If you don’t buy a toaster by January 17, you will die.
Sounds stupid, doesn’t it? Yet it is no more ridiculous threat than the equally fictitious “fiscal cliff.” The daily chatter of ‘news’ outlets, talk shows and the water cooler is lemming lunacy. The cliff is not the problem. It’s the Lemmings who are running.
As I told you in U.S. Economy 101 (in Plain English, with Humor!): How the GOP and the Media Are Shucking You, as we headed towards the first dash towards the “fiscal cliff,” the United States has gross domestic product (GDP) bigger than China and Japan combined. We are the biggest economic power in the world. $15.1T GDP as of 2011.
What makes our debt good? Because we say it is.
Yep. That’s it.
World economics are a confidence game. The image painted by Tea Party of the U.S., England, Spain and Greece sitting around the kitchen table using Quicken to balance their checkbook and track their savings account is not how the world works.
Once we were a country pegged to the gold standard. Today, we’re a GDP-standard. Our currency, and our debt, are loosely pegged to what we produce in total output. We’re good for it because we make enough of it every year.
So we have a $15.1T GDP and a $14.9T total debt that equals about a year of that GDP. That’s a HUGE problem, right?
Not really. If the government were a business, that would be about an average debt-to-equity ratio. By contrast, most major banks, who have far more ephemeral assets that are juggled like a Cirque du Soleil act are more leveraged than the U.S. government. [2] Debt of 200-400% over equity in banking is not uncommon. Even at these high levels, the U.S. government is more solvent than a lot of Fortune 1000 companies.
After the fourth Great Depression in the United States and the end of WWII, federal debt including that debt purchased by the Social Security Trust Fund, was nearly 122 percent of gross domestic product. States and municipalities had little debt. [3].
Could our debt be lower? Sure. Reagan and the Bushes spent like drunken Shriners in Vegas on their watches. The Republican Congress of the Bush years added insult to injury when it handed out tax breaks and deregulation during two very costly wars until their no-tax-and-spend policy rotted Uncle Sam’s fiscal teeth. President Obama put billions more into preventing you reading this from a flat-screen in the doorway of your soup kitchen line.
Now we have to pay it off. In times where there were two sane political parties, this was a no-brainer. The old saying that you have to spend money to make money applies to fixing our fiscal imbalance. Stimulate the economy to get it moving in high gear, and the overall prosperity raises revenues that pay down debt to more modest levels. Ike did it. Reagan did it. Clinton did it. As long as you have a tax base that can draw revenue from that prosperity, the government can pay down its debt.
“What about waste?!” I will hear the Fox-fed decry as they harumph over food stamps and welfare loafers.
The government has been cut and slashed for decades. While you can always find an egregious example of waste here and there, federal government agencies are a lot leaner and meaner than the bloated bureaucracies of the 1970s and 1960s. Government payroll is well within the lower range of historical averages . Government employment was just 4.4M in 2010. By contrast, it averaged around 5.28M during the Reagan/Bush I years, and 4.2M during the W. years. The largest number of “lost” jobs in the U.S. economy over the last couple of years has been in the public, not the private sector.
After years of Frank Luntz and Roger Ailes and other Republican fear merchants peddling demon government, when you ask people specifically whether they want their rivers to burn, or have an EPA, they’re usually for the EPA. If you want nuclear waste dumped into your water supply, then you probably are for dismantling the Department of Energy (DOE). The fact is that we’ve become attached to bridges, roads, tunnels, schools, efficient air travel, clean water and even someone watching Wall Street to hopefully keep us safe from their piratical Bainbeards.
Why all the hullabaloo about debt ceilings and fiscal cliffs?
The children of the United States Congress play games, in part to amuse themselves and keep Fox and MSNBC in program topics, in part to dare themselves to be slightly less incompetent than usual.
The Congress created an artificial “debt ceiling.” It was supposed to be a number to remind them that they need to do more to keep revenue and spending in balance. It’s more financial Maginot Line than fiscal cliff though. Routinely Congresses run by both parties have lifted the “ceiling” when spending and tax cuts forced its rise. They’ve lowered it when they have been able to achieve meaningful reductions, as they did in the Clinton era.
The 2010 Teahadis dragged the Republican Party into a shameless stunt. Boxed in by their pledge of allegiance, not to the United States government, but to Grover Norquist, and trying like hell to find a way to scapegoat someone after their freewheeling spending and drunken tax gimmies to the rich, they went to the bullpen: The Tinhorn Alley team of Luntz and Ailes, served up a catchy phrase which they hoped would scare America’s conservative lemmings into voting for them in 2012: The fiscal cliff.
Fiscal cliff: A dynamic duo of magnificent mots that conjure up faux financial disaster bigger than the real one they created in 2008.
This cliff is an epic dilemma which, of course, only Republicans can solve by slashing evil government, even though most Americans told them in their 2012 election defeats that they’re kind of sweet on Uncle Sam and Aunt Liberty.
The truth is much more humble: It was the Tea Party holding the debt ceiling hostage that artificially created a problem where usually there is none. The allegedly fiscally-responsible Republicans brought our invincible credit rating down for the first time in its history. Not for any real cause other than their political theatrics and histrionics undermined credit rating agency confidence in: “Because we say it is.”
It remains the complete unwillingness of the Teahadis to speak to the revenue side of a belt-tightening that has been the major sticking point because the richest 1% of Americans will have to go back to paying 3% more on their taxes, even though most use loopholes to pay far less tax per capita than their employees.
While there should never be racial or gender litmus tests for admission to elected office in the United States Government, I’m starting to like the idea of an IQ test. We trust our $15.1T economy to a pack of cretins who believe in fairies and elves quicker than science or economics.
National and global economics are a confidence game. The solution to our fiscal woes, as it has always been is growth. American corporations, fired employees that were obsoleted by computers anyway. They were dumped like racks of last year’s sweaters at the Salvation Army. Now these companies are enjoying record, if not historic profits. They don’t want a lot of those workers back.
That means that we have to create new industry, via the web, new technologies that can be built here, and other new kinds of jobs that don’t rely on workplaces that will never “upsize” again.
You want to fix the economy? Start with a smart Congress. We got rid of the Village-Idiot-in-Chief in 2008, but Capitol Hill is loaded with malleable mental midgets, terrific turnipheads installed by the Club for Growth and the Dead Billionaires Club to rubber-stamp the wealthy’s wishes.
We have nearly a score of smart able women arriving in the freshman class. In 2014 we need more. We also need a new litmus test, a return to a fundamental leadership requirement for American government. No, it’s not abortion, not “family values,” nor even whether your pro or anti-Obamacare.
We need more people of science and business and humanity who can apply reason, not hyperbole and hysteria, or some doofus’ dogma to politics and policy. We need leaders with a brain in their freakin’ noggins, people.
The search for the replacements to the Teahadi toddlers and their tantrums should start now, today, in your community. Better yet, if you read this RUN. America needs common sense again. Thankless job that it is, being part of government can be being part of the solution. Don’t leave our economy in the capable hands of the incapable.
My shiny two.
