Nations, like rich people, are different from you and me. They've got more money.
And if you care about the effects of long-term budget deficits and accumulating debt, what's even worse is that nations have the ability to print money like there's no tomorrow. Which there might not be if they keep printing so much money...
Have you ever been in the red for a long time? Have you ever created a structural-deficit problem in your household? Or figured out how to pull yourself from the brink before you pulled a Chrysler and become the love toy of a foreigner? Hmmm...the two aren't necessarily related, though I did come to own a Plymouth Valiant, one of only two cars I bravely swore never to drive while in high school and couldn't afford insurance, much less a set of wheels. At lunch one day I pounded the table like some retarded version of Kruschev and announced that I wouldn't drive a Plymouth Valiant, even if I got one for free! The other car I wouldn't drive was the Valiant's twin, the Dodge Dart; they were such nerdmobiles! But then my grandfather died and his Valiant came my way... I can't help it if I'm lucky...That freaking car still drove after I destroyed the distributor cap during a tuneup gone wrong (and they always went wrong)...Sorry, where was I? Admiral Stockdale, can you come and get me?
Here's Reuters' Jim Pethokoukis writing in The Weekly Standard on the magnitude of the debtitude and how to fix it. He worries that President Obama's plans revolve around the iron triangle of confiscate, inflate, and growth (hey, one out of three ain't bad!). Which may lead to everything from Weimar Republic hyperinflation (go long in wheelbarrow futures!) to Argentine-style seizure of pension plans (but the beef is so good, tenderized by bolo-weilding gauchos!) to a fixation on unlikely scenarios of massive economic growth (wouldn't it be great if someone invented something new and revolutionary for a change? Maybe the Segway will finally take off and the economy will be as sound as a pound in no time flat).
Such worries are easy to come by but what's interesting is that Pethokoukis points to a fascinating recent summary of what's worked and what hasn't:
A 2009 study by Harvard University’s Alberto Alesina and Silvia Ardagna...examined 40 years of debt reduction plans by advanced economies and found that “those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases.” They’re also associated with higher economic growth. But spending cuts alone are probably not enough. The budget-cutting Roadmap for America’s Future of Representative Paul Ryan, the Wisconsin Republican, intelligently cuts future social insurance benefits as a share of the economy and partially shifts Americans into private retirement and health care plans. So far, so good. But the Ryan plan would take seven long decades to restore American indebtedness to pre-financial crisis levels.
To which I say, those seven decades won't seem "long" because everything speeds up when you get older and more broke!
In other words, what works for you and me might just work for nations: Spend less, you dummies, and keep working to bring in revenue. If you don't fuck around with taxes (which means, inevitably, screwing around with various types of loopholes to let your favored pals get around said taxes), money will come in as easily as before. Markets like stability in terms of large institutional structures, right? The key is spending, just as it is in your personal finances. We all know (read: dream about) millionaires who go broke because they spend too much. Everyone can live within their means, even Uncle Sam, the spendthrift son of a bitch, you know he's got a closet full of like 30 of those stupid red, white, and blue outfits. How many tophats does a guy need anyway?
The full story doesn't appear to be on The Weekly Standard's website, which is like a throwback to the Internets circa 1995 or whenever TWS started publishing and lobbying for U.S. entry into what Bob Dole used to denounce as "Democrat Wars" before he got caught up with the Viagra and the Britney Spears and the soda pop. So I'll link to Pethokoukis's blog at Reuters instead. He's always worth reading.
Bob Dole. I bet he drove a Valiant at some point. Such nerdmobiles. Such good cars...