As this article is written, the Republican House and the Democratic Senate are wrangling over the budget; there is a chance that the government will close down; and the president is scheduled to leave town and make a speech about energy policy in Indianapolis.
Confrontations over the budget are not a new thing in Washington. They have happened before, the most recent being in the mid-1990s, when the government (as everyone is endlessly rehashing now) actually did shut down for a short period.
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But those debates were different than the one that is now occurring. In the past, the argument was about political philosophy. The Left believed that more government spending would make our society better and our economy stronger. The Right believed the opposite: that the size of government had reached a point of diminishing returns, so that reducing the burden of government would make everyone better off.
This debate is different. It’s not over what Washington should do. It’s over when and how Washington will do what it must do.
Arguing over what should happen presupposes that different options are realistically available. But the basic direction of budgetary policy is no longer optional. The government has run out of money, and its current rate of spending must and will substantially change.
If I am standing in the middle of railroad tracks when a train approaches at high speed, I do not have the option of staying where I am, no matter how much I may like my current position. My only two options are to move either before, or after, the train hits me.
According to official government projections, the government will run $7 trillion of deficits over the next ten years. The debt, which has doubled over the last four years, will nearly double again by 2021.
As I said, those are official projections. They probably underestimate what the deficits will be. In other words, if the government could continue borrowing at its current rate, it would likely have to borrow even more than it is now projecting.
But even the official scenario is fantasy. The government will never borrow $7 trillion over the next ten years. In fact, unless the credit markets see a substantial change in America’s budgetary policy, the government may well not be able to borrow the $3.5 trillion it is currently projected to borrow over the next five years. Long before the ten years are up, and possibly before five years have passed, the government will no longer be able to finance its deficits.
The government can’t force anyone to lend it money. It has to access the credit markets and get money from financial institutions and individuals on the promise that it will repay the money with interest.
Lenders can read deficit projections as well as anyone else. They already suspect that the government will not reduce spending substantially and will instead inflate the currency in order to make it easier to repay its debts. They are also concerned that recovering economies around the world will demand more capital and put pressure on the credit markets. As those suspicions crystallize into something approaching certainty, lenders will demand a higher interest rate before loaning the government more money. That will increase the debt service the government must pay, which means the government will have to borrow even more money to make its interest payments, and that will drive up interest rates further, until eventually the government cannot leverage itself any further.
At that point there will be no more money, and the spending will stop. The economy will go into a stall; the middle class will be in danger, and poor people — who depend on government services more than anyone else — will be in desperate straits.
It happened to Greece and Portugal. It is happening in several states now. It will happen to the U.S. government as well. Over the last few years, the government wasted most of its credit reserve on spending that was at best nonessential. Moody’s has already threatened to lower the government’s bond rating, and the Treasury has been reduced to financing its borrowing entirely with short-term bonds. Lenders are unwilling to buy longer-term notes, because they suspect interest rates are going up.
A final and fatal run on the government’s credit could be triggered by any one of a number of events: a successful terrorist attack or other major global disruption, an economic downturn, a significant miscalculation by the Federal Reserve, or the insolvency of a state.
So the current budget confrontation is not like the confrontations of the past. It is not a clash of political visions. It is a struggle between those who, like Rep. Paul Ryan, are willing to grapple with reality and those who are not. Given the stalemate in Congress, and the president’s desire to avoid responsibility, there will probably be no fundamental change in budgetary policy in the very near future. But, as the line attributed to Otto von Bismarck goes, “God protects fools, drunkards, and the United States of America.” Our country may yet make it through, if by good fortune the reckoning is postponed a while longer, and if the next election brings in a group of leaders who act decisively before our luck runs out.
— Jim Talent served as a U.S. senator from Missouri.
Unfortunately this is not the case. We do have the option of staying put and being hit, and that is the option the left will choose. They are too heavily invested into handing out goodies to achieve votes, because their positions do not stand upon facts, logic, fairness, and what is in the best long-term interest of everyone. Further, in their mythology they see America as an evil empire and many on the left have a desire to see it fall. Whether or not we can wrestle control back from them before being hit will be the decision made by the public in 2012. For more permanency in this decision, we must also win back the schools and media from being propaganda machines of the left, and allow freedom of opposing views to be heard clearly and honestly, instead of allowing discussion to be muffled by ad hominem labels.
The thing that supports their refusal to grapple with reality is a myth they have spun themselves that there is a huge, huge unused bag of money sitting somewhere and if only they can get at it and take it, it will be possible to continue spending more and more ad infinitum.
Is it possible to show the public that this bag doesn't exist, using vivid storytelling and without getting too far into the weeds with complicated arguments? Or would that be trying to prove a negative?
Senator Talent, A simple and clear statement of the challenge. To explain to the voters (especially the 20 somethings) Republicans will need to make analogies to this demographic that does not like to pay for much, e.g. it's like paying only the interest on a credit card and keeping on charging - the principal goes up and soon enough the bank cuts you off, therefore you have to stop spending now to avert the train wreck. That 20 something and Ind demographic which showed strong for Obama coupled with winning the argument with a large base of independents will hopefully usher in a realistic Executive and Congress. We miss you Senator!
Nice try but, you're saying the base of the right doesn't follow along because it personally financially benefits them to have lower taxes? It's all about the good of the country? Laugh.
Everyone is after goodies, the right actually offers even MORE which is -- here's a load of cash with no strings at all.
Actually Jim Talent simply outlined the Obama plan. Spend us as quickly as possible to that point where we can't recover or correct. That began by Nancy Pelosi who is the key speaker at the George Soros events held this week.
Obama was elected after she had already began the massive increase in spending. Obama's job is to create as much chaos as possible before 2012 election's. He needs to get the citizens so upset and riled up that they demand he step in ad do something "Bottom Up." Obama will do something, he will use all powers he has against American's "Top Down." Which will be met by complete rejection by the citizens "Inside Out." Poof, we become Venezuela, with Comrade Obama in the roll of Hugo.
That is the script, but I believe too many American's know it already and won't go along with it. House Republican's surely won't allow the spending, but stopping oil drilling and other acts are doing a great deal of damage on their own. 19 months isn't enough time to cause Top Down, unless he begins to do things so overt they are impeachable, such as his attack on Libya is. But what if he attacked Israel?
The government can force borrowing from every person that has a dollar. You see, every dollar represents a claim on production in America. Every dollar can buy a little piece of the American economic output. But with INFLATION, every dollar buys less tomorrow. That's terrible, unless you are the inflator.
You see, the government is the one creating the new dollars, and it stakes bigger and bigger claims on the economic output by creating more money that only it can spend. The government is doing it now. It works well until the people going to work stop using dollars.
If the government were a family making 60k and spending 100k through borrowing, we all know that this is a fast trip to bankruptcy. We've been doing it for 3 years now. How many more are left? Senator Talent says 5 years. I say 2 tops.
At some point, the government will have to spend only what it takes in. That point is rapidly approaching. The conservatives are trying to reduce spending without a default on the old loans. The liberals know deep down that they are not going to pay the loans so why worry.
Liberals are the family who has decided to default and are out shopping until the credit cards are turned off. They know and don't care.
Liberals will never stop spending because they don't care if we default.
Benefitting the country DOES benefit the base, and everyone else living here as well (even the liberals foolishly creating the problem). Are you actually so short sighted that you cannot see that impoverishing the country will have a negative impact upon you and anyone else living here that you care about? Or is that it, that you care about nothing except a few scraps from the table in the immediate short term, regardless of whether it makes you a slave for the gov't long term?
Reducing spending and taxes is not handing out goodies; people worked for their money, they are the only ones that have a legitimate claim on it, not the people receiving it without having done anything for it, as an entitlement. The entitlements being cut are the goodies, not keeping my own money that I worked for. Only the left has to twist and distort logic and facts so much that they are the opposite of the truth, to conceal the foolishness of their behaviors.
@relaxok, Reality Check is not delusional. The simplest explanation for essentially 100% of Obama's policies, from debt relief to defense to bowing to despots to hectoring honest citizens about their objections to the price of gasoline, is that BHO hates America as it is and is trying to bring it down. Any man can do a lot of damage in the White House in four years; Mr Obama has already exceeded Carter's record.
