Drive Home

Dear Reader,

As I was driving home I was listening to Terri Gross on the NPR show Fresh Air. Today (April 15,2009) Terri was interviewing an MIT Economics professor and former head economist of the IMF.

He said that US national debt as a percentage of GDP would go from 30% today, (18-25% has been the norm from 1960 to 2007), to 80-90% as a percentage of GDP when this economic crisis is over. That means the national debt, in I suppose four years, ( I hope they don’t expect this crisis to last longer than that!), will be 80 to 90% of every dollar earned. That doesn’t include what the government will cost to run! OH MY GOD! The thing that blows my mind is the calmness and offhanded way he said it.

This guy is from the Keynesian school of Economics. He is firmly in the same philosophical corner as the Obama administration. He said “ I am on the side of the government.“ That makes me believe that the administration is aware of these numbers and they are comfortable with this level of national debt.

What the hell are we to do in five years when national debt is 80-90% of GDP? We have another two lumps going through the system. The social security lump, and the Medicare/Medicaid lump. They are expected to balloon the national debt in ten to thirty years. We are getting close to the transition time when the income to the Social Security administration will be outstripped by the cost. At that time either FICA taxes go up or the money must come from the “lock box.” The “Lock Box” that is full of IOUs. The money has to come from somewhere and the only font is the taxpayer. Taxes must necessarily go up. (For the social security and Medicare/Medicaid lumps).

President Obama claimed that all economist of every school are behind him in government spending. I beg to differ. The term all ‘is not subject to gradation’ therefore as he cannot know the minds of every economist the statement cannot logically stand. I would also like to point out that science is not a democratic enterprise, (as many would have us believe with terms like “consensus” and such). The “ consensus of scientists in Galileo’s day was that the sun revolved around the Earth. But that didn’t make it true…

I was also amazed that he was arguing that Goldman Sachs paying off it’s TARP money early is a bad thing. Ten billion dollars, that is how much Goldman Sachs is coughing up. The only reason , according to this economist, is to be able to pay their executives better. I don’t disagree that this is probably a factor. But, It would be stupid to stop there and not think further. I would expect the heavy hand of government is also a factor, (among others). The Obama administration has all but nationalized the banking system; With Goldman Sachs trying to get out of it’s Faustian bargain with the government. The government is rightfully worried that others will do the same. Leading to the un nationalizing of the banking system. The Elite might loose some of their hard earned power…

But now we are projected to have 80-90% of GDP as debt!? In only four years?! Now is the time to stop this insanity! At the height of WWII costs, 1948, national debt as a percent of GDP was 110%. That is after the US fought the second world war. We produced millions of planes, tanks, howitzers, guns, ammunition, clothed millions of soldiers around the world provided trucks and armaments of free via Archangel to Russia, lost half a million men, etc… For that national debt. Much of what was produced from the war was later used for industrial purposes. But the money spent today is going down a rabbit hole. The beneficiaries are the corrupt Elite. Especially those in bed with the government…

Well at least our Great Great Great Great Grand children will have our foolishness to look back on. They will say, “What idiots! To think they could spend their way out of debt…”