It is remarkable that, in our current straits, and with the demographic clock running out on the graduated reforms to our entitlement programs that nonpartisan think tanks have been propounding for decades, the government has shifted its stimulus machinery into overdrive. With the economy still shaky, we are warned, now is not the time to begin consolidating our debts! With interest rates so low, we would be fools not to borrow trillions more while the getting is good! With the states $7 trillion in debt and maxed out on private borrowing, Washington needs to be doing more not less! This is what a pathological fiscal system sounds like when debt stimulus no longer stimulates and its options are running out.
The fiscal cliff will be avoided, or not. We face two other challenges that are much more serious and nearly as immediate. The first is to begin contingency planning for the coming debt crisis—which may arrive as early as next year, when California is the first of our bankrupt states to apply for a massive uploading of debt to the federal government. The second is to establish institutions of public finance with a fair chance of disciplining rather than placating the populist pressures of contemporary politics, and of right-sizing our middle-class welfare state to acceptable levels of middle-class taxation.
These institutional tasks can hope to succeed only after we have developed a new public rhetoric of fairness. It should be a matter of acute national embarrassment that our leaders can pretend to be redistributing from wealthy to average citizens when, in fact, they are redistributing in far greater measure from the young and unborn. Our rhetoric must teach that, although government borrowing is appropriate for certain purposes, the routine redistribution of wealth from future generations to ourselves is undemocratic, corrupting, and ultimately impoverishing. We don’t need to wait for a deadline or a crisis to take this intellectual leap.
Tuesday, December 18, 2012
The real financial cliff.
Another sobering reminder of the real financial cliff facing our nation. From the Weekly Standard, an article by Christopher Demuth on what we'll be facing in the not too distant future. And the advise of some is to go faster off the financial cliff.