Are We Nuts?
Posted by Doug Rice on Wed, Jan 07, 2009 @ 08:44 AM
"Fiscal deficits and the national debt don't matter."
I have heard others say such things.
So the latest report by the CBO that projects a fiscal deficit of $1,186,000,000,000.00 next year - NOT including the fiscal stimulus package that is being discussed (anywhere from $700,000,000,000.00 to over $1,000,000,000,000.00) OR the additional war expenditures for Iraq and Afghanistan for tens of billions more OR any of the future spending that is promised through Medicare and Social Security (this is the really big one that is, depending on who you listen to over $40,000,000,000,000.00) - doesn't matter?
Can that be right?
In the 1990's we began to pay down our national debt through a combination of a increase in economic activity leading to more tax revenues and a restriction on spending cause by a law commonly referred to as "Pay-Go" Rules. This law mandated that any increase in spending be offset by either an increase in revenue or a cut in spending elsewhere. But they put a sunset provision in the law so when it expired, the purse was back open and they could spend at will, which they did.From 2000 to 2008 our federal debt doubled from approximately $5,000,000,000,000.00 to $10,000,000,000,000.00. And now we are tacking on another couple trillion as if we must do this or the country will perish. All the while we know that medicare and SS are underfunded.
Apparently, those in charge think it's right.
But further down the road, if we don't get our fiscal house in order, we will be faced with a choice of cutting benefits, increasing taxes, going bankrupt, or printing the money to pay our bills which would be hyper-inflationary (ask Zimbabwe how much fun that is).
When we are actually facing those choices, what will we say then?
I bet it's not, "It doesn't matter."
What can we learn from this?
Self interest precludes everything else in much of our decision making. This is part of human nature and it must be taken into account when analyzing any situation. We see it everyday. From Wall St. to one's own family, decisions are often made in favor one's own self interest. This is just another example, an a doozy of one at that.
It's advantageous for us to go deeper into debt right now, so that is what we are going to do. It's not to the advantage of our children or our future. But we come first...naturally.
So instead of fiscal restraint and a bit of sacrifice, development of a long term plan that addresses the needs of everyone, those that are making the decision look for the path that will provide the most pleasure and avoid the most pain...for themselves.
Are we nuts?
No, we're human.