Expect many more fiscal crises in the near future
Saturday, October 19, 2013
Beth Cody, Writers’ Group member
Iowa City Press-Citizen

Whether the government shutdown is resolved by the time this goes to press or not, one thing is clear: we can expect a lot more of these fiscal crises and it will only get worse as time goes on, so we should get used to it.

As the experts have kept telling us for decades now, government spends too much – far more than it takes in. When interest rates rise (as they inevitably will, since they are around zero percent, after inflation), the U.S. government will not be able to pay for both the debt payments and the expected future entitlement payments such as Social Security and Medicare, let alone for all our wars and military bases around the world, as well as the myriad other programs and departments that devour our tax dollars.

One side says that the problem isn’t too much spending, it’s that taxes aren’t high enough. This side actually advocates for more spending, except perhaps for the military.

The other side, although it would like some small cuts in actual spending (except perhaps for the military), it would be willing to settle for modest cuts in just the future growth rate of spending.

Both sides act like if the other gets what it wants, our nation will be destroyed and millions will probably die.

But the whole exercise is a charade, a play-act to convince Americans concerned about the size of our spending and debt that government is doing something to address it, when actually it is politically infeasible to do anything avert the inevitable:

  1. 1) The U.S. government will increasingly find it harder to borrow money, because people will be less willing to buy our riskier government debt, even at higher interest rates
  2. 2) Raising taxes will lead to higher unemployment, lower GDP and lower taxes collected; printing more money to pay government debt will lead to painful inflation and the same.
  3. 3) Government will eventually be forced to make the spending cuts that were politically infeasible before, albeit in ways that result in much greater human suffering than if spending were cut in an orderly way during relatively prosperous times
  4. 4) There will be mass unemployment, laid-off government workers rioting, reduced law and order and large-scale economic suffering
  5. 5) The U.S. government WILL default on its debt (I’m glad the “D” word is now being spoken in Washington – the denials are a first step)
  6. 6) Following all this, almost certainly there will be some re-ordering of our government, perhaps resulting in two or more new nations

 

This will all happen in the next two or three decades, perhaps sooner.

I know no one wants to hear this. It’s just like a compulsive shopper who finds it terribly bothersome to receive those annoying calls from banks and credit card companies, and won’t listen to warnings from people who care about them that continued, indiscriminate shopping will result in bankruptcy and future suffering.

But that’s fine if you don’t want to hear about it or think about such unpleasant things. Don’t worry about it yet – we can’t actually do much about our spending problems at this point anyway. It’s politically impossible to reduce spending when so many people haven’t admitted yet that there is a problem.

I think it’s admirable that a few people in our government are risking political damage to try to cut spending by a little bit. But not only will it probably fail, even if it does succeed, this drop in the bucket will do little to prevent the inevitable.

My advice is just to enjoy our relative prosperity for as long as we can. After all, most people can still get jobs if they want them; all manner of non-essential businesses are still operating around us and restaurant parking lots still seem pretty full, even on weekday nights.

There’ll be plenty of time for worrying later.