Sunday, October 20

I Need Someone to Explain to Me, How We're Not All Screwed

Imagine that for whatever reason, the Democrats decided that paying off the national debt was in their best interest, and suddenly, virtually everyone in our federal government was in favor of of doing whatever it took to do so.  What then?

Well, they would still have to avoid, causing the people on government assistance to riot.  Look at how they acted last week, during a computer glitch that only lasted a few hours.  The largest portion of federal government expenditures goes to wealth transfer payments, so it’s going to be hard to quickly make any progress there, but as you can see from the chart below, these things would need to be cut if we were going to solve our debt crisis by cutting back on government expenditures.

Even the most liberal politicians, do not endorse eliminating the military entirely, and discretionary spending does not make up a large enough piece of the pie to make any real difference.  

To make matters worse, the yellow slice of that pie is threatening to grow much larger, without (much reported) warning, and despite any efforts of our government may take to prevent it.  The federal reserve has been keeping interest rates artificially low, but they will not be able to do so forever.  Eventually interest rates will skyrocket.  Imagine if that yellow slice was two to three times as big as it is.  We’d all be screwed.

There is one way out of this.  We have been in a similar situation before, after WWII, but we got out of it with robust economic growth that lasted for decades.  That is unlikely to happen this time around.  After WWII, much of the rest of the world’s manufacturing capability was destroyed, it anyone needed anything, they came to us.  Today we are but one of many industrialized nations, and more often than not, we are not the lowest cost producer.  On top of that, we have done nothing (effective) to spur economic growth, like increasing domestic energy production, reducing regulations, or reducing corporate taxes.

So even if Democrats were on our side concerning reducing the national debt, it is unlikely that we will avoid an economic catastrophe.  It would take them abandoning all of their principles and constituents, and even then, it is unlikely that we could react in time to stave off the avalanche.

Do you think that I am fundamentally wrong about anything I have said here?  If I am not, then I think it’s time to consider shifting our focus from trying to avoid the coming collapse by political means, to trying to survive once it happens.

Maybe I'm just dumb. I hope so. If that's the case, I want someone smarter than me to explain how we get out of this. If I'm not dumb (or crazy)...

How soon should we hit this thing?

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