problem. There is not a whit of evidence that our bloated and entitled government will ever have the discipline to impose austerity by curbing its spending habits without being forced into it by political mandate. Even worse, it is least likely to do so when times are good, revenues are high and political largesse is easy to bestow.
Sadly, that means I have no clue what is the best way forward. The approach most likely to succeed in the long-run is probably to impose austerity now since there seems to be some real support for it, election results allowing. But if we follow that approach we need to recognize that doing so will force some dreadful near-term impacts, many of them forced upon those least able to manage them successfully.
The better solution (assuming a more perfect world) risks longer-term financial ruin without responsible government and leadership (how often have we seen that recently?) and has potentially nightmarish consequences for our children, who already assume that they will never have Social Security and Medicare benefits even as we Boomers are whining about any potential cuts to that which we are “entitled” (in a social compact we made with ourselves without the consent of our children, who we expect to pay for it).
If anybody has a plausible solution, I’d love to hear it.
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Technically, the U.S. can’t go bankrupt, because it has the power to issue fiat money in unlimited amounts.
I share your concerns and frustration that we are on an unsustainable path, and our highly polarized political environment leads to gridlock — elected officials are concerned solely with winning the next election (kowtowing to the lowest common denominator in their respective political “base”) and advancing the interests of the moneyed contributors that make that possible.
I don’t have any solutions. I personally believe that we won’t have any solutions, and we will end up disproving Winston Churchill’s observation on Americans (they can be counted on to do the right thing once all other options have been exhausted).
We have made unsustainable promises on social security, medicare and medicaid, and have an unrealistic expectation that we can continue to have a military force more powerful than the rest of the world combined. Once you finance those priorities, it leaves less than zero dollars for the entire rest of government.
While we can raise taxes some, any significant tax increase is counterproductive. And while we go through an extended period of slow growth, it is never going to be a good time to raise taxes – especially where the money is, which is on the broadly-defined “middle class”.
I foresee that we will solve the problem by “printing” the dollars we need to in order to pay our obligations. In other words, we will do nothing to address the deficit for a couple decades, and then will be forced to inflate away the promises to seniors by reducing or eliminating indexing of benefits, and having the value of benefits (especially medical benefits) get whittled away.
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