In history, we’ve had a number of great civilizations which have had spectacular runs and then fallen into ruins. China was clearly the world’s most advanced nation in ancient times and then look at what it was like 50 or 100 years ago until recently. Athens and Rome ruled for centuries. Egypt held the top spot for quite some time.
Great civilizations seem to come and go, and the citizens at the time must have been quite surprised at the stunning falls of their societies. The good times probably seemed like they would go on forever.
We are so much more modern and sophisticated now, aren’t we? We can print money like there is no tomorrow and nothing bad is ever going to happen. We just can’t imagine it.
When Mitch McConnell suggested that states might have to declare bankruptcy rather than get federal bailouts, he was essentially saying that the federal government does not have unlimited money. And yet we act like we do, and we are spending like we do. Our national debt is climbing now very quickly, as is our annual deficit, and there seem to be no plans to pay any of this borrowed money back, ever. In fact, some economists have said as much. Others say, well, yes, we must pay it back eventually, but there is nothing to worry about in the short-term.
We might pay interest on it, but that is pennies on the dollar. When people realize that the money will never actually be repaid, there is a chance–a good chance, in my view–that our economy will collapse. And if future generations manage to save it, it is going to come at considerable pain and cost. Our current Coronavirus-caused economy will be the “good old days” when the game is up.
Economists seem puzzled that we haven’t had inflation with our overspending. But the missing word there is yet. Economists perhaps don’t think in terms of decades and centuries, but instead in terms of days and weeks, or maybe months.
Perhaps the collapse will come in 20 years. Maybe we can play this Ponzi game for that long, living the high life, with unlimited money and no fiscal constraints. But, eventually, we either have to pay it back or acknowledge that we can’t. And when we can’t, what happens to the economy?
Perhaps the leaders will never make such a public acknowledgement that our money is actually worthless because debts are not going to be honored. But people will eventually wise up as they see debtors getting shafted. Several cities have declared “bankruptcy” and Puerto Rico bondholders had to take a big “haircut.” This means they got paid less than they were promised. Nobody seems to mind too much…yet.
But some day, they will realize that the “full credit” of the United States is that we keep our printing presses well oiled and if we need money, we can print it, or have our federal bookkeepers create it out of thin air. When it no longer is safe to “save” money, because of hyper inflation or debt defaults, people will no longer want money. Maybe we will have to go back to a barter system, or maybe we will use “hard currency” like gold and silver, which used to back our monetary supply. Since 99% of people don’t own gold or silver, the government or the angry mobs will seize what they want because they will have no other choice. Maybe even Venezuela today will be another example of “good old days.”
In my view, the last 10 or 15 years have laid the groundwork for this coming disaster, because we have sidelined our “deficit hawks.” In our democracy, politicians get elected by spending money and promising to spend money, not by saying No to our powerful interest groups. Our politics have become bidding wars with Bernie Sanders and Elizabeth Warren leading the way, making it easier for the Joe Bidens and the Donald Trumps to promise to “borrow” and spend trillions more than we have, just so long as their spending is less than what Bernie and Liz propose. You see, that makes them moderates.
Had we instead tightened our belt, we would have faced some immediate pain, but we would take away this potential future disaster scenario and, in this pandemic crisis, we could reasonably borrow our way out of it and plan to repay the spending later…and then do so. So when times were good, we didn’t balance the budget and make it clear that we were on the road to repaying our debts, we just kept borrowing and spending even more. And now times are bad, and we are digging our hole several times deeper than it ever should be.
Democracy is a great system, maybe the best ever devised by humankind, but this perpetual deficit spending exposes a serious flaw. Politicians cannot run and win on balancing the budget and making tough choices to cut entitlements or raise taxes. And for every trillion dollars we deficit-spend in the short run, we will have a trillion dollars of belt-tightening to do in the long run. Or we will face the worse consequences of people losing faith in our monetary system if we just keep letting the debt go up forever.
Our deficit is now $20 or $21 trillion, and is expected to jump to probably $25 trillion next year. Who knows how soon we will hit $30 trillion. As interest payments increase and inflation starts to go up, this will either have to be voided debt or we will just stop counting it.
$30 Trillion is just the tip of the iceberg, of course. We have untold promises we must repay as well, including future retirement costs for government workers at the local, state, and federal level which are tens of trillions of dollars in debt right now. These future pensions costs assume high annual investment returns and are still way underfunded. After the recent stock market correction, the red ink will be far worse.
The reason we need to tackle these deficits and debts is because a crisis might hit us, and then we need to be able to open up the fiscal spigots to get over it. But instead of spending money like we will have to pay it back, Congress is spending money like we don’t. And perhaps that is because our leaders have figured out that at least on their watch, we don’t. And then we can pass the buck to the next generation, or maybe the one after that, and let them deal with the economic collapse. Is this the legacy we want to leave to future generations?
Allen Nitschelm is publisher of PublicEditorMA.com. He critiques the Boston Globe, mostly focusing on the bias in their news reporting. News articles are graded for bias, and the website has a listing of the average bias ratings for all reporters reviewed. See our website for more information and the four categories of articles we publish.
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