How Broke(n) Are We?

Some people worry about the threats to our nation posed by ISIS, China, or Russia; I worry about just what in the heck our elected officials are up to. Stuck between the sad tales of living in the Illinois limbo land of no bucks and that of our Washington legislators offering up a federal budget deal that piles another $474 billion onto our nearly $19 trillion of national debt, I believe that I can reasonably wonder whether those in charge have the very least clue that a fiscal disaster unparalleled in human history is now upon us.

What is also worrisome is that so many of our elected officials are apparently still gulping the Keynesian Kool-Aid when it comes to the canard that dumping truckloads of borrowed dollars into the economy will prompt growth. Let us be plan: forty years of deficit spending has taught us that it enriches a handful of insiders and leaves the rest of us with a nice fat bill to be paid. A jolt of deficit dollars is like banging down an entire bottle of rum—today’s hooting hilarity is tomorrow’s horrific hangover.

Of course, my old-fashioned sense of right and wrong may be leading me completely astray when it comes to our nation’s dire financial condition. Moreover, I may be completely incorrect regarding the intentions of our elected officials. Perhaps it is simply the case that our debts now so enormous that, like a massive snowball rolling downhill, they are going to engulf us no matter what we do—and those in charge know this to be true. Perhaps, if you are about to go under financially, a last minute spending spree makes perfect sense. After all, resolving to sober up after your liver is shot makes no absolutely sense if you are a career alcoholic; by the same token, deciding to max out your credit cards and have a stupendous party when your debts are crushing you may, in fact, make a certain amount of utterly perverse sense that one has to squint just a bit to fully appreciate.

Therefore, maybe the question we should now be asking is this: What is our nation going to look like the day after the money runs out? It could be that it will all work out reasonably well because the books will be wiped clean and a harmonious national “do-over” of fiscal renewal will ensue. However, it also may be the case that those with the most beans, bullets, and bottled water will be the ones who survive. All I can guarantee is that public and private pension funds, who are among the largest holders of municipal, state, and federal debt instruments, will start dropping like ripe apples from a tall tree. The unfortunate truth is that debt—and the promise to repay it—is by design someone else’s asset; if Puerto Rico’s current efforts to default on a large portion of their unsustainable debts are successful, expect a stampede for the courthouses of America as lawyers for both sides of the debtor/creditor equation go to war.

It bears repeating that a major contributing factor in the collapse of virtually every “invincible” nation-state in history has been as constant as the hubris and short-sightedness of those who allowed it: unsustainable public sector debt. We could take some comfort from the sad fact that many nations today are even worse off than ours, but this should perhaps instead be a source of keen concern. Nations hobbled by debt tend to withdraw from international commerce, and we are already seeing a stunning collapse in trade and shipping that may foreshadow a global slowdown that will engulf us all. When this occurs, expect an outcry for yet more poisonous stimulus that will create no long-term prosperity but will hobble our nation’s future with yet more crushing debts. As Winston Churchill once famously observed, “The definition of insanity is doing the same thing over and over again and expecting different results.” How very true this is.

Given the circumstances in which we now find ourselves, perhaps the only sane response to this catastrophe is, odd as it may be, to engage in one last, insane orgy of borrowing and spending before the wheels of the global economy fall off completely and leave behind a dazed world of debtors.

Who knows?  Perhaps our nation’s leaders are actually smarter than they seem in this regard. Party on, Wayne! Party on, Garth!

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