I’ve been known to hit the snooze button on occasion. My long-suffering editor can attest to that.
Just ten more minutes, then I’ll…
Imagine if each press of the snooze button made the next BEEP-BEEP-BEEP happen a little bit sooner than the last.
Eventually, you wouldn’t be able to sleep at all. Time to either wake up or smash the alarm clock.
America has been hitting the fiscal snooze button for the last 30 years. The alarm is getting shriller these days, and it beeps more often than it used to.
So, what’s the plan?
In essence: smash that stupid alarm clock to bits and worry about consequences later.
Social Security, and pensions, and Medicare, oh shit my!
In 2011, Social Security will pay out $130 billion more in benefits than it collects in revenue.
The program’s deficit this year would have been a paltry $45b, if not for Obama’s one-year deal lowering SS payroll deductions from 6.2% to 4.2%…
The CBO admits the system will be completely drained by 2037. But even their own analysts don’t buy that, as reported by the Christian Science Monitor.
By the way, did America really enact a tax break that lasts one year?
Yes, we did.
The social security payroll tax cut is a 12-month deal — for now. Short-sightedness is at all-time highs in D.C.
Now don’t get me wrong; I would much rather throw away 4.2% percent of my income, given the alternative of 6.2%. But why, exactly, are we cutting funding to Social Security when the program is already running on fumes?
Can’t say for sure, but I suspect they are attempting to cushion a blow that’s set to fall.
Yes, we did raise the retirement age to 82. But you got a tax cut, baby!
Medicare finds itself in a similar predicament, having burnt through surpluses which were supposed to pay for increased cost in the future.
Pensions are woefully underfunded, as evidenced yesterday when New York State seized control of Nassau County’s finances.
Time to face facts. Get on with the belt-tightening already! It must happen, one way or the other.
It’s not the end of the world; far from it. It is simply economic reality.
All this political bickering over budgets is nauseating to watch, but the fact that it’s happening is a very good sign.
Oh-so slowly, the world is starting to accept that the status quo is untenable…
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Ticking faster
In the golden age of kick-the-can economics, Feds were able to stave off the next crisis for a decade or more. But they’re not going to pull it off this time.
Their actions have become increasingly desperate. The Federal Reserve is actively monetizing Federal debt.
Not everyone understands the significance of this fact. Hell, just a year ago, Bernanke stated flatly, “We will not monetize the Federal debt.”
If history is any guide, this marks a turning point. Once the printing presses get fired up, it is very difficult to pull the plug.
Call it what you will: quantitative easing, credit creation, whatever.
It is printing money, and will have consequences — some of which we’re beginning to see play out now.
TANSTAAFL
There ain’t no such thing as a free lunch, as Robert Heinlein once wrote.
The buffet America has been gorging on for 30 years wasn’t free, of course. It was highly-subsidized with debt, loose money, and various accounting frauds.
This time, those re-flation efforts are doomed to fail.
When they do, it will be a great day for Main Street… even if it doesn’t seem so at the time.
For Wall Street? The opposite of great.
But the rest of us will finally be allowed to get our collective house in order, and back on a path to sustainable growth.
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-Adam
