The Slow March To Ruin

Who will historians blame when they look back on the series of financial catastrophes that led to the inevitable default of America on its obligations and the resulting global depression of the mid-21st century?  The New Dealers who started the entitlement wave?  The Great Society of Lyndon Johnson that extended it (during the middle of a costly war, no less)?  The decision by George W. Bush to not only maintain his package of tax cuts but accelerate and broaden it in the aftermath of 9/11 (and in the middle of TWO costly wars, no less)?  The gutlessness of Barack Obama, who promised hard choices during his campaign and his initial speeches, only to cut nothing of substance and indeed, moved for a massive new health entitlement that vastly increased the size of government (in the middle of two costly CONTINUING wars and the worst financial crisis since the Great Depression, ironically, a crisis caused by excessive living beyond means)?

All of the above, probably…but as President Obama and congressional Democrats continue to pay lip service to but substantially ignore the shameful multiyear projections of near double-digit unemployment and massive deficits of a level not seen since World War II, while pushing on a very risky health care entitlement opposed by solid majorities of Americans in virtually every poll, you can bet that the current crop of pols will bear a substantial part of the historical jeering. 

Doomsday tea-party talk?  Nope, credit analysis:

The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

That sobering assessment, issued Monday by Moody’s Investors Service, provided a reminder that even Aaa-rated United States Treasury bonds, supposedly the safest of safe investments, could be downgraded one day if Washington failed to manage the federal debt.

Moody’s said the United States and other major Western nations, particularly Britain, have moved “substantially” closer to losing their gilt-edged ratings. The ratings are “stable,” but “their ‘distance-to-downgrade’ has in all cases substantially diminished,” the credit ratings agency said.

A downgrade would affect more than American pride. The bigger risk would be to the country’s ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.

A credit rating lets lenders and investors know how likely it is that a borrower can pay back a loan. A sterling rating means there is little for lenders to worry about. A lower one typically results in bond investors demanding higher interest rates on debt.

Those higher rates, in turn, add to the country’s overall debt burden and can force the government to reduce spending, increase taxes or both. That difficulty has been well-illustrated recently in Greece and Portugal, with strikes and protests as citizens march in the streets to oppose tough austerity measures that directly reduce entitlements and state benefits.

“Growth alone will not resolve an increasingly complicated debt equation,” Moody’s said. “Preserving debt affordability” — the ratio of interest payments to government revenue — “at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.”

…The administration of President Obama estimates that the United States deficit will rise to 10.6 percent of gross domestic product in the current fiscal year, the highest since 1946, and federal debt will reach 64 percent of gross domestic product. Government expenditures are expected to rise to a postwar high of 25.4 percent of G.D.P.

I have been consistent in my opposition to offering anything close to universal health care for a very explainable reason:  we cannot afford it.  I don’t believe that future  Congresses will have anything approaching the political will to make the necessary cuts in Medicare that would result in the lion’s share of the plan’s reported “deficit reduction”.  I believe the opposite:  a giant, incredibly expensive new entitlement is being born at the exact moment the nation can least afford it.

This nation is broke.  Let’s acknowledge George W. Bush had a big part to play in that – but let’s also acknowledge that the Obama administration is fooling no one in continuing to blame it all on Bush.  It is Obama’s deficit now – and he could choose to make those hard decisions he promised us, or he could choose to play to the base.  It’s obvious what choice he made.  History will not look kindly on his failure of leadership in addressing the deficit – the biggest problem currently facing the nation by a whisker, barely trailed by the dismal employment outlook.  Universal health care, at this current moment in time, is not even in the top five – maybe not the top ten. 

Unfortunately, while the historical judgment will rest on Bush and Obama and the other politicians, it’s we the people that will have to grow used to living in a country where the future no longer looks brighter.  America’s politicians, over many generations and from both parties, have failed us.  I say again, we are broke – we have been for some time…and while the Krugmans of the world continue to insist we can spend our way out of the hole through some sort of Keynesian miracle, most of us know better.   The answer to debt is never more debt.  It is less spending.  This is fundamental.  This is an easy lesson.  Alas, it is beyond the mental capacity of our leadership…

2 comments to The Slow March To Ruin

  • Fargus

    Health care is not in the top 5 or maybe even top 10? I don’t think you really believe that, Mark. Honest people can certainly debate whether the way it’s being done is the best way to do it, but what they can’t debate is whether the ballooning cost of health care is one of the major drivers of increasing debt and deficits. You might say that the bill on the table doesn’t do enough to bend the cost curve, and I’d say you’re probably right, though a lot of the primary efforts to do so were lied about and demagogued about by the most dishonest reaches of the party which you call home, to the point where the public seems to generally not like this bill, but they seem to individually like everything in it a lot more, because they’ve been lied to about the contents of the bill itself.

  • Okay, maybe I overstated health care not being in the top five or top ten, I’ll back off a little from that. But I do believe it definitely takes a back seat – WAY back – to getting people to work and getting the deficit under control at THIS particular moment in time…

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