Wednesday, March 21, 2012

Obama Doesn't Care About Debt

Should we worry about the debt and the deficit?  Everyone says they do, politicians especially.  But nobody does anything about it.

Except now.  Except for Rep. Paul Ryan and his second House budget.  The first one is here, and the second one is here.  The White House doesn't like Ryan's budget.
The House budget once again fails the test of balance, fairness, and shared responsibility. It would shower the wealthiest few Americans with an average tax cut of at least $150,000, while preserving taxpayer giveaways to oil companies and breaks for Wall Street hedge fund managers.
What Democrats care about is their programs.  Writes David Harsanyi:
Democrats are willing to move heaven and earth for the things they do care about. They were prepared to whip up political turmoil and put the presidency and Congress on the line to pass Obamacare. Yet they won't risk offering a budget, lest anyone glimpse their priorities.
Some of the things that Democrats care about are patronage/clientage things, like the great social programs that dish out benefits to ordinary voters and dish out a little on the side to the poor.  Other things are elite things, like green energy and the environment and abortion, which are issues that the educated class cares about.

But debt and deficits? Not so much.  Because for Democrats the programs are the thing.  They figure that, one way or another, their programs will survive in the rough and tumble of partisan politics.

Unfortunately, in the long term, the one sure thing about governments is default. The point about debt and deficits is that, when you get to the Grecian formula, where the government cannot issue debt except upon ruinous terms, and the next step is sovereign debt default, then ordinary people are going to suffer.

Why?  Because when you Go Greek two things happen that are bad for ordinary people.

First of all, the government defaults on its debt and devalues the value of money and ordinary people are usually invested in government debt through their savings and their pension funds.  So ordinary people get screwed out of their savings.

The other thing is that government expenditures get cut.  When you look at where the money goes, and the place to look for that is,  you see that most of it goes to ordinary people for ordinary Social Security, ordinary Medicare, ordinary Education, and then some stuff for Welfare.  Out of $6 trillion a year in spending, you get about one trillion each for Pensions, Healthcare, Education and Defense, plus (once we get out of the Great Recession) $0.5 trillion for Welfare.  So that is $4.5 trillion out of the $6 trillion.  And that is before interest on the national debt.

Politicians and the educated class don't need to worry too much about deficits and debt and default.  They have skills and assets and connections.  They will probably come out of it OK.  But ordinary people will get screwed.

Back when the Soviet Union collapsed, I asked a Pole about conditions in the old Communist block.  He said that it really hit old people the worst.  They ended up "eating the paint off the walls."  There is no reason to expect that things will be any different when our government runs out of other peoples' money.

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