Fiscal Free Falling with Paul Krugman
On the night before Christmas, Paul Krugman sent a present to all the high spending elves of Congress: When Prophecy Fails. Dr. Krugman would have us believe that those who oppose unrestrained deficit spending are unhinged “cultists.” He make this charge on the curious basis that the economy has not crashed as a result of unfettered federal deficits and mountainous federal debt (at least, not yet).
For sheer entertainment value, you just have to love Paul Krugman. Fiscally, he is the guy who jumps off the 100 story building in defiance of the “prophets of fiscal doom.” As he passes each floor on the way down, Krugman defiantly shouts, “So far, so good!” Perhaps the good professor doesn’t understand it’s not the fall that kills you; it’s the sudden stop at the bottom. Free fall federal deficit spending doesn’t matter until it does. And then it’s too late.
Back in the sixties and early seventies my parents smoked like chimneys. My brother and I were serious competitive swimmers, and the combination of swimming and smoking led to familial discord. Before we were old enough to drive, Mom did the schlepping of young swimmers to and from swim practice. The ride to practice was no problem, but the return trip was another matter. Our lungs, raw and aching from exertion and chlorine, were in no shape for exposure to cigarette smoke within the confines of a car. Mom’s habit caused us active physical discomfort. And so, in the finest tradition of the Varmint Cong, my brother and I took it upon ourselves to convince our parents to quit. After a long, grueling guerrilla campaign of theft, sabotage, and general mayhem, we achieved our goal: Mom and Dad kicked the habit.
For Dad the cure was permanent, but Mom resumed limited smoking when my brother and I left home. At first she was surreptitious about it, a cigarette here or there away from the house. Eventually though, Mom resumed fairly regular, light smoking – two to four cigarettes a day, always outside of the house. She insisted that her moderate habit would not affect her health, and so the self deception went. At least, so it went until she had a triple coronary bypass surgery. She’s doing OK now, but the object lesson in the extraordinarily unpleasant consequences of a really unhealthy habit have convinced her to quit for good.
We all know that deficit spending is a bad thing – for an individual, a family, or a nation. We all know that quantitative easing, i.e. printing dollars until the printing presses smoke, serves only to mask the symptoms of our unhealthy federal spending habit. We all know that sooner or later our federal spending habit is likely to end in the fiscal equivalent of a heart attack. And we all know, if we but choose to face the truth, that a guy like Krugman is the worst sort of enabler. He feeds our propensity for self deception, and if we let him, Krugman (and Obama, Geithner and Bernanke) will lead us merrily down the road to national financial ruin.
As I write this the national debt stands at $16,308,552,900,000 and counting (and by the time you click on the link it will be significantly higher). To put things into perspective, one trillion seconds is ~31,710 years. If dollars are seconds, our debt amounts to more than half a million years. 500,000 years ago the planet was in an inter-glacial period, as now, with four ice ages to go to the rise of modern humans. Our Homo erectus ancestors had mastered fire, but the Acheulean hand-axe remained the sin qua non of human technology.
Our $16+ trillion national debt amounts to ~$52,000 for each man, woman and child in the country. Or ~$143,000 per household. Or, if we apply the infamous Romney 47% rule, ~$270,000 per tax paying household. But don’t worry about those numbers. Just repeat after Paul Krugman:
So far, so good.
P.S. – Yesterday, the Houston Chronicle reported that the current debt limit of ~$16.4 trillion would be reached by New Year’s Day: U.S. Treasury to Take Steps to Avoid Borrowing Limit. This will certainly add a little spice to fiscal cliff negotiations, but the ugly truth is this: Even if we go over the fiscal cliff, the national debt will continue to rise (albeit at a reduced pace). Going over the fiscal cliff does not end the spending madness; it just tones it down a bit.