Entitlements

Doom, Doom-Doom Doom!

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Writing in Sunday's Washington Post, Joel Achenbach is what the kids used to call "shrill" about the fiscal health of the United States.

I'm sad. And unhappy.

The short term looks awful, and the long term looks hideous. Under any likely scenario, the federal debt will continue to balloon in the years to come. The Congressional Budget Office expects it to reach $20 trillion over the next decade—and that assumes no new recessions, no new wars and no new financial crises. In the doomsday scenario, foreign investors get spooked and demand higher interest rates to continue bankrolling American profligacy. As rates shoot up, the United States has to borrow more and more simply to pay the interest on its debt, and soon the economy is in a downward spiral.

Ouch. Murmurs from the Obama administration are not reassuring:

When I spoke to Peter Orszag, the director of the Office of Management and Budget, he expressed optimism that the administration can balance the primary budget—not including interest payments—by 2015. The longer-term deficits are his bigger worry. Asked if the political process in Washington is broken, he answered: "I think it's too soon to know whether the system's broken. The problem is not what happened last year or this year. The real issue is when we move forward in time, something has to give."

Most troubling of all is the way the article ends, with some quotes from one of the stars of Michael Lewis' terrific The Big Short, Michael Burry:

You do NOT want to be betting against this guy

[Burry] believes the federal government is behaving like the companies that lost billions in mortgage-backed securities. He told me he sees the common mistake of focusing on short-term benefits—whether quarterly earnings or the next election.

The world doesn't want America to go broke, he points out. Americans are the planet's greatest consumers. But if this is a bubble, it will burst with little warning, Burry said.

"Strictly looking at the monthly Treasury statement of receipts and outlays," Burry said, "as an 'investor,' you see a company you might want to short."

God help us.

Link via Veronique de Rugy, whose Reason archive hits on many of the issues Achenbach explores.

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  1. Public debt is to the right as global warming is to the left…we’ve been told for decades and decades that these things are going to be the death of us yet we keep truckin’ on…

    1. Greece says hello

      1. And it is amazing how quick the accumulated trust of centuries – that allowed building that mountain of debt – can turn around in a few weeks and months. Then no one wants those dirty bonds, regardless of the yeilds.

        Then you’re doomed, dooooomed, dooooooooomed.

    2. Yep. Stupid worrywart ant. The grasshopper had it right all along.

      1. No, Dan is saying they are both equally right… and wrong. So let’s go drink and have a toast to moral equivalence.

    3. Not to put too fine a point on it, but Tyler had become an antenna. We’d be at lunch somewhere, having a perfectly reasonable conversation, and he’d suddenly start repeating words in this trancelike, monotone voice: “Arbor?truce?subjective…ignore?violet?mucus?retention?caustic?evaluate?” and so forth, for about three or four minutes. Then he’d snap out of it and resume the conservation just like nothing had happened. But I knew, man. That was no random sequence of words, Tyler was an antenna. It was code. Part one of the code that was being picked up by Tyler and transmitted to somebody else. Me? Perhaps.

    4. Yeah, so silly to worry about public debt. Who cares if it has a devastating effect on the economy, leading to unemployment and old people eating cat food. Those aren’t traditional Left concerns, anyway.

    5. Like housing prices.

    6. No country in history has ever defaulted on its debt, and no fiat currency has ever lost value.

      Sell all your gold, quickly.

  2. You expect a guy named Achin’ Back to be happy?

  3. “I think it’s too soon to know whether the system’s broken. The problem is not what happened last year or this year. The real issue is when we move forward in time, something has to give. For fuck’s sake, this is EXACTLY what we want to happen. It’s not a bug, it’s a feature. Luv, Peter :)))”

    FIFY

  4. The problem with selling short is that the government sets you up as a scapegoat for the big fall.

    In every devaluation in history, governments have blamed “currency speculators” for the economic problems. Said governments also have an unfortunate tendency to shoot or do other nasty things to the “currency speculators.”

    1. Where’s the best place to live in Canada?

      1. I mean, I figure New Zealand would be my ultimate destination in a total U.S. collapse, but if we’re talking a temporary calamity, a nice town in Canada seems like a good place to send the wife and kids.

        1. In an absolute Mad Max-style meltdown, NZ is probably the best place on Earth. Low population density, lots of food and fresh water, strong rule of law, good climate, very hard to get to (for refugees or invaders). But you’d have to go there before the meltdown, as they’d probably cap immigration numbers…

          Short of that extreme, though, I’m sure British Columbia would serve pretty well.

          But you know what? Best move is probably to petition the US government not to go bankrupt. Yes, I know it’s seditious.

          1. New Zealand already has very strict immigration laws. Unless you’re filthy rich or have some in-demand skill, they won’t let you in.

            Trust me, I checked.

      2. Victoria.

        Unfortunately, we’re tied to the US economically. No matter how hard we swim, we go down the drain with you.

        Which is why I care about US politics.

        1. Unless you take our place. Canada is pretty wealthy and could always start selling stuff to Asia.

        2. Victoria may be a pleasant place to retire, but it’s not the most exciting place to live.

          It’s mostly university students, navy, government bureaucrats, and the tourism industry.

          I lived there for 5 years, but moved to the mainland to get a real job.

          1. Nunavut, then?

            1. In three years, it’s climate will be like your beloved Tampa. However, make sure you buy land 100 feet over the water table.

              1. Oh, good. Thanks, Al!

      3. I’m thinking Tasmania. All those native tasmanian devils that, with the right mixture of animal charisma, behavior modification and pharmaceuticals, could be commanded into an unstoppable defensive army. Only a fool with a death wish would dare intrude.

        1. “Why for you bury me in the cold, cold ground?”

        2. Except that they’re all dying of communicable cancer.

          1. See? Ferocious and cancer-spewing! Attack at your own mortal peril.

        3. Sure. Tasmanian devils. Your desire to move there has nothing to do with the fact that Tasmania is one of the largest producers of opium poppies.

  5. Peter Orszag …: “I think it’s too soon to know whether the system’s broken.

    That *the director of OMB* is saying *this* is a pretty good indicator that the system’s broken.

  6. I think it’s too soon to know whether the system’s broken.

    What does he say the next time you pull his string?

    1. He says “the economic recovery is underway.”

    2. “Where the white women at?”

    3. “I see green shoots.”

  7. “I see green shoots.”

    1. Yeah, but what about the green shoots?

  8. To quote TAI (in a completely different context), we’ve got a big mess on our hands.

  9. Where’s the best place to live in Canada?

    Costa Rica.

  10. Costa Rica, British Columbia?

    1. actually, Turks and Caicos wanted to join Canada

      http://www.cbc.ca/news/background/turksandcaicos/

  11. Well I can guarantee you whatever Obama’s bipartisan deficit commission comes up with will be opposed by you guys and the right.

    Hey, you libertarians are closest to the Palinites, why don’t you explain to them why reducing the deficit might involve losing some government handouts for themselves, or a raise in taxes? It could clear up a lot of confusion.

    1. The federal deficit and the public debt are two different things. Whether or not libertarians disagree with “Obama’s bipartisan deficit commission” is irrelevant to the long term problems of continual debt accumulation. Stop filling Reason with straw, please.

      1. Wouldn’t the first step in stemming continued debt accumulation be to have a balanced or surplus budget?

        You guys don’t have a real solution. Cutting taxes and praying has never worked, and neither has decimating the middle class tax base with laissez-faire policies.

        1. Actually, I think the first step is to stop the hemorrhaging that’s funding our global empire:

          http://www.whitehouse.gov/omb/factsheet_department_defense/

          Sure, $660 billion may seem like a pittance when compared to the $12,877,195,922,374.91 total outstanding public debt, but we wouldn’t have gotten there without rampent spending of money we didn’t have, a process I don’t see being reversed.

          You accuse libertarians of not having a “real solution” but I think it’s kind of lazy that a big government straw dealer like yourself is okay with so much unnecessary and dangerous excess.

          1. Defense is where I’d go first, too. Maintaining our empire comes at a grave cost… including the entire arab muslim world hating us and wanting to kill us. Now run along and convince your Palinite friends that they don’t get to keep their empire and still claim to be for small government. They aren’t gonna listen to me.

        2. Cutting taxes and praying has never worked

          Yes. You have to cut spending too.

          Possibly on entitlements and social welfare programs.

          Which you geniuses invented.

          1. You have to cut spending period. The real economic damage is done by the wasteful spending, not the choice of how to fiance that spending. Raising taxes to pay for wasteful spending will just as surely lead to ruin as borrowing to pay for it. Until you’re willing to stop throwing away money, nothing else you do is going to make much of a difference.

          2. Means test social security and medicare (i.e. make them more explicitly welfare). Then roll SS taxes + medicare into the federal taxes.

            And then raises taxes.

            it might eliminate the deficit, but you’d have a rather angry populace. I suppose the IMF can enforce that at some future date though.

            1. Don’t just means test. Cut benefits. A lot.

        3. Wouldn’t the first step in stemming continued debt accumulation be to have a balanced or surplus budget?

          Wouldn’t the first step to a balanced budget be to control spending and honest accounting?

        4. Tony|4.26.10 @ 6:02PM|#
          “You guys don’t have a real solution….”

          Yes, ‘we’ do; cut entitlements.

        5. You do not have any kind of solution. Your side is proposing new spending at a pace where even if tax hikes were to bring in the expected revenues, the spending would outstrip them.

    2. Well I can guarantee you whatever Obama’s bipartisan deficit commission comes up with will be opposed by you guys and the right.

      You’re probably right. We’d probably oppose it because it’s been made abundantly clear to us that Obama and his boosters have brains which are literally wired to not understand the effects of government spending.

      Let’s put it this way, if his plan to mitigate national debt is anything like his plan to control healthcare costs, we’re fucked.

      1. Given the market sophistication and fiscal responsibility of the current administration, after 5 million years of cogitation, I have arrived at the answer:

        YOU’RE FUCKED.

        Now, as to the meaning of ‘YOU’RE FUCKED’, that will require additional funding to compute.

    3. Tony|4.26.10 @ 5:50PM|#
      “Well I can guarantee you whatever Obama’s bipartisan deficit commission comes up with will be opposed by you guys and the right.”
      Pretty good bet.

      “Hey, you libertarians are closest to the Palinites, why don’t you explain to them why reducing the deficit might involve losing some government handouts for themselves, or a raise in taxes?”
      Hey, you’re closest to the socialists; why don’t you explain to them that we can’t afford all the entitlements?

      1. We can afford entitlements, and frankly we have to. What we can’t afford is subsidizing the gilded age lifestyles of people who don’t produce anything but still own 99% of the wealth.

        When the rich were taxed at 70%+, life was pretty good.

        1. “gilded age lifestyles of people who don’t produce anything but still own 99% of the wealth”

          So you support complete elimination of Social Security? It is a subsidy for the wealthiest (but very low income) age group.

  12. Where the fuck is Warren?!

    1. he got lost in the woods east of Flin Flon

  13. That’s because you can guarentee it will consist mostly of VAT.

  14. For those worried where to go when the collapse occurs, fear not, you can relax. Years ago, on one of my hikes in the mountains near by, I found a valley where a dozen varieties of wild grapes grow, where the revenuer fears to tread, where there is an abandoned gold mine whose mother lode was never found. Contact me if you are a hearty libertarian in spirit, best avoid me if you are not.

  15. …he expressed optimism that the administration can balance the primary budget — not including interest payments — by 2015…

    I can do that with my family budget this year, just by cashing all those blank checks the credit card companies keep sending me!

    All the government has to do is keep borrowing more to pay off the interest on the old debt, and they’ll be fine!!!!

  16. Guns & ammo.

    A great investment and they hurt liberals vaginas everywhere.

  17. It doesn’t help that every deficit reducing proposal by the Obama administration has been met with a resounding “NO!” from the Republicans, and faint farting noises from the libertarian peanut gallery.

    1. every deficit reducing proposal by the Obama administration

      Such as?

    2. Mainly because what the Dems are calling “deficit reducion proposals” are actually accounting gimmicks to hide spending or just plain ‘ole tax increases to offset their additional spending.

      The deficit is caused by spending more money than you bring in, and the way you way you stop spending is to, errr, STOP SPENDING.

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