Sunday, April 10, 2011

Don't Worry, Be Happy: Deck Chairs Rearranged!

Americans have been treated—those of us who pay attention, anyway—to the spectacle of our national political leadership congratulating each other because they managed to prevent a stoppage of taxpayer dollars flowing to government operations on Friday night.  (The Recovering Bureaucrat refuses to accede to the Mainstream Media calling what didn’t happen a “shut down,” since so much of what the government does would have continued in spite of the political impasse.)  This mutual self back-slapping even included a visit by President Obama to the Lincoln Memorial to brag to tourists that “because Congress was able to settle its differences, that’s why this place is open today.”

But in a blog posting with the appropriate headline “Pathetic,” Roger Kimball says it all:
The president, right on cue, was out there beaming, praising himself: “Americans of different beliefs came together. . . .”  Thanks to me, B. Obama, we just worked out the “biggest annual spending cut in history.”

How big? $38.5 billion trimmed out of government operations through September. $38.5 billion out of—remind me, what’s the total budget? In 2010, U.S. federal spending was about $3.5 trillion.
So, as a percentage, the Congress trimmed 1.1% off that total spending number—a budget for the current fiscal year, by the way, that Congress has actually not passed yet.  The majority party, on its way to minority status in the House last fall, consciously decided for the first time in American history to renege on its responsibility to pass a budget.

To put the “drama” into another perspective: in the week leading up to the budget compromise, the federal debt increased by another $54.1 billion, according to a post on the web site of the Annenberg School at USC.  So what we have is a “deal” that nicked a decent fraction off our weekly debt bill.  One week out of fifty-two.

This is all occurring while the government of Portugal was giving up on the idea of cutting its budget enough to live within its means, and formally seeking a bailout from the European Union.  These two events must make serious citizens wonder if we have the courage to do the truly hard work ahead.

As if to underscore the magnitude of the coming task, former OMB Director David Stockman has been taking to the air blasting the Republicans for their unwillingness to raise taxes, so drastic does he believe the current debt crisis to be.  And although the RB remembers Mr. Stockman mostly for his churlish and whiny memoir blasting former President Reagan for being unwilling to cut the budget in his first term in office, he does not want to run the risk that this latter-day Cassandra might not have a point that we all must heed.  Are we, as he says, entering a “solvency crisis” which will lead to a lead to “a bond market conflagration—that's when the yield really soars, that's when the sell off really begins to happen, and that's when Congress and the White House finally wake up”?

Mr. Stockman is not alone in his stridency about the potential for the global financial markets to melt down again.  Economist Nouriel Roubini has expressed concerns about a double-dip recession for some time now, and has been worrying about the municipal bond market.  That’s why the Portugal and Eurozone situations have such a potential to harm the already anemic recovery in the U. S.

Since the current global crisis is unprecedented in its scope and nature, it is extremely difficult for us humans to think about it with the courage, depth, and audacity necessary.  It is easier to swat at the flies buzzing around the budget elephant than to put it on a strict and drastic diet.

Yet, given the enormity of what we collectively owe, and at a time when economic growth remains fragile, what choice do we have?

No one remembers definitively what the band was playing when the Titanic sank, but today’s Capitol orchestra must be playing “Don’t Worry, Be Happy.”  When will we start demanding that our leadership stop rearranging the deck chairs and get down to the business of turning our ship around?

1 comment:

  1. Maybe the reluctance to seriously tackle the government bubble comes from a difference of public opinion (however well-informed or uninformed?) of the angle from which we should be doing the tackling.

    Certain wings of our political class siphon their fuel from a "tax the rich" class warfare and victimization rhetoric, making the case that our debts exist simply because the rich are exploiting their influence on political processes to hoard cash (whether through low tax rates or tax loopholes or other policies considered retroactive "spending" in progressives' eyes).

    No matter how bad the public debt becomes, these politicians can always win elections by pointing the distressed public's attention in the direction of largely imaginary wealthy villains. This distraction allows the struggling taxpayers to believe they are entitled to the same (or higher) level of services without having to contribute any more in taxes than they already do.

    And this distraction allows the politicians and their electors to continue avoiding the uncomfortable choices required to reconcile scarce resources with lofty expectations.

    I think the Great Distraction has been hugely successful in forestalling the courage needed to make the painful decisions we must make as society.