A History Lesson About Debt And Deficits

If the United States were the first country in history to experience the crisis that debt and deficits are about to bring down on us, government officials might have some excuse for what they've done.

One of the most exasperating characteristics of our problem, however, is that our so-called leaders started us down this road knowing exactly where it would lead. Or, if they didn't know where they were taking us, they should have known, because the historical precedents are legion. Sooner or later, every country that has spent beyond its means has collided with disaster. The crash that we are about to experience has been experienced many times before. 

Why, for instance, did Rome fall?

Three successive emperors, Caligula,Claudius and Nero, all emptied their treasuries to pay for lavish ceremonial feasts, luxurious villas, elaborate temples, no show servants and bribes to the army and praetorian guard to ensure their loyalty. When they ran out of cash, these arrogant rulers raised taxes, seized the assets of wealth citizens, or expanded the money supply by re-minting old coins using more base metal and less gold and silver.

What they got for their trouble was severe inflation. In one thirty-year period during the third century A.D., the price of wheat rose 100,000 %.! A loaf of bread that cost the equivalent of $2.00 at the start of the period cost $2.000 at the end. By the time Rome collapsed, high taxes had already destroyed Roman commerce. Cities and towns were reduced to ruin by lack of investment in their maintenance, the population was impoverished and dwindling, and riots and rebellion were commonplace.

Thirteen hundred years later, Spain, which had been one of the mightiest countries in Europe, began running huge deficits to pay for wars, a bloated civil service, and endemic corruption. By the end of the sixteenth century, revenues covered only half the state's spending. Sound Familiar? Repeated currency devaluations, growing inflation, and a murderous tax burden killed off Spanish industry and agriculture. Impoverished, Spain lost its global influence as its empire contracted to a fraction of former size.

America In Ruins

Some economists think that if the U.S. is very, very lucky it can fix its debt/deficit and suffer no more in the process than Great Britain has in the last thirty years. Great Britain's economy didn't so much crash as it did run aground. In 1976, the British government had to ask the IMF for help in servicing its debt, an acute embarrassment to the once mighty kingdom. In 1979, with inflation nearing 14%, British elected Margaret Thatcher to lighten ship. Her platform stressed fiscal conservatism, lower taxes, and a reduced public sector. Thatcher's unpleasant task was to remind Brits that though the public might make unlimited demands on the government for services, the government's resources were nonetheless finite.

If the United States has its own Margaret Thatcher, We haven't elected him or her to national office yet.

One thing is certain in these troubling times:  What we do now will determine what happens to us later, both as individuals and as a nation. Little time remains for us to act, and, even then, our actions must be decisive, bold and radical if they are to prove effective. Forestalling the demise of our country requires the commitment and participation of all of us, NOW!

WELCOME; America,The Newest Member To The Third World

Huge deficits and debt rob the government of any flexibility it might have had in controlling the domestic economy. Normally, when he United States suffers a recession, the government can spend more to help get things moving again. But, Not now. The government is already spending 40% more than it takes in, and adding to that deficit will hurt, not help the economy.

Monetary policy also gets derailed by debt and deficits. Government usually tries to keep interest rates low in order to promote investment and consumption and fuel economic growth, but continually financing our large deficits will require the government to keep interest rates high enough to attract the capital, especially foreign capital, that it needs to finance its debt and deficit.

In other words, the government has already lost its ability to use fiscal policy, government spending and taxation, to keep the U.S. economy on a more-or-less even keel, and it has diminished its capital to use monetary policy, control of the money supply for the same end. What's coming next is external control, that is, other nations telling us what we may and may not do, just as the IMF now gives developing nations their marching orders. We can cure our deficit, or the countries that hold our debt will take control of our economy and cure it for us whether we like their methods or not.

Foreign countries haven't yet pressured us as hard as they might to mend our ways, because we still play a powerful, if reduced, role on the world stage as protector of the free world. Moreover, some nations, though they may publicly state otherwise, wouldn't be unhappy if the America dream collapsed and they could step in as the new, dominant world power.

Nonetheless, our allies have been lecturing us about our deficits for more than eight years. Japan points to the U.S. deficits as the cause of their trade imbalance. When our debt reached such propertion that we no longer make the interest payments due,as it will in a few months, then the holder of our debt, probably a group of nations, will dictate terms of settlement to us. We'll be in the same situation as many African countries, Suedan, Somalia, on-and-on. As recipients of IMF and World Bank support, WE have no choice but to abide by strict limitations on its fiscal and monetary behavior.

We're almost in the same fucked-up situation as Greece; the deficit ties the government hands, and ours to. HELLO! It's difficult to cut spending because DEBT INTEREST IS A VERY BIG Part of it, Okay? And we got one hellofa problem with ENTITLEMENTS!! They’re just too damned hard to reduce, as we've seen. The need for revenues makes it impossible to control inflation and as soon as they raise taxes to lower the deficit, the prices go up, not your pay, and Obama wants to tax you more.

Throughout history, the world's greatest powers, And Super-powers have been exporters of capital, as those nations became debtors, they lost their ability to influence world affairs to their on advantage. That, America, is what we're watching, it’s not a TV show played for your entertainment, you're about to start marching to that beat. I'd love for a "Liberal to defend Obama's reason for handing the rest of our financial future, and our children, grand-children, possibly our great-grandchildren future over to say China, Saudi Arabia, it's nolonger out of the scope of possibility, so while you're learning all about Sharia law and Chinese style labor colonies, hopefully you'll think back and remember, I voted for this.

What that debt deal didn't do





Mohamed El-Erian, head of Pimco 

  

In narrow economic terms, the debt deal is actually not a big deal, neither as good as its advocates claim nor as terrifying as its opponents fear. The actual cut to the 2012 budget, the only budget over which this Congress has control, is $21 billion out of total expenditures of $3.7 trillion—a pittance. Everything else can and will be changed by future Congresses. What the deal does is kick tough choices down the road, this time to a congressional super-commission that will have to come up with a larger plan to reduce debt. And it does nothing to spur growth, without which the debt will expand well above projections. That’s why the usually circumspect Mohamed El- Erian, head of Pimco, the world’s largest bond fund, grades the deal somewhere between an incomplete and a fail. Other than eliminating default risk emanating from a self-manufactured crisis, there is nothing good about America’s debt ceiling debacle.

The deal’s largest impact will be political, and there it has been a disaster. The manner in which it was produced added poison to an already toxic atmosphere in Washington, making compromise even more difficult. Democrats now feel they need to mirror the Tea Party’s tactics and are becoming unyielding on any cuts to entitlement programs like Medicare. Republicans, emboldened by the success of their bullying, have closed ranks more solidly around a no-tax agenda. But the only solution to America’s debt dilemma will need to involve both cuts to entitlement programs and higher tax revenues. Even if the besmirched ratings agencies don’t downgrade America, we’ve downgraded ourselves. The system did not work.

Evidence of a working system would have been the adoption of a grand bargain almost forged between President Obama and House Speaker John Boehner to reduce the budget deficit by almost $4 trillion over 10 years, a plan that might actually have been enforced, because both parties would have been invested in it, each having contributed to shaping it. The system would have worked if it had adopted some version of the Bowles-Simpson plan, which reduces the national debt by the same amount, with pain on both sides of the aisle, but in an even smarter way. This is how Congress used to work: grand bipartisan bargains to solve difficult problems with compromises by both sides. This is not nostalgia. It is how the system worked in the 1980s and ’90s to save Social Security, reform the tax code, rationalize immigration policy and close hundreds of military bases.

Instead, we have demonstrated to ourselves, the world and global markets that our political system is broken and that we are incapable of conceiving and implementing sensible public policy. What we have instead is the prospect of more late-night cliff-hangers, extreme tactics, budget guillotines, filibusters and presidential vetoes. It makes for good TV news specials, but it is a sorry picture of how the world’s leading country governs itself.

http://www.thedailyshow.com/watch/thu-february-5-2009/clusterf--k-to-the-poor-house---economic-recovery-plan
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There is one silver lining. The sword of Damocles that hangs over Congress (steep reductions in defense and Medicare if the two sides can’t agree to a basket of other cuts) is supposed to make legislators act more sensibly. Actually, it might provoke something more important: a national debate on the role of government. This might well have been Obama’s calculation and his purpose in accepting the debt deal—that it would end the crisis, in which the Tea Partyers held the country’s creditworthiness hostage to their agenda, and force a broader national discussion, one he is comfortable leading. If so, such a debate is long overdue. For more than a generation, Americans have delayed it, at incalculable cost to the country.

Farm Subsidies



The modern seesaw about the role of government began with Ronald Reagan, who rode to the White House in 1980 on a tide of frustration with high taxes and big government. He promised to cut both down to size. He succeeded with taxes, reducing rates across the board and closing loopholes. Although he raised taxes several times during his presidency, by the time he left office in 1989, taxes were at 18% of GDP, down from about 20%. But what he did not do was cut spending consistently. Spending under Reagan averaged 22.4% of GDP, well above the 1971–2009 average of 20.6%. Yes, much of this was for defense, but almost everything went up during his Administration.   Farm subsidies, for example, rose 140%. If you lower taxes and don’t trim expenses, there is only one way to make up the difference: by borrowing. The national debt tripled, from $712 billion in 1980 to $2 trillion in 1988.

Reagan reflected the American public’s basic preferences. We want big government but low taxes. The only way to make this work, short of magic, is debt. And government at every level—state, city and local—followed this pattern and took on ever increasing amounts of debt. In fact, because of weak accounting requirements, politicians at the state level have even resorted to a kind of budgetary magic to satisfy key constituencies. When public-sector employees want pay raises, politicians provide just modest step-ups in salary but huge increases in pension and retirement health care benefits. That way, the (fraudulent) budget numbers don’t look that bad until years later, when the politicians who did the damage have safely retired.

Over the past three decades, this pattern has persisted, with a few exceptions at the federal level. Tax hikes and spending restraint under George H.W. Bush and even more so under Bill Clinton brought the problem under control and in the late Clinton years even produced a budget surplus. Then came the George W. Bush tax cuts, expanded health care benefits and two wars—all unpaid for—without any tax increases. The result: the surplus disappeared, and by 2008, the debt had ballooned to $10 trillion. The final blow was the financial crisis and recession, which meant that federal tax revenues collapsed, followed by more tax cuts and stimulus spending. The debt rose to its current $14.3 trillion.

We couldn’t be grappling with this at a worse time. Many economists believe that the economy is fragile and that it would be better not to cut spending or raise taxes at this point. It’s true. The sensible economic policy would be more stimulus now and major deficit reduction in a few years. But that kind of smart, sequenced public policy is simply beyond the reach of the American system today.

So far, the national debate has been built around the fantasy that we do not have to choose between big government and low taxes—that we can get both by cutting waste, fraud and abuse. But the money is in the big middle-class items, from Medicare to the mortgage- interest deduction. With federal taxes at 15% of GDP, a historic low, and spending at 24% of GDP, there is really no conceivable way to close the gap without increasing taxes—either raising rates or eliminating deductions and loopholes. And Republicans might find to their dismay that when forced to choose, Americans will decide that they like their government programs after all. Polls show that the public would rather raise taxes than, for example, cut Medicare. (In fact, we would have to do both.) The public may hate government in theory, but it has warm feelings about most individual government programs, from the space shuttle to Head Start to Pell Grants. This may be why Obama might be happy to have this debate in 2012 and urge a mix of cuts and increased revenues. 

U.S. Congress





Whatever the outcome of the ideological debate, that outcome has to then be translated into public policy. For that to happen, we need a government that works. What the debt crisis has highlighted is that Congress—the heart of day-to-day government—is utterly and completely broken.

Can one measure this breakdown? Yes. Congress is more polarized than ever before. A National Journal study shows that, for the first time since the publication began tracking the divide 30 years ago, the most left-wing Republican is more conservative than the most right-wing Democrat. There is no overlapping set of moderates, who used to engineer congressional compromises. This polarization has resulted in paralysis. More than two years into the Obama Administration, hundreds of key positions in government remain vacant for lack of Senate confirmation. The Treasury Department had to handle the global financial crisis, recession, bank stress tests and automaker bailouts, as well as its usual duties, with about a dozen of its senior positions—almost its entire top management—vacant. Senate rules have been used, abused and twisted to allow constant delay and blockage. The filibuster, historically employed about once a decade, is now a routine procedure that allows the minority to thwart the will of the majority. In 2009, Senate Republicans filibustered a stunning 80% of major legislation. Given how the chamber is composed—two Senators per state, no matter how thinly populated—people representing just 10% of the country can block all legislation. Is that how a democracy should function?

American parties now function like European parliamentary ones, ideologically pure and with tight discipline. But we don’t have a European system. In parliamentary systems, power is united so that when, for example, the British Prime Minister’s coalition takes office, it controls the legislative branch as well as the executive. The Prime Minister is, in effect, chief legislator as well as chief executive. The ruling party gets a chance to implement its agenda, and then the public can either re-elect it or throw the bums out. The U.S. system is one of shared and overlapping powers. No one person or party is fully in control; everyone is checked and balanced. People have to cooperate for anything to get done. That is why the Tea Party’s insistence on holding the debt ceiling hostage in order to force its policies on the country—the first time the debt ceiling has been used this way—was so deeply un-American.

The strength of the Tea Party is part of a broader phenomenon: the rise of small, intensely motivated groups that have been able to capture American politics. The causes are by now familiar. The redistricting of Congress creates safe seats, so the incentive is to pander to the extremes to fend off primary challenges, rather than to work toward the center. Narrow cast media amplify strong voices at the ends of the spectrum and make politicians pay a price for any deviation from dogma. A more open and transparent Congress has meant a Congress more easily pressured by small interest groups and lobbyists. Ironically, during this period, more and more Americans identify as independents. Registered independents are at an all-time high. But that doesn’t matter. The system in Congress reflects not rule by the majority but rule by the minority— fanatical, organized minorities.

These dysfunctions have reached crisis levels at the very time the U.S. faces intense pressures from an aging population, technological change and globalization. We need smart policies in every field. We need to pare spending in areas like health care and pensions but invest in others like research and development, infrastructure and education in order to grow. In an age of budgetary limits, money needs to be spent wisely and only on projects that are effective. But in area after area—energy, immigration, infrastructure—government policy is sub optimal, a sad mixture of political payoffs and ideological positioning. Countries from Canada to Australia to Singapore implement smart policies and copy best practices from around the world. We bicker and remain paralyzed.

ome of those best practices used to be American. The world once looked at America with awe as we built the interstate highway system, created the best public education in the world, put a man on the moon and invested in the frontiers of knowledge. That is not how the world sees America today. People watched what happened over the past month and could not comprehend it. We have taken something that the world never doubted—the credibility of the U.S.—and put it into question. From now on, every time the debt ceiling has to be debated, the world will wonder, Will America honor its commitments? Will it keep its word? Will the system break down? We have taken our most precious resource, the trust of the world, and gambled with it. If, as a result of these congressional antics, interest rates on America’s debt rise by 1% —in other words, if the world asks for just a little bit more interest to lend us money—the budget deficit will rise by $1.3 trillion over 10 years. That would more than wipe out the entire 10 years of cuts proposed in the debt deal. That’s the American system at work these days.

YOU LIE

Most American politicians lie to get elected, lie to stay in office, lie about who will benefit from proposed legislation and who they really work for, lie about sexual indiscretions with staff, strangers at the next urinal, and fathering children with women they are not married to. They lie about the bag of cash in the freezer, the bank account for the mistress in the Bahamas, about their political rivals and anyone who threatens their parasitic pursuit of wealth and power. Obama is a typical lying American Politician. Promise everything but give nothing to the American People. Promise everything and give everything to the special interest elite.

It's All Happened Before

Unless the people's government in Washington D.C makes drastic changes in its fiscal policies now, the typical American family will be fortunate in 2013 if it can feed and house itself, and even then not in the manner to which it has been accustomed.

Grim reality:

As many as 20% of American jobs--Gone.

Personal savings--Eviscerated by inflation. 

Pension and social security payments--Cut or eliminated by inflation and mismanagement.

The American dollar--A joke.

This is not an exaggeration. In fact, I may be understating the degree of the calamity that will befall most Americans. It's going to be awful, and whatever you think I mean by awful, you can be sure that it's going to be worse.

While we can't be certain exactly when the tragedy of America's economic collapes will unfold, we can be pretty certain that the bottom will drop out of the American economy in one of either ways or in some combination of both. In one scenario, which I'll call "Death by Hyperinflation", prices spiral out of control and the dollar loses value-- first by the month, then by the week and eventually by the hour. In the other scenario, which I'll call "Death by Panic", traders and investors on the world market literally put America out of business.

Probably, well get a taste of both, Hyperinflation and panic sell off, but the shooting victim hardly cares whether he's dead from a .45 or a .357 caliber bullet. Hyperinflation or market panic or any combination of the two will finish off America as it was once known.

We saw how continued deficit spending by the federal government has raised the national debt to record-breaking levels that interest payments alone are already almost more than we can afford. Congress, the President and the American people must wake-up now and realize the size and seriousness of the problem that we all face.

But what if we don't wake-up? After all, Americans have the attitude that we can get of any crisis after it's occurred. This time we're wrong. You can't  recover from cancer once you've died. So, what if we let the calamity develop? How does "Death by Hyperinflation an Death by Panic play themselves out? some of what follows is speculation, but none of it is implausible, and if it doesn't happen in exactly the way I've laid it out here, it will happen nonetheless and  in some other way that's just as unpleasant. I've spent two years studying just such effects around the world.

Both scenarios begin with the White House blaming the crongress and congress blaming the Withe House for everything that ails us. Neither of them will tell us the truth and we, the electorate, keep electing the people who are best at telling us only what we want to hear,,and how much they are going to do for us.

Besides, our leaders help us find plenty of outside devilsto blame for the recession that, over the last few years, just wont break, and for the joblessness that just keeps getting worse. We can hate the Middle East and Europe, who think we are greedy and arrogant because they keep buying our companies. We can damn the Mexicans who we believe will work for peanuts and continue taking our jobs. We can resent the Saudis and all O.P.E.C. nations who control the price of oil. We can even go to war in Libya because Gadahfi is not a nice man and it's more fun foe Obama to fight with him than to deal with the problems here at home.

 Meanwhile, here's what's happening behind the scenes. Every 6 months the US Treasury borrows more and more money to pay the ballooning interest on the growing debt that you and I creat, and every year the note, bonds and bills that the Treasury sells to raise this money are getting harder to peddle to wary investors. A prominent investment adviser recently said "Who in their right mind would invest in Treasuries?"

Investors are worried about the government's ability to continue to service this swelling debt burden. The only way the treasury can continue to find buyers is to agree to pay higher andever higher interest rates, which, of course only makes the government's payment problems worse. Or, the Treasury can sell all of its debt to the federal reserve, which has the effect of creating the money the government needs to service its debt. Both alternatives involve unpleasant costs, and the choice poses a dilemma to the people at the Treasury and fed. They have to decide whether investor revolt or inflation is the greater immediate risk.

The Nightmare Snenario:

By the end of this month, the government announces plans to cut the armed services by half. The other half will be kept on , at half pay, to quell the uprising that begun in cities and suburbs alike. Riots Become commonplace throughout the country. Congress passes emergency legislation eliminating social Security benefits for anyone earning more than $10.000 a year and cutting benefits to remaining qualifiers by 75%. Medicare and Medicaid are temporarily suspended. With no prospect of receiving these payments, hospitals begin to curtail, and in some instances eliminate,treatment for what are now charity cases. Many hospitals begin to show signs of failure, and some in fact, will fail. Doctors incomes plummet, as a whole and then drop into the abyss.

Many stores close since consomers have no cash because by now most banks have failed. No one honors credit cards, but some entrepreneurs set up barter exchanges. People trade their new stereo televisions for a week's worth of groceries, but they hold on to the Audi against the day when gasoline might be available again. In Lower Manhattan, pedestrians run the risk of being struck by plunging suicides, and in California a nonpartisan committee called RAG (Restore America's Greatness) is organized to draft a Reagan like conservative to put our economy back in some kind of working order.

I know that these scenario's sound extreame and far fetched in this day and age, but there so few that actually remember the Great Depression of 1930s' and those that do remember, aren't concerned with the out come, they feel, It could never happen in their life time

COLLAPES: It Can (And WILL) Happen Here

Hi Mr. President; Wanna take a shot at it?

 

If you were to lay all the economists in the country end to end; you still would never reach any conclusion. For every opinion held by one of these practitioners of disinformation, three more will take different and conflicting points of view. Some will even defend the indefensible: LIKE; the federal government's continued deficit spending.

Economists of both liberal and conservative strip each respective reason why deficits don't really matter or, if they do matter, why America's case is special. They argue that even if the debt is growing from year to year, so too is our economy. The United States' gross domestic product (GDP) nearly doubled in the past decade, and it's still one-quarter greater than Japan's and Germany's combined.

Politicians usually seize upon whichever economist's argument suits their agenda at the moment. Reagan was beguiled by a faction of Supply-Side economists that argued that cutting taxes would creat so much economic growth that government revenues would increase and the debt and deficits would vanish. Reagan proposed and got tax cuts through congress, which did prompt incredible economic growth, but failed to substantially reduce the deficit because revenue growth was both overestimated and re-invested in technological advances (SDI) Strategic Defense Initiative; for the promised reductions in government spending to take place, in fact, government spending actually increased during the Reagan years.

I did not use complicated mathematics or computer generated economic models to make this case. I believe that clear eyes, well researched facts, good sense and lessions drawn from historical experiences of other countries are all the tools one needs to come to some basic conclusions about the economy.

It's as simple as Personal Finance 101. Just as a person who pockets a hefty pay raise can afford to charge more on his credit cards, a country whose GDP is expanding can safely take on more debt. But there's a caveat to this contention that many people neglect to mention, "Debt must remain in some reasonable ratio to income if a person wants to remain solvent.

As long as debt as a percentage of  the country's GDP remained constant or declined, the US could afford to borrow. We got ourselves into trouble when our debt began to grow faster than our GDP, which is the alarming situation we still face to this day. It's true that the past decade our GDP almost doubled, but our debt more than doubled as fast as the percentage of GDP.

To get a better understanding of what I'm talking about, let's look at a little not-so-long-ago history. The country borrowed heavily to pay for World War 2, and at the war's end our debt was 128% of GDP.  But from 1946 through 1974, our debt as a percentage of GDP steadily declined to 35%. Since 1982 though, the percentage has increased dramatically. In 1982 America's debt stood at 36% of GDP. In 1991 it had rose to 64%. Today our debt ot GDP ratio is 72.9% of GDP. What's being deminstrated is that our debt is growing three times faster than the size of our economy. That's why we're in such deep DO-Do. 

Future Politician



Our debt as a percentage Of GDP is higher and growing faster than that of most industrialized nations in the world. It's also indisputable that no government anywhere, ever, has operated for long under these circumstances without its citizens eventually paying a really fucked-up price, and nothing about the United States suggests that we're in any way exempt from this rule of history.

American citizens and institutions are the biggest buyers of US tresury securities, but the total amont we owe to foreigners has soared. The US, like any garden-variety developing nation, is now in debt to the world. A creditor nation is one that has more invested abroad than foreign countries have invested in it, Basic, and a debtor nation is just the opposite. In 1975 we were the world's largest creditor nation, and by 1986, we were had become the world's largest debtor nation, a ignominious position that we still hold to this day.

The issue isn't the percentage of our debt that's held by foreigners; it's the total amount we owe them. The amount matters because that's what we pay intererst on. If we fork over, say, an average of 8% interest on the national debt, we'll send foreign crestors  more than $230 billion this year alone, that's wealth that our kids WILL NEVER see, ever, their money. Moreover, debt securities form the core holdings of US banks and pension funds, including the pension funds of state and local government employees. If the federal government defaults on its debt, first to get obsorbed  will be these accounts.

The degree of our indebtedness means that we must dance to the foreign investors tune, or, they'll stop lending to us. If foreigners stop buying new treasury securities, we won't have the money we need to run the country. If foreigners become reluctant to buy our debt, we have to increase the interest rates we pay in order to make treasury investments more attractive, a move that would have dire consequences for the economy. It's already happened in the spring of 1992, the interest rate on long term treasury securities was bumped up a full point, because the government was unable to attract enough investors at lower rates. 

If foreign investors decide to cash in on their treasury securities, they'll use their money to buy productive assets, such as factories, and entire companies in this country. Foreigners own more than $7.4 trilion in US based assets, to include such American icons as Rockefeller Center, Burger King, Brooks Brothers< Holiday Inn, Columbia Pictures (etc). Forewign ownership of US assets has more than quadrupled since 1980. If the trend continues, as it assuredly will if we don't rein in our and spending, we will have to transferred control ofmost of  our productive assets from ouyrselves and our kids to foreign owners. With ownership will go the stream of profits thhat was to serve as our kids inheritance.

As the United States is about to find out for itself, people and countries get little respect when they're so far in debt that they can't pay back what they owe. The debt we're continually building will very soon deprive us of our wealth, to be sure, but it's also going to cost us our prestige and infuence in the world and take a large bite out of our self-respect. You only have to half-read the newspapers to know that the United States has already lost much of its ability to compete commercially and diplomatically with other nations, Particularly Germany, Russa and China. We don't have the same policy clout we once had overseas, and we can't eventake care of the social problems we have here at home. a country can put things on the tab for only so long before it starts paying a price, and we're about to start paying it.

GOOD LUCK AMERICA

So Proudly We Will Fail

At least five times in the past ten years, Washington politicians have announced a new law, or reached a new agreement that they promised would bring spending under control in order to reduce and eventually eliminate budget deficits. Each time as we now know, they have been wrong. Well, either wrong or lying or both.

If there are elected officials currently serving in Washington who both know how to attack the government's propensity to overspend and want to attack it, they are a pitiful few, and they have their hands tied. Most elected officials realize, in fact, that their re-election to office depends on their perpetuating a system that encourages waste and deficit spending. We, the American people, are to blame for this sorry situation. The sad truth is most of us don't even realize what has been done to our country in so short a time. Consequently, we have sat back as a silent majority and let the special- and foregin interest lobby groups destroy our country.

 If Washington officials really wanted to cut trillions of dollars from the federal budget, they could have followed the Gace Commission, created by President Ronald Reagan in 1982. But, they didn't.

If Washington officials really wanted to control the budget process in order to phase out deficit spending, they could have stuck to the terms of the Gramm-Rudman-Hollings Act as it was passed in 1985, But they didn't.

If Washington officials really wanted to put an end to deficit spending, they could have lived up to the two revisions of Gramm-Rudman-Hollings in 1987 and 1990, But they didn't.

Or, are Washington officials genuinely interested in stacing off the calamity that budget deficits and a huge national debt have been brought down on the country could have abided, at least, by the terms of the budget agreement of 1990, But they didn't.

In every attempt to control their own irresponsibility in spending the public's money, Washington officials in the white house and congress have failed.

It's hard to be cynical about legislators and officials in the executive branch who are either fooled by their own words or assume that the public will be. Most of the decisions and actions taken in Washington in the name of deficit reduction in the last sesven years have reduced nothing but the deficit's visibility. Maybe elected officials believe that if no one sees something, it isn't there, or that if the public sees less of something, it has grown smaller.

If attempted deception were a federal offense, almost everyone involved in the federal budget process would be guilty of the crime. But, like the movie gang that couldn't shot straight, the Washington gang hasn't disguised its deception well.

The deficit reduction language spoken today in Washington is the opposite of what's actually being said, (ie) "reduction" has come to mean "increase". Congressional budget writers defend their terminology by explaining that the spending levels were lower than earlier projections of spending. You probably don't have to ask who makes the projections. Just calling something a reduction doesn't make it so, of course; it doesn't even hide the truth all that well, but what it does do, however, is keep legislators and voters alike from dealing honestly with reality, because to do so is to acknowledge that an attempt was made to deceive and that it failed. Here's a perfect example: The child who fibs about raiding the jelly jar can't acknowledge the jam on his face even when it's plainly there for the world to see.

Damed Republicans



So it took the threat of economic calamity to force Congress and President Barack Obama to finally reach a debt deal. Just like it took a near government shutdown to compel them to strike a budget agreement in April. And the prospect of an unpopular tax hike at the start of the year to force them to compromise in December.

So what have we learned from the default crisis? Expect more 11th hour decisions to come, America.

The same messy forces of divisive politics, decisions-on-deadline and vastly differing visions for the country will apply to the two overlapping stories barreling in on everyone. The first is the 2012 campaign, in which the White House and Congress are on the line. The second is the coming period of governing in which the debt fight will only get harder.

In the least, one lesson for the next year and a half is that the government can work when it absolutely has to do so. The deal moving through Congress gives the country enough borrowing power to pay all its bills come Wednesday morning, cuts spending and sets in motion a vote on broader deficit reduction this year.


Almost done with the deficit deal paperwork, it's right here somewhere.  

 

Yet to expect more — say, a bipartisan jobs agenda — is a real reach before the next election. And oh, what a mess to get this far.

Washington always has stalemates, but this one brought the country to the brink of defaulting for the first time in history.

By the end, Obama found it more effective to plead with the public to lobby lawmakers through Twitter than to negotiate with them.

No leader emerged talking about how this all built trust between these two branches of government. It was more like an endurance contest that left much of the world in disbelief.

A Pew Research Center poll out Monday found that most Americans of all political persuasions found the default fight to be ridiculous.

Take me for instance, a 52-year-old avionics teacher in Miami, I captured the sentiment of many on Monday when he said the fight in Congress will hurt Democrats and Republicans alike come election time. "They're all going to have a hard time recovering from this," he said, Well, I took it as meaning, "No more Mr. Nice Guy".

The standoff revealed that the Republicans, despite controlling just half of Congress, exert enormous influence over what gets done and what does not. They were unyielding in insisting on spending cuts, even above the amount the debt limit would be increased, a condition never before attached.

Obama wanted tax increases on wealthy Americans to be part of the deal but the Republicans refused to go along, and the president relented. Obama, though, achieved his final bottom line, winning an assurance the country would not have to endure the same mess or the threat of default until at least after the 2012 election.

In essence, it was another forced compromise for both sides, not a willing one, which is how the pattern is sure to continue.

The debacle also said something about the country itself.

People want less squabbling from their elected leaders. Yet many times they vote in ways that practically ensure it, by ousting moderates in party primaries and electing, in some cases, candidates who proudly say they will not compromise.

And what about those millions of missing jobs? All sides say they care about that issue the most. Obama's re-election will likely be driven by it.

Yet another take away from this episode is that Washington is immersed in issues that target employment only indirectly: the size of the debt, the need to inject fairness into the tax system, the political will to reform Medicare, Medicaid and Social Security, the very role of government.

Obama said from the start he wanted to take on big deficit reform. But Republicans, particularly the boisterously conservative tea party-flank of the party, forced the issue by winning the 2010 elections. Regardless, the true test of leadership on the debt is coming soon.

Almost overlooked in the mad push to avoid a meltdown this week is what would have to happen by Christmas.

The debt legislation would force Congress to vote on up to $1.5 trillion in deficit reduction by Dec. 23, taking on tough issues that have proved elusive for decades. And if Congress fails to do so, it would have to live with about $1 trillion in automatic cuts both parties would hate, a built-in penalty intended as incentive.

So that action will frame up the next five months in Washington and set a crucial tone for the 2012 elections.

Campaign strategists say it's too early to know how the debt-ceiling issue will affect the mindset of voters.

Democrats are in serious danger of losing their 53-47 edge in the Senate in the 2012 elections. They have far more competitive seats to defend, including those in Missouri, Montana and Nebraska. In the House, it is conceivable Democrats could regain control, but it would take a big wave election in their favor.

For Obama and congressional Democrats, the biggest campaign challenge might be to find a better way to shape their message to voters.

Democratic strategist Doug Thornell said Obama clearly has angered some liberals, but he is poised to make significant inroads with independents, the slice of the electorate that has decided the last few elections.

And James Cottrill, a Santa Clara University political scientist, said the biggest gain for Obama is that he avoided a federal default that many voters might have blamed on him. On the down side, he said, "jobs are what will matter in 2012, and it is hard to see how spending cuts are going to offer any help in that regard."

As the votes needed to get the bill to Obama's desk appeared to be coming together on Capitol Hill, it was hard to find anyone who was not eager to move on.

"This was a mess. There is no question. It was a circus at times," presidential spokesman Jay Carney said at the White House. "We unnecessarily sent the message around the country and the globe that the United States might, in fact, default on its obligations for the first time in its history. But in the end, compromise won out."

He said that was hoped to build upon.

The country will know the next time its government is up against a deadline.