National Debt? What National Debt?


If you’ve been watching the national news much lately you’ll wonder what ever happened to all the concern about the national debt and the massive budget deficits planned for the next decade.   On the up side however you will be quite an expert in addressing issues relating to repairs to the late Michael Jackson’s nose.  But I digress….

Hey, maybe we solved the debt and deficit spending problems?   Oh.  No.  We.  Didn’t.    We owe 11.5 Trillion and it’s rising faster than an inconveniently untrue  misinterpretation of a globally warmed sea level on a Florida shoreline.   Although it’s true that most economists from most sides felt a stimulus was important, and in fact it appears that has stemmed the tide of a financial death spiral, I think most would agree that as the recovery starts to take shape we need to look long and hard at how much we spend.   The *key cut* is obvious and it is the defense budget, but the legions of fake conservatives (often aka “Loyal Republicans”) who carp about a few million wasted here or there refuse to tackle the defense budget, blinded by an absolutely incomprehensible lack of understanding of basic global strategics which have shown throughout history that seeking massive military superiority has little or no justification.   From the Ming Dynasty’s Great Wall of China to the Viet Nam to Iraq,  “defense” become “offense” and results in massive spending with hugely negative ROI and often just exaggerated the unstable conditions you sought to avoid  (e.g. Afghanistan, Middle East).

Incredibly, the concern about the debt has flipped to paying an extraordinary amount of attention to fixing the problems we don’t have anymore.     Obama was explaining to a crowd yesterday all the things the government is doing now to prevent the financial troubles *we do not have anymore*.     Overvalued real estate?    That ship sailed and sunk.    We are probably near the bottom now, things seem to be picking up a bit, so lets move on.   Financial system?   It’s not in great shape but the catastrophe appears to have been averted.

Yes we need oversight but not a huge bureaucratic encumbrances many Democrats are calling for now- ironically many like Barney Frank who are squarely at fault in this crisis for the crappiest era of congressional oversight in the history of the country.    The system failed to address the risk factors properly for reasons that are slowly becoming clearer – a combination of corporate greed and incentives run amock, defective ideas about how huge economies work, terrible government mismanagement of the regulatory systems, and I think by far and MOST IMPORTANTLY people using their homes as piggy banks, raiding their paper equity from stocks and Real Estate to live at inappropriately high standards, work less, retire too early, buy boats, speculate in MORE stocks and real estate, etc, etc.

We all made this bed  and now we are sleeping in it.   YES, even those of us who did NOT mismanage our finances were involved unless they lived alone on an island and didn’t do any investing, borrowing, or buying during the bubble.

The economy has been reset at a lower, more appropriate levels given all the prevailing circumstances.   Welcome to how economies *really work* and why the risky investments of the bubble were … risky.     But those aren’t the investments people are making now that will put them at risk.    New crops of scams are brewing as we speak and more importantly the debt on our backs is weighing down the future prospects *for our children*.   The massive debt is unconscionable yet we are fretting over things that will have relatively trivial impacts compared to that debt.    The country is acting a lot like the most irresponsible among us during the bubble who simply borrowed and borrowed and spent and spent and now are so far underwater in debt they have *no prospect* of paying things back.

Here’s a site with great debt detail:  http://www.treasurydirect.gov/govt/reports/pd/pd.htm

Oh, and if you want to get in your two cents and make a $.02 contribution to reduce our national debt there’s a place for that too, it is called “Dept G” in West Virginia.

The cool thing would be that if your $.02  reduced the 11,500,000,000,000.00 to 11,499,999,999,999.98   you would have changed a whole lot of numbers for a buck.     Printing costs alone would more than wash it away though, and you’d have kept the spiral going.   But that’s OK becuase that is how we roll now here in America – we spend like there is no tomorrow.   And then we spend the money that was supposed to be for tomorrow.   And when the spending gets out of hand we …. spend much, much more.

David Brooks on Different Economic Points of View


David Brooks of the New York Times is one of my very  favorite thinkers – he’s a calm and intellectual conservative who manages to maintain a great deal of respect for the reality of the sweeping political changes before us, but Brooks is wisely very cautious about the many pitfalls that come with the overwhelming power Americans have granted to the President Obama and the Democratic Party.

In my view Brooks, unlike “conservative” blowhards and political/media buffoons like Rush Limbaugh, Sarah Palin, and Sean Hannity,  articulates the kind of vision the founders of our American experiment would have appreciated very much.     They understood how important it was to debate, discuss, consider and reconsider and then use democracy within a constitutional framework as the key tool to resolve disputes.

On Charlie Rose Brooks made a several of observations I thought were really, really interesting.    The first is that Obama  – so sharp and confident as President and chief  manager – is at risk for overextending himself based on that level of self-confidence.   Brooks seemed to suggest (and I’d certainly agree) that this overconfidence is reflected in the governmental and budget optimism that is used to support what I’d call our massively irresponsible spending plans for the post-recession economy.    Almost every economist and politician now agrees that a large deficit is appropriate for a few years in an effort to stimulate the global economy, but there are huge differences of opinion about what to do after that stimulus … stimulates.

To me the answer is probably that we should return as soon as possible to the free marketeering mechanisms that got us to the incredible levels of prosperity we now enjoy, and should seek to reduce government … dramatically.    However this “small government” view has become so unpopular now that I’m going to avoid the stress and just sit back and watch as the huge government view now so prevalent is tested on the grandest scale in all of human history.     I still think we are pushing debts forward at massively unsustainable levels, but luckily we should have a good sense of how unsustainable within a few years as the projected benefits of massive spending fail to materialize.

Another point Brooks made was that Obama’s vision is that of a technocratic and effective government, bringing resources and people to bear on the host of regulatory, security, military, and economic problems Obama inherited from the past.    Brooks agrees that unbridled Capitalism needs to be kept in check but worries about the government as the mechanism for that balance.       Brooks prefers the ideas of UK Moderate Conservative party leader David Cameron who he suggested is trying to embed the necessary checks on capitalism’s potential for excess in non-governmental institutions such as competing sectors of the market, family, and community.

This “small governments, empowered communities” idea  is very provocative and I’d guess very much in line with what the founders would have liked to see, though I think it will take some time to catch on as we’ve spawned a generation of voters who will simply assume that massive government is the status quo.

Capitalism did what  it does so well and said  “damn the torpedos full speed ahead”.     From 1945 until 2008 the global economy dodged most of those torpedos and many – especially in the USA and Europe but also much of the developing world – enjoyed levels of prosperity unparalleled in all of human history.      In 2008 the global economy suffered direct hits from a *lot* of the torpedos we’d been dodging so well.      Governments failed to see them coming and I doubt they’ll succeed in restoring prosperity without torpedos (I’d argue that’s not even possible – the risks *created* much of all those rewards), but we’ll know soon enough.

In the meantime when you tuck your children into bed be sure to tell them “thank you”.   “Thank you for taking on our families share of the USA debt of $473,000 … while you slept” . Source for 473,000 is USA Today.

David Brooks on Charlie Rose:
http://www.charlierose.com/view/content/9335