America’s Coming Fiscal Hangover (Regardless of Who Wins)

Here’s a question I never hear asked of Obama and his supporters — or Romney either, for that matter.

“Do you think the $16 trillion dollar debt is a problem? And if so, what do you plan to do about it?”

In principle, Romney has made it clear he agrees it’s a problem. But he hasn’t been specific at all regarding what he intends to do about it.

Obama has answered this question by implication. His answer, based on what he’s proposing for the future is: More of the same. More of the same means continuing to increase domestic and welfare state spending, continuing to reduce defense spending, and doing everything possible to raise taxes everywhere.

Raising taxes will not reduce the debt or the deficit. It will motivate “evil rich people” (who make $200,000 a year or more) to find ways to divert their income. Or, it will lead them to pay fewer employees, harming economic growth even more — thereby raising the debt and deficit more. Or, it will lead them to spend less on luxury items that most of the country resents them for having — thereby reducing economic activity and raising the debt even more.

No matter how you look at it, both the debt and deficit are doomed to keep rising under Obama’s polices. This is true if Obama is returned to office with a Republican House of Representatives that will curb the spending and tax increases a bit, perhaps; and it will be even truer if Obama is returned to office with a fully Democratic Congress (or gets one in another two years).

The inescapable fact is: More spending and more taxing leads to more debt, and less economic activity — which in turn leads to more debt. It’s a self-destructive, self-reinforcing cycle no different than that of an alcoholic, a gambling or a crack cocaine addict.

In the abstract, Mitt Romney probably agrees with this. But it remains to be seen, if he wins, how he will reverse course on the debt. Many conservatives have pointed out that Mitt Romney is no Ronald Reagan. In other words, Mitt Romney may not be serious about cutting taxes and reducing the rate of increases in spending, as Reagan did. But cutting taxes and reducing the rate of increases in spending will not be enough. When Reagan came to office 30 years ago, I remember him complaining about how the national debt was about to reach $1 trillion, and trying to explain in concrete terms how much money that was. Today’s national debt is way, way beyond that — and will continue to increase at exponential rates just based on obligations for Medicare and Social Security alone.

Most Americans don’t grasp what the implications of a continuing debt really mean, for them. They assume it’s not a good thing –but what the heck, the government checks keep on coming, so it can’t be all that bad.

Psychologically, to fear something or to be upset about it requires some kind of concrete understanding of what this danger actually means — including to oneself. This is something that neither candidate seems able or willing to explain.

Obama outright evades it and counts on his supporters to do the same. Romney acknowledges it’s a problem, but that’s frankly easy to do when you’re not the one in office.

What specifically does Romney plan to do about the problem, once in office? We won’t know until Romney is there, assuming he gets there. He won’t be “doing something about it” alone, of course, because he will be counting on a certainly half-Democratic and half-hostile Congress to help him.

Right now, the psychology of the national debt, for most people, probably works this way:

“The debt is surely not a good thing. It makes us more dependent on China, somehow, and that can’t be a good thing. However, the debt has been going up and we still have a military. Social Security and Medicare checks are still coming. The government hasn’t collapsed. It can’t be that bad a thing.”

This is why the Tea Party stalled. The Tea Party was a vocal movement in favor of confronting the debt, including all the spending that makes it possible, in the last election cycle. But there are only so many people who sympathize with the Tea Party, and more importantly there are only so many who are willing to really try and wrap their minds around the fact that the debt is something that can be a real danger — including to them personally.

It’s up to economics, not psychology, to explain the likely or certain consequences of continuing on our current debt-producing course. Unfortunately, the economists who work in the government — at least, the most prominent and powerful ones like Federal Reserve Chief Ben Bernanke and Treasury Secretary Tim Geithner — are focused exclusively on the “micro” issues. It’s not that they’re trying to get Obama reelected so much as they’re just trying to manipulate the currency and the overall economy to get it through the next month. Critics of Congress and Obama rightly complain that they simply keep “kicking the can down the road,” but so are the people who have more power over how the fundamentals of the economy (banking, currency) actually run.

It shouldn’t be necessary for a majority of people to have a technical grasp of economics to accept that this spending and debt — escalated by Obama, although not created by him — is unsustainable. It’s kind of like running up a credit card bill beyond your ability not only to pay the debt, but even to pay the interest.

That’s where America now is.

Imagine if such a fiscally negligent person were to say, “Oh, well, things are still moving along OK. I have a roof over my head and nothing disastrous has happened. It can’t be that bad.” You wouldn’t need a degree in psychology or expertise in addiction to conclude, “This person is in denial. He’s got a big problem.”

And yet, most Americans seem unable and unwilling to do that about our own national credit card, a much more serious problem than the bankruptcy of any one person. That’s why we have President Obama, and that’s why he might be reelected. And, even if he’s not, that’s why we still have a very, very big problem on our hands that no election is going to erase.


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