Friday, January 23, 2009

If Mr. Easterbrook Didn't Live in D.C., maybe he'd know how bad things actually are

Today, we're gonna give the treatment to Gregg Easterbrook. Easterbrook's day job is at Brookings and his night job? columnist during the NFL season. For the most part, I like Mr. Easterbrook but...

If Teenagers Borrowed to Spend the Way Washington Borrows to Spend, Adults Would Call Them Irresponsible:

This is true.

Since the taboo against serious deficit spending in peacetime was shattered under Ronald Reagan, presidents and Congress have borrowed lavishly to give constituent groups and special interests whatever they want -- then handed the debt to our children and grandchildren, all the while wagging their fingers about how somebody else must do something about the federal deficit.

Yes, yes, tell me more! I'm one of those children! What happened next? Will the next sentence be as long as the first? I'm at the edge of my seat here.

George W. Bush added the wrinkle of simultaneously cutting taxes and borrowing to increase spending, all the while wagging his finger about the deficit. The result was that the national debt nearly doubled in eight years. But Bush will never have to deal with that, since he will be retired when the bill comes due. Bush took the easiest possible path, cutting taxes and increasing spending... Tax cuts and spending increases are candy.

I agree! I agree! This is right! I like candy also! And tax cuts! And spending! Why can't this work? So what if W was a cut revenue and increase spending President! No one said anything for years and year, so why are we pointing this out now?

Barack Obama was right last week to call Bush's handling of the country's finances "profound irresponsibility," though, of course, Democrats in Congress went along with it.

What? No. Not really. See the GOP controlled both the Senate and House from 2002-2006. It wasn't until 2007 when the Bush spending spree was some what slowed, thanks mainly to the Democrats taking control of Congress. And then 2008 came around and we had to spend.

The soaring debt is worrisome for many reasons, not least because it represents headlong borrowing when there is no national emergency.

Interesting... where is he going with this?

Terrorism is a concern, but not an emergency.

Good way of putting it.

The economy is a concern, but recessions are cyclical and all previous postwar recessions cured themselves.

WHAT? The economy is just a concern? Did Mr. Easterbrook miss September and October? Did he not realize that the credit markets came to a stand still and we were looking at the economic abyss? I know is was only, THREE MONTHS AGO, but the entire system almost broke. And when I say broke, I mean it in the 'people weren't going to get paid' kind of way. The economy is more than a concern and what happened back in the fall wasn't going to correct itself. This wasn't 1992 or 2002. This was 1929/1930, and pretty much every economist agrees with me.

Though life is mainly normal, we're borrowing as if the whole world were at war. If the United States borrows like mad even when things are under control, what's in reserve for a genuine emergency?

Point taken, only life isn't mainly normal. Life may be normal in the L.A. of the East (D.C. is FantasyWorld to L.A.'s FantasyLand), but for most of American—New York, the Midwest, California—things are pretty bad.

Considering the slack economy, some short-term deficit spending may be a lesser evil...

May be? May be a lesser evil? That's an understatement. When banks aren't lending money that's kind of, sort of, a major problem.

Obama said last week, "We're going to have to stop talking about budget reform and totally embrace it" in order to "make a change in the way Washington does business" on the budget. Genuine budget reform will require either deep spending and benefits cuts, or tax increases, or both.


Little of the federal budget is discretionary; most is entitlements (Social Security, Medicare and Medicaid), defense and payments on the debt. If you ended agriculture subsidies, shut down the National Park Service, abolished NASA and the Environmental Protection Agency, stopped all federal support for education, and canceled all pending Pentagon weapons programs, there would still be federal deficits.

Yawn... So what?

There just isn't any way out of the debt mess that does not involve long-term tax increases;

Falling asleep... Everyone knows this.

or Social Security cuts (perhaps eliminating benefits to any senior whose household income is above $50,000 annually);

Yeah, yeah, only that doesn't matter since Social Security is really just a Ponzi scheme with transparency. Birth rates rise and fall. In 30 years, with just a few tweaks, we could even lower the Social Security threshold.

or Medicare reduction (perhaps requiring seniors to pay for half their care).

Okay, Medicare is a problem. But no one wants to do anything about it. Why? Because old people vote and for many of them it's the only way they can get health insurance. What private company is going to insure an eight-one year old male with a long list of problems? With private health insurance, there are going to be some losers—children and the elderly in this case.

The question should be about cutting Medicare, it should be how to we reduce medical costs on the whole? That would save billions.

Someone in Congress should introduce the Future Dramatic Spending Cuts Act, which would require big spending cuts, but only once everyone who voted for the bill has left office.

The jokes write themselves people! The joke write themselves... sigh.

With each passing year that the United States refuses to deal with its deficit, the problem gets worse, owing to the compounding of interest... For the past three George W. Bush budgets and at least the first Obama budget, the country is borrowing, borrowing, borrowing as if tomorrow will never come.

And with this he goes back to the N.F.L. Look, part of the reason the U.S. is able to borrow, borrow, borrow is because the U.S.A. has more assets than anyone else. To compare it to the financial crisis is flat out wrong. What happened there was that people with few assets were given homes or credit lines they couldn't afford. What's happening with the federal government is much different. Should we be concerned with government spending? By all means yes, but it doesn't work the way Mr. Easterbrook wants it to work. The Federal government can borrow because Americans and non-Americans want to lend their money to the U.S. And when these people buy Treasury bonds, the U.S. usually don't lose too much money (if any) on the deal because interest rates on those bonds are so low.


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