Spot is really glad that he found the Minnesota Free Market Institute; it's a sure-fire cure for writer's block! For example:
Maybe as a Halloween warm up for scaring the kids on his block, Davey Strom tells us that we will drown in a sea of public debt. Yes drown, he says:
Have you been worried about the financial crisis the past few months? Well if the chaos in the credit markets has had you spooked, the looming fiscal disaster should have you positively terrified.
The financial crisis has been riveting to watch, and it has captured all of our attention. Unfortunately focusing on the budget deficit and the growing unfunded liabilities of the government is about as interesting as watching paint dry.
In the long run though Americans should be much more concerned about the fact that over the past few decades our government has created a fiscal time bomb that is getting harder and harder to defuse. Rapidly rising government spending and the increasing liabilities of Medicare and Social Security have already put Americans more than $53 trillion in the hole as of the end of last year. That amounts to $175,000 for every man, woman and child in America. And that doesn’t include all the new liabilities added to the books over the past few months in response to the financial crisis.
Davey is talking, of course, about accrued liability, which is the true way to reckon these things, but it is not like the dinner you just ate but don't have the cash for the tab. Davey doesn't tell us what assumptions are in his figures: is he calculating out into an infinite future? What doe he assume about life expectancies, medical costs, population changes, tax collections, etc. Davey undoubtedly got his number from a right-wing Mount Olympus somewhere. We will certainly have to figure out how to raise some additional money, trim benefits, or both, but that can and will be done.
But $53 trillion over the long, long term? Pocket change, Davey. For something a little more immediate to worry about, consider this:
This chart is from Phillips' new book Bad Money. The big spike that you see is the Depression. Over on the right side? That's now. The legend on the left is "Total credit market debt as a share of the U.S. gross domestic product." As you can see, the percentage held pretty steady at under 150% from after WWII, through the Vietnam War and up until the middle 80s when it went totally freakin' crazy.
The chart includes both private and public debt, but the private side is the one that has really grown; pay particular attention to the "Total household" and "Federal government" lines:
Americans are in hock up to, and in a lot of cases over, their eyeballs. Phillips attributes this to the "financialization" of the economy that began in the 80s with Reagan Administration's deregulation mania. It seemed like a good idea for a while, but the chickens are coming home to roost. The DOW is down over twenty percent from its high of just a year ago and credit markets are frozen.
Unlike the unfunded liability that Davey laments, the private debt described above is current, or will be if you miss a couple of payments. This is why Henry Paulson and Ben Bernanke are hyperventilating.
When Davey tells you, boys and girls, that the long term fiscal crisis is bigger than the current financial crisis, he's full of something, and it isn't necessarily merely hot air.
Davey's post is just part of the continuing conservative canard to destroy what's left of the New Deal. Not only is that a bad idea, but we're gonna need a new New Deal very soon.