The Big Think

October 21, 2013

The Reality of America’s Finances

Filed under: Politics — jasony @ 1:24 pm

The Reality of America’s Finances | FreedomWorks: “The analogy is imperfect, but imagine the green is your salary, the yellow is the amount you’re spending over your salary, and the red is your Visa statement. Then imagine your spouse runs into the room and shouts, ‘great news honey, our fiscal crisis is over. We just got approved for a new MasterCard!’ Your first call would be to a marriage counselor or a shrink.”

Click to see the chart he’s referring to.

2 Comments »

  1. “Yet when a conservative hesitates before raising the debt ceiling, he’s portrayed as a madman.”

    That is mad: we’ve already racked up the debt. We have to pay it back. Not raising the debt limit is like not paying your credit card bill. When you do that, people won’t loan you money at sane rates anymore. And we can’t get out of borrowing money for a long long time at this point.

    If you want to help fix the problem, deal with it when congress makes a budget. The way out of debt is to not increase your borrowing, not by failing to pay the credit card bill.

    Comment by greg — October 21, 2013 @ 1:39 pm

  2. Hi Greg,

    There’s a long, long post that I have brewing that would probably better serve as a reply, but a short part of it is this. I have to politely disagree (if what you’re saying is what I think… I wasn’t sure what the “this is mad” part referred to)

    Raising the debt limit is fundamentally not like ignoring your credit card bill. Instead it is exactly like getting another credit card. Not paying the debt you already owe is decoupled from obtaining a higher credit limit. The two things are not related at all. If I owe $20,000 on a credit card bill and my interest payments alone are, say $1000/year, getting a higher debt limit does not allow or disallow me from spending the money to pay the bill I’ve already racked up.

    When President Obama said that raising the debt limit would not incur more debt he was being overly clever with his wording. It’s true that the direct result of a higher debt limit would not be more debt, but the expected result is that, yes, the government will run up the additional debt and then come back for more (sidenote: what good is a “debt limit” if it is going to be raised every time we come up against it? That’s like saying “this is my household budget” and then ignoring it completely).

    But back to the point. There is enough money coming into the treasury to pay off the bills we have already accrued to date (or at least pay off the interest on the loans while we figure out a way to address the principle). Failing to raise the debt limit would not force us into default unless we chose to ignore the bills we already had. Would this be painless? Absolutely not. In fact, I suspect that, if we really had gone past the deadline, we’d have seen the administration use economic strong arm tactics similar to closing the national parks to make it hard on the average American. But, just like in the analogy with a household budget, if you must pay your debt (a Constitutional requirement) then all other bills become secondary (defense, social programs, etc). The bills— or at least the interest on the bills— is at the head of the line when it comes to repayment. It would be the Mother of All Shutdowns but would have the salutary effect of instantly balancing the budget. Just like in a household that cuts up credit cards.

    But, distressingly, what is missing in this whole discussion is the bigger point of it all. As a nation we’ve been saying “you can’t kick the can down the road forever” for years and years. Decades. We all knew that someday our fiscally errant behavior would come back to bite us in the backside. But previous generations were comfortable pushing the day of reckoning off into the unknown future, secure in the knowledge that they would be dead and gone before the math caught up to them (Social Security ponzi scheme as a particularly egregious example). So instead of arguing over the particulars of the shutdown we are beginning to hear people stand up and loudly declare “it’s not just about this program! It’s not just Obamacare or Social Security or Welfare or Defense or anything else. It’s that We. Cannot. Afford. Everything. Not even close”.

    So.

    The math doesn’t allow us to have everything we want. And 100-200 trillion dollars in future unfunded kicked-the-can-down-the-road liabilities are beginning to insist that we won’t be able to have anything we want unless we get this leviathan under control. The math has been positively screaming it for decades and only now is its voice becoming harder to ignore. I have never seen a serious proposal for paying off our debt that doesn’t ask for some sacrifice from citizens. Unfortunately, what we’ve gotten the last decade and a half has been a gigantic expansion of the problem.

    So, to come back around to your original point. When someone stands up and attempts, however inelegantly, to force the issue of fiscal sanity by flirting with a debt limit (which could constitutionally still be dealt with) he is derided and shouted down. One side “wins” and the other side “blinks”. The media report joyfully. Ha ha! Problem averted! To the victor go the spoils! Except in this game ultimately it is math that will win. The road is getting very, very short and the can is becoming too big to kick.

    You stated “If you want to help fix the problem, deal with it when congress makes a budget.” Except that the Senate has not offered up a budget since April 29th… 2009. (source: http://www.budget.senate.gov/republican/public/index.cfm/budget-background?ID=b630d3bd-f985-4943-a87a-a746ecec6a51). Except once when the President offered a template budget and it was unanimously voted down. Even by his own party. This does not inspire confidence that they’re taking the problem seriously.

    I’m not trying to win points or lay partisan blame here. But what I am saying (along with a growing number of voices on both sides) is that we must do something soon. We cannot continue running up debt like this and not expect Very Bad Things to happen (see: every example in history— and we’re orders of magnitude worse in debt than just about every one of those examples were!).

    People are positively screaming for a responsible response to this. So far all we’ve gotten is… more spending, no serious budget, bigger entitlements (O-care), and a turbocharging of the welfare state.

    When does it stop? If we don’t chose a different path, and soon, a stop will be forced upon us. And it won’t be pretty.

    Miss you guys and have enjoyed the FB posts and pics (and blog posts!). Sure miss your Hefeweissen, too! You still brewing?

    Comment by jasony — October 21, 2013 @ 2:17 pm

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