I realized, talking in office hours with a couple of my law students, that they did not really understand what is meant by the phrase “borrowing from our children” — as we often hear it raised or referenced these days in budget, deficit, and other policy debates. These are bright students who have often taken some economics, but haven’t necessarily learned to think through common economic tropes in current arguments. So it hadn’t really occurred to them to ask, what does it mean to “borrow from our children”? The children who mostly don’t yet exist, and in any case don’t have any money from which to borrow.
As soon as it’s put that way, it is obvious that what we actually mean is, we will borrow today from people who do have money — and who are willing to forego consumption today, presumably in China and the rest of Asia — and our children will repay the principal and interest. We have internalized the consumption (er, investment? –ed.) currently and externalized the repayment. It might be more accurate to say that we have exercised an option with regards to the future — we are the holders and they the involuntary writers of an option. But the fundamental public policy point is that in order to engage in this borrowing exercise today, even if we are going to “put” the repayment to our children, someone today has to be willing to give up consumption now and lend us those resources today.
To that end, David Sanger has a nice piece in the New York Times Week in Review, “The Debtor the World Still Bets On.” While we’re at it, Irwin Steltzer’s Weekly Standard essay, “Government Intervention Will Leave a Nasty Hangover.”
And finally Joshua Kurlantzick, in the Boston Globe, “Dazzled by Asia,” arguing that if you’re assuming an emerging Chinese hegemony, you might be disappointed. (To which I’d add my own oft-repeated observation that if the corollary is longing for American decline and the rise of a new, post-American-hegemony, world of cooperative great powers in peace and harmony, think again — the human right universalism of the last fifteen years has been an epiphenomenon of American hegemony, and if it fades, the human rights universalists fade with it. A multipolar world is competitive and more aggressively Westphalian, not less.)
Kurlantzick on President Obama’s Asia trip: “Major media outlets covered the president as if he was some kind of Dickensian vagrant, appealing to his increasingly powerful creditors in China for leniency.” And, to judge by spiraling Chinese hubris in its demands concerning the Dalai Lama, Taiwan weapons, and other things — well, the appetite grows with the eating, and the President has fed the beast. (Responding to someone in the comments asking on what basis I thought China had raised the stakes, see among many articles in the last few weeks, this Jan 31, 2010 Washington Post front page new analysis, “China’s Strident Tone Raises Concerns Among Western Governments, Analysts.”)
(Update:) An Instalanche (thanks, Glenn) — and Megan McArdle’s quote of the day! Wow!
One last thought about thinking about various things as options. Some of the comments have expressed surprise, and a certain amount of derision, at the idea that the option running in favor of the present at the expense of the future is non-trivial. Speaking as a teacher, I consistently find that when students who are not in econ, business, or finance discover for the first time that what looks to be a “loan” actually (because of the limits of downside created by many legal rules, such as bankruptcy, or non-recourse rules, etc.) turns out to be an option is an “ah-ha” moment.
And even more so when, as in this case, one realizes that it is a loan from Party C(hina) to Party A(merica), but also a put of the loan from Party A(present) to Party A(future). That’s not a trivial observation, whether speaking pedagogically or intellectually. Commonly-made these days — of course — but not trivial, which is why unpacking “borrowing from our children” has to be unpacked if you’ve never unpacked it before.
And note that one of the comments notes with some condescension that this is merely pretentious — but then gives as an analogy something that doesn’t actually fit. Kids “write” their parents “involuntary” options all the time and, yes, that’s pretentious and trivial. However, they less frequently (at least in the past) write them in the form of loans in the present from third parties located in China, with consumption by the present borrower and repayment by a future obligor. That’s neither trivial nor pretentious.
And touching the intersection of debt and security, I cannot recommend highly enough the monumental history of the intertwining of public debt and democracy, A Free Nation Deep in Debt: The Financial Roots of Democracy, by James Macdonald.
aeolius says:
1. Clinton did agree to let china into WTO. But according to cato (Clinton’s China Blunder
by Aaron Lukas
This article appeared on cato.org on May 28, 1999.)
.
But then goes on to damn Clinton for negotiating back. And finally suggests China be admitted toWTO, seeming without conditions.
SoCato seems to suggest that Clinton representing the US should have kowtowed to Zhu and acccepted his “generous” terms. Having failed to do so, we committed such a blunder that we accept anything and just let China into WTO
Then Bush was elected and let China into WTO with few strings.
Here is an early report from Bush administration
HKtrade development council
Do you remember any follow-up.
Finally via naked capitalismANNUAL REPORT TO CONGRESS
Military Power of the
People’s Republic of China
2009
DOD http://www.defense.gov/pubs/pdfs/China_Military_Power_Report_2009.pdf
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February 7, 2010, 4:20 pmPragmaticist says:
If the debt burden were to mushroom and become unbelievably repressive, what would be the downside of default or repudiation? Would it be that people would not lend monies to the government in the future? Is that like saying nobody in the future will be willing to sell alcohol to the town drunk? I am interested in contemplating this “unthinkable” scenario.
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February 7, 2010, 4:30 pmJestak says:
Yes, that is pretty much it–you see this happen in the business world all the time. Lenders lose faith in a corporation’s ability to pay their debts, and they stop lending to them. Bankruptcy generally follows.
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February 7, 2010, 4:35 pmRowerinVA says:
“Borrowing,” as used in the phrase “borrowing from our children,” is not an apt term because “borrowing” from a person implies a promise or an expectation of paying back to that person. The adults and government officials (hah) who are “borrowing” the money today have no intention of being the ones who pay it back, and certainly are not planning to pay it back to their own children. The point is to have the children responsible for the paying back. The children are getting an obligation, nothing else.
Let me put it differently: if “borrowing from our children” were actually borrowing from our children, it would create an account receivable (an asset) owned by the children. Instead, the practice that’s occurring creates an account payable (a debt) suffered by our children. China, or whatever other lender, owns the receivable.
Even worse, to most Americans, “borrowing” implies not only a promise to pay back, but also a promise to pay interest. This makes it sound like the children are getting an investment of some type. They aren’t. The children are responsible for repaying the principal and the interest.
The correct term for this isn’t “borrowing” from our children. It’s “stealing.”
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February 7, 2010, 4:39 pmaeolius says:
Sorry, got timed out on edit
As I see it and please correct me, the previous administration was aware of the need to watch China but never did, and had a policy which allowed China to accumulate capital to pay for a massive modernization of its military.
I guess the Bush genes of Aiding and Abetting the enemy that Grandpa Bush had skipped George H. but were picked up by George W.
So please compare and contrast what GWB did with the sins you accuse Obama.
If you care to tell us that China was not our enemy then I suggest
China-U.S. Aircraft Collision Incident of April
2001: Assessments and Policy Implications
Updated
http://www.fas.org/sgp/crs/row/RL30946.pdf
You might want to compare the response on the right to this incident with that of their response to the USS Pueblo.
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February 7, 2010, 4:42 pmAllan Walstad says:
Far more significant, I suggest, is the cost of American hegemony to our own traditions of individual rights and limited government.
I like your thinking, Pragmaticist, but what if the government is determined to have the resources anyway? Do we get despotism at home and even more foreign wars? What’s the end game? I’d worry a lot about that.
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February 7, 2010, 4:43 pmcubanbob says:
If the Chinese were to stop buying US Treasuries they would be doing the American people a great service. Other than national defense and law enforcement (and the related judiciary) very little of what the government spends is of any benefit to the actual net income tax payers. What is needed is a serious reduction of the non essential federal workforce, a reduction in pay and benefits to the rest and a serious scaling back back of the progressive entitlement state. To use a business analogy, if you need to constantly borrow to cover your payroll, you are essentially bankrupt. The government needs to be scaled back to a realistically sustainable tax burden. Something the tax payers as opposed to the tax consumers are willing to tolerate. The T.E.A. Parties are a loud and clear message that the endlessly expanding entitlement state is not sustainable.
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February 7, 2010, 5:11 pmorca says:
Yeah, who needs roads, fire departments, the internet, etc., etc.
Bill Clinton put a stop to the U.S. government selling 30 year bonds, the only debt instrument that could rightly be described as “borrowing from our children.” Did noted conservative George W. start issuing them again?
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February 7, 2010, 5:19 pmHistory Punk says:
“The T.E.A. Parties are a loud and clear message that the endlessly expanding entitlement state is not sustainable.”
Yet, they consume them like crack-addled hogs. None of them are going to give up their child tax credits, their home mortgage interest deductions, or allow the government to start compelling their religious leaders and institutions to render on to Caeser. I’ll accept a cut to Social Security when those dead beat, welfare degenerates give up their farming supports.
As for national defense, if US military cannot quickly and effectively dispatch al-Qaeda and the Taliban with Cold War sized budgets, well it’s time they learn the joy that is the American unemployment system.
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February 7, 2010, 5:23 pmRelic says:
The difference, Pragmatist, is that the town drunk pays for his booze.
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February 7, 2010, 5:30 pmPersonFromPorlock says:
The best thing to do with the phrase “borrowing from the children” is to replace it with “sticking them with the tab.” That clears up any ambiguity or confusion.
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February 7, 2010, 5:32 pmRichard Riley says:
Professor, I’m puzzled by your suggestion that “spiraling Chinese hubris” re the Dalai Lama and the Taiwan weapons sale is something to be concerned about. Do you have any evidence the administration plans to back off on the Taiwan weapons deal? I haven’t seen any.
Are you saying that if Obama had somehow been tougher, the Chinese would have moderated their rhetoric? But Chinese anti-Western and anti-U.S. rhetoric was (obviously) much, much more strident in the days when they were accusing us of being running dogs of imperialism, and of course China was much weaker then. And of course the Chinese have been hyperventilating about Taiwan literally since 1949. Your apparent connection between U.S. strength and moderation of Chinese rhetoric really doesn’t make much sense.
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February 7, 2010, 5:37 pmgeokstr says:
Enough of this phony “conservative” Dubya cr*p. He was as much a “conservative” as the RINO the media picked for the R’s to run for prez in 2008. He tossed tax cuts and Roberts/Alito to us as bones and then did most of what the left wanted anyway (except lose to algore), like out of control spending, S-CHIP, amnesty (almost), Prescription Drugs, (but not expensive enough for the left), and lots more. He’s even been outed as being quite dismissive of his base all along. “Compassionate Conservative” was just Newspeak for liberal-lite.
As for the inaptly named war on terror, even the left actually got caught up in patriotism after 9/11 as the rabid speeches of HRC and Kerry (before he was for it, or was that after he was against it, or...whatever.) Then that morphed into patriotism being synonomous again with painting Hitler moustaches on Bush when it was more convenient.
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February 7, 2010, 6:04 pmsteve s says:
geokstr-So you are saying no conservatives voted for or stumped for Bush? Isn’t this a bit convenient, being able to disown him when things did not work well?
I think we have long assumed that China can be “handled”. I think this is wrong. This financial crisis has just enabled what China was going to do sooner or later anyway.
Steve
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February 7, 2010, 6:38 pmEvilDave says:
With a replacement rate of about 1.2–1.4 in the EU and Blue States, those children won’t ever exist.
BTW, a replacement rate of 2.1 is considered neutral (no population growth or decline).
And what population growth that is occurring in the EU (and many parts of the US) is due to immigration. Do you really think poorly assimilated immigrants will be willing to pay the debt off (and the high taxes that would entail)?
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February 7, 2010, 7:36 pmBorrowing from Our Children? And Hegemony | Liberal Whoppers says:
[...] the original: Borrowing from Our Children? And Hegemony [...]
rpt says:
Translation:
Clinton surplus bad.
Bush deficit no problem.
Obama post-Bush deficit end of the world.
And so it is the money-baggers are just rebranded R’s offering more of the 2000’s, led by the “palmreader-in-chief.”
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February 7, 2010, 9:16 pmElliot says:
1. GWB did not issue 3o year bonds.
2. The maturity date of a bond has little to do with the situation. Five year bonds can be sold. When they come due, the government sells more five year bonds and used the proceeds to pay off the first issue. The cycle continues. The huge danger we have today is that all the money being borrowed at low rates will have to be refinanced at much higher rates, resulting in an even greater deficit covered by even more borrowing.
3. Note that we have already started to monetize the debt. The Federal Reserve is buying bonds from the Treasury because the market rates at auction are coming in too high.
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February 7, 2010, 10:30 pmEli Rabett says:
Current interest rates on Treasuries are as close to zero as possible. A great time to borrow. If we had any sense we would call all the outstanding note (I know this is impossible, but future notes should all be callable, just as they are for every other country)
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February 7, 2010, 11:06 pmRicardo says:
Bush’s Treasury Department did indeed begin to reissue 30-year bonds in 2006 after the issue of such bonds had been suspended since the surplus years.
This is partially true. The yield curve generally slopes upward as it does today. This means it is more expensive to issue long-term bonds rather than short-term bonds. So why do so? Typically, because you are afraid of the risk of rates increasing when your debt becomes due. Why would you face this risk? Perhaps people are concerned about the government’s commitment to combat inflation and conduct responsible fiscal policy.
To be fair, it was only natural for Bush’s Treasury Department to reissue the 30-year. At that time, the yield curve really was practically flat — you’d have to be crazy to not take advantage of long-term rates being so low. Of course, this implies you have large deficits at a time when the economic situation really did not justify them.
Partially right. The Fed certainly wants lower long-term rates but not for the benefit of the government. The Fed funds rate has been hovering near 0% for a while now. In other words, conventional monetary policy has already been exhausted in fighting the recession. But the Fed funds rate is simply a very short-term borrowing rate and has little relation to the rates private businesses pay when undertaking investments. So the next best thing for the Fed was to attempt to lower longer term borrowing rates in an attempt to stimulate more investment by private businesses. I haven’t been following this lately but I believe the Fed cut back on this aspect of its monetary policy in late 2009.
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February 7, 2010, 11:28 pmFran A says:
Bush was a big spender. Obama is so much worse that there is no comparison. Give me Bill Clinton back. Going into debt for assets (roads, bridges, even things like GI Bill to get an educated workforce) can be good — the payoff is there. In fact, there is some building of toll roads and bridges right now by private enterprise and they expect to do well. Going into debt to give people over 65 medical services that are better than they ever had pre-65 does not make a lot of sense and I am 71.
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February 7, 2010, 11:38 pmLee Peters says:
Here’s a related YouTube video showing the reaction of the next generation to the recent record-high debt limit increase: YouTube
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February 8, 2010, 12:49 amlgm says:
Actually, the government of China forces its people to forego consumption by taking their money. The government then buys US treasuries. It also maintains the value in China of US treasuries by manipulating exchange rates.
Not more accurate, just more pretentious. I have an option to take my kids to the playground and they have involuntarily written that one too. Actually, it’s an American style option since I can exercise it at any time (or maybe Bermudian because I can’t do it at night).
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February 8, 2010, 1:00 amRicardo says:
The increase in the deficit under Obama is due to a combination of falling tax revenue due to the recession and large, temporary stimulus programs also due to the recession. You can’t really compare one year under a President who has dealt with the most severe recession since the 1930s to eight years under a President who faced a very minor recession followed by several years of robust economic growth.
Obama’s economic policy team already has a decent overlap with Clinton’s team so you do sort of have the spirit of Bill Clinton determining fiscal policy. What we don’t have is the kind of economic growth that allows us to focus on balancing the budget rather than reducing unemployment. Raising taxes or cutting spending are not very attractive when unemployment is over 9%.
Bush signed into law one of the largest new increases in entitlement spending in many years. Obama is hearing people telling him to keep his government hands off their Medicare whenever cost control is discussed. The prospects for reduced Medicare spending simply are not all that great right now for either party.
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February 8, 2010, 1:16 amTed F says:
Bill Clinton put a stop to the U.S. government selling 30 year bonds, the only debt instrument that could rightly be described as “borrowing from our children.”
This is nonsense. If the government sells a 1-year treasury that it’s going to have to roll over 29+ times without ever extinguishing, the only difference between that and a 30-year bond is the increased interest-rate exposure.
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February 8, 2010, 6:31 amA. Zarkov says:
The U.S. will never be able to repay the principal on the national debt. The last time we had zero national debt was during the administration of Andrew Jackson. We roll over the debt like the homeowner with an option ARM mortgage. According to Hyman Minsky there are 3 kinds of borrowers.
1. The hedge borrower who pays back both principal and interest from current cash flows and investments.
2. The speculative borrower who can only service the loan and must roll over the principal.
3. The Ponzi borrower who can’t pay back principal or interest from current cash flows and depends of the future appreciation of some asset to service the loan.
With respect to the government + private debt, the U.S. is a speculative borrower in transition to a Ponzi borrower. The “appreciating asset” is the U.S. economy. Thus you hear that the U.S. will “grow its way” out of debt. The problem here is the U.S. GDP grows at about 3% per year net of inflation. Thus if the total debt (public + private) grows at a rate greater than 3% net of inflation it can never be paid back. At some point we can’t service the debt and can no longer roll it over. Exactly this happened to New York City in 1975. It could no longer issue new debt because no one would buy it. Private debt exceeds public debt by about a factor of three. Our total debt is nearly four time GDP. This has never happened before. We have entered uncharted waters.
Foreign debt is even worse. We owe about $2 trillion to China and Japan. It will never be repaid because we lack the productive capacity to make exportable goods to China and Japan to repay the debt. What can we possibly manufacture that China can’t make even cheaper on a scale large enough to repay the debt? With respect to China we are already a Ponzi borrower. Why does China continue to lend to a Ponzi borrower? I can see only one reason: future purchases of real assets in the U.S. Why invade a country when you can buy it? Remember our interest payments are in dollars which must be recycled into new debt which in turn yields more dollars. Some day China has to buy something with those dollars. In the alternative the U.S. can simply go into default just like Russia in 1998 and Argentina in 2000. Finally there is a third dismal way out: inflation.
So yes we are indeed borrowing from our children– future generations. But think about something. Perhaps we are the children that was borrowed from. The payback time is today.
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February 8, 2010, 6:40 amA Blog | Considerations says:
[...] No Comments · Administrative, Blogroll, Blogs From Left to Right I’d like to see The Volokh Conspiracy (sample blog) on our blogroll, not because I’m a libertarian, but because I think they [...]
orca says:
It certainly doesn’t have to.
Who knows, maybe one of those deficit reducing Republicans I keep hearing about but have never seen will win the Presidency and refuse to roll over the bonds.
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February 8, 2010, 10:21 amAnthony says:
I for one am very much worried by the spiraling debt. However, one forgets that the US population in about 30 years is expected to increase by a third. That means, in theory, we have a better ability to pay of today’s debt tomorrow. Or more likely, refinance and service today’s debt tomorrow.
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February 8, 2010, 10:36 amsardonic_sob says:
And will promptly be denounced for shutting down the government, interfering with entitlement payouts, and drowning kittens in the blood of the innocent.
It can’t be done. Our choices are default and monetization. Default is politically unacceptable. The Federal Reserve has demonstrated that it, the only entity which even theoretically could resist monetization (although if it actually did so the FRA would be repealed or amended in about a day) has no interest in doing so. Somebody order a few new servers for the FRB network, they’re going to have some extra zeroes to store.
You remember all that business about a “soft landing,” economics-wise? A soft landing in debt-mageddon is about all we can hope for. A soft landing in this regard constitutes the industrialized world not being destroyed by war and economic devastation. Anything better than that (say, the whole world being turned into Cuba) is a net win, sickening as that is to say.
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February 8, 2010, 10:51 amAvatar says:
Approach the question from the other direction. Foreign countries and investors alike are perfectly aware of the budget environment the US is dealing with. Why, then, are they continuing to fund US debt expansion? Shouldn’t they invest their money in other countries with, let’s face it, more responsible fiscal policies?
Well... they would, but... there really aren’t any. If you look at the other Western economies, they’re mostly in the same boat we are — large debt loads, deficit spending, economic recession, budget capture by entrenched special interests. Invest in Japan, you say? But their debt load is well over 200% of GDP. Europe? The individual national economies just aren’t big enough to shoulder the load, and the Euro’s still largely untested for that purpose — if Germany and England are bastions of stability, they’re in harness with the likes of Italy and Spain.
What about the Chinese economy? Sure, if you like your money to be subject to the whims of a government that’s nominally Communist. At best you can hope for benign neglect; at worst, outright confiscation, with a whole range of kleptocracy in the middle. Moreover, the country is essentially dependent on ever-growing foreign exports to fuel its economy; the kind of Western meltdown that would make investment in China attractive would also put tremendous stress on their domestic politics...
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February 8, 2010, 11:04 amJohn Blake says:
Humanity’s equilibrium/replacement birth-rate is 21 per thousand (2.1%). In today’s developed world, native populations –excluding immigration, legal and otherwise– are in net decline by factors of three or more. For whatever socio-cultural, political-economic reasons, stable two-parent families fostering some two births per couple number less than one in five (20%) from Europe and Scandinavia to China and Japan. Even traditionally high birth-rates in Africa, East Asia, South America have fallen by a quarter to a half.
Given this looming demographic cataclysm, comparable only to population crashes due to medieval plagues, collectivist Statists’ “generational theft” that shifts debt burdens to unborn posterity is in fact unworkable. Even should depleted cohorts agree to enslave themselves to long-past socialist death-eaters, their numbers will make nonsense of projecting late 20th Century wealth available for selfish Know Nothing ripoffs.
America’s multi-trillion debt so cavalierly entered on by boundlessly corrupt, incompetent administrations, acting in bad faith under false pretenses over decades, will simply not be paid– not in inflated dollars, not in anything. About AD 2020 — ’30, the highest-and-best policy will be to default on sovereign debt, just “walk away”. Why not– Russia, Brazil, etc. did just that in 1998. Anyone who thinks citizens born c. 1990 — 2000 will spend their entire working lives paying 60 — 80% of real income to validate dead coteries of smirking interest-groups had best recuse themselves.
Something-for-nothing always works, but never for more than (say) 72 years [see Sovietism from 1917 — 1989]. Having exhausted societal surpluses, official gangsters create a desert: Nothing-for-something is their stock-in-trade. The governmental overburden crashes, as occurred in AD 450 when Roman parasites finally drained residually productive ponds. Now as Earth enters on a 70-year Maunder Minimum presaging the overdue end of our current Holocene Interglacial Epoch, global elites are purposefully, willfully sabotaging energy economies while precluding any long-term fiscal or demographic remedies. Amid worldwide mega-deaths, such policies will sink free-market prosperity forever to Churchill’s “abyss of a new Dark Age.”
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February 8, 2010, 11:30 amMark Field says:
So: we’re all agreed that America’s in terminal decline and a new Dark Age is upon us. The only difference is that one group blames the Republicans, the other group blames the Democrats.
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February 8, 2010, 11:34 amA. Zarkov says:
How is he or they going to do that? I don’t know the average maturity of Treasury bonds, but you be sure it’s a lot less than 20 years. Short term bonds means lower interest rates, but that also means more rollover. This year Treasury has to find something sell something like $2 trillion in new bonds. It’s not clear they can unless we have a another panic and the “flight to quality.” Only US debt is looking less and less like “quality” these days.
Treasury is stuck with short term bonds, because interest rates are near zero. It does not have the money to service the interest on long term bonds which are about at 4%. If the Fed can’t keep short term rates really low, Treasury runs out of money and the government stops functioning.
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February 8, 2010, 11:56 amA. Zarkov says:
You have it exactly right. We don’t really have a financial problem, we have a demographic problem. Even if all the retirees had lots of money, who is going to service them? No kind of legislation is going to fix this problem. Bringing in immigrants won’t work because they retire too, and demand all sorts of services too. Low-skilled, low IQ immigrants brought in from the Third World is not going to fix the US demographic problem unless they have some kind of slave status, but that won’t work either because what do we do for skilled labor?
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February 8, 2010, 12:08 pmjustaguy says:
Many of the comments anticipate some type of a “big bang moment” when the U.S. suddenly can’t pay it’s debt. The moment was a whimper and has already happened. When we began monetizing our debt through the Federal Reserve, we began printing money. After this, we never have to default, we just pay back in de-valued money that we magically create. China wants its $1 trillion, no problem, a few key strokes of the Federal Reserves computer. There is not a big event to force us us to stop spending, just look at most South American countries.
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February 8, 2010, 12:19 pmA. Zarkov says:
That only works for a while. The “big bang moment” is a currency collapse. It happened to Iceland. Their currency fell to zero almost overnight. In the 1990s Argentina was forced to issue dollar-denominated debt because no one would buy their their peso bonds. After a while Argentina had to curtail imports to service their debt as they ran out of hard currency. Then the women came out banging their pots and pans and the government defaulted on the bonds sending Argentina in the toilet in 2000. The US can last longer because the dollar is the world’s reserve currency, and many other countries are just as bad off. But we can’t keep it up forever. The big mistake is thinking we will have smooth transitions. But any one familiar with the behavior of large scale non-linear systems like a national economy knows that’s not true.
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February 8, 2010, 12:37 pmluagha says:
On the subject of too much government expenditure:
“Yeah, who needs roads, fire departments, the internet, etc., etc.”
Here in California they were reading a list of departments in the California government as an example of things that could be cut before they cut police and fire departments and construction (although politically they will always threaten to cut those first.) The one that stuck in my mind was the “Commission on Professional and Semi-Professional Kickboxing.” Really. The California government pays people to monitor professional and semi-professional kickboxing.
You know, I’m sure there’s money in it, and danger too, and someone should be watching to make sure all the safety issues are monitored, but I’ll also bet that it’s pretty overstaffed and it could just as easily be handled by one person monitoring for law enforcement and requiring the professional and semi-professional people to self-report to him.
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February 8, 2010, 12:37 pmluagha says:
“Clinton surplus bad.
Bush deficit no problem.
Obama post-Bush deficit end of the world. ”
More like:
Clinton Surplus: didn’t exist
Bush Deficit: barely manageable
Obama post-Bush Deficit: 10x Bush, over the edge, unsustainable
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February 8, 2010, 12:39 pmluagha says:
“Why does China continue to lend to a Ponzi borrower? I can see only one reason: future purchases of real assets in the U.S. Why invade a country when you can buy it? Remember our interest payments are in dollars which must be recycled into new debt which in turn yields more dollars. Some day China has to buy something with those dollars.”
Buying us is only part of the answer.
The other reason China keeps us around is to steal from us.
All the new technologies, all the innovations that no one could have ever figured out, comes from the US. China is great at incremental improvements and efficientizing and manpowering; but they come up with very little that is ‘new’.
If we go down, there’s no more golden goose to get new things from.
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February 8, 2010, 12:45 pmFat Man says:
I am surprised that your students don’t understand how badly they are getting screwed by the refusal of our political classes to put down their crack pipes (i.e. out of control entitlements financed by borrowing).
My son, age 22 understands it. But he is an econ/math major who doesn’t want to go to law school:-)
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February 8, 2010, 12:46 pmRandy says:
And why is the phrase “borrowing from our children” limited to merely economic debt? When we despoil the environment, we are passing along those problems to our children, who will then have to clean up the mess or otherwise deal with it.
Ex: In previous generations, they let industrial pollution ruin ocean waters. Today, as a result, no ocean fish are without mercury, and we are advised to not eat more than one or two pieces of fish per week because we will ingest too much mercury.
Our fisheries are collapsing, and so our children might not have the pleasure of eating seafood as we do. They will pay for our greed of over-fishing.
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February 8, 2010, 1:18 pmgs says:
But...but...I thought that future generations will revere the boomers for the far-sighted investments we had the wisdom to make on their behalf.
Seriously, a process seems underway:
Reagan’s Farewell Address: I’ve been asked if I have any regrets. Well, I do. The deficit is one. I’ve been talking a great deal about that lately, but tonight isn’t for arguments. And I’m going to hold my tongue.
Attributed to Cheney: Reagan proved deficits don’t matter.
Obama/Pelosi: Wheeeee!!
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February 8, 2010, 1:22 pmgeokstr says:
Of course they did, but “compassionate conservatism” turned out to be pretty much anything but conservative. And as a matter of fact, conservatives strongly criticized Bush policies on a host of major issues (as I mentioned in my earlier comment) for the entire 8 years he was in office. It wasn’t the moderates who derailed “shamnesty”.
In addition, when you have only two choices, and the other team is nominating people with voting records to the left of Bernie Sanders, even RINOs like McCain and Bush are infinitely more appealing.
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February 8, 2010, 2:03 pmTS Alfabet says:
One way out (or at least to begin to see a way out) is to re-think the Federal Hegemon.
Simply put, there is actually very little that the Federal Gov’t does that could not be done better by State/Local governments or by private enterprise. Certainly we need a Federal entity for external threats. We need a Federal judiciary for true constitutional issues but certainly not for the plethora of Federal statutes that strangle us all. We...uh, well.... I suppose we need the Legislative and Executive branches, too, as long as they don’t actually pass any laws or issue any executive orders.
Seriously, if the trillions of dollars in tax revenues that now flow to the Federal Hegemon stayed, instead, with the States where the citizens reside, there would be far less corruption, far less waste and far less tyranny. Local government is simply more accountable to citizens and is far more restricted from oppressing its people. And it is far easier for the oppressed to move from a nanny state like Maryland or California to a ‘free’ state like Texas or Alaska, than to leave the U.S. and move to...?
Of course this could hardly be accomplished in one stroke– the sudden layoff of hundreds of thousands of federal workers would be catastrophic. But the steady “winding down” of the Federal Hegemon would go a long way to curbing spending.
And as to the doom and gloom of the so-called inevitable Apocalypse, there is some hope. Americans are, indeed, a marvelous people and there are any number of transformative innovations on the horizon that could completely change the equation we now face. To take just one (though by no means the only one): nuclear fusion. There are at least three, different technologies now in advanced stages of research that hold out the possibility of cheap and plentiful energy. U.S. economics would be revolutionized with the elimination of oil imports.
Demographics is an unsolvable problem you say? One transformative technology that shows promise is biogenetics that would radically extend the productive life of average adults by 20 to 30 years. Although this might not be such good news when considering that the retirement age is upped to 95, it suddenly infuses our economy with millions of high-skilled, intelligent and already-assimilated workers.
I am not saying that either of these technologies will, in fact, come to fruition. I am just pointing out that history is replete with transformative technologies that up-ended conventional thinking and the prophets of doom.
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February 8, 2010, 2:04 pmHalifaxCB says:
Out of curiosity, I looked up the German reparation debt after WWI that drove Germany into hyperinflation (and ok, I used Wikipedia, so the numbers may be more than a little suspect :) — but apparently it was in the neighborhodd of 400 million 2005 USD; the population was around 60 million.
The US population is now 5x that — around 300 million, and the debt is certainly going to be well up above the equivalent 2 trillion. It’s hard to see this turning out well, but then again, I’m not an economist (or lawyer).
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February 8, 2010, 2:16 pmTim McDonald says:
The scary thing is, the US debt is in dollars. It can be repaid anytime simply by the gubmint writing a check. Of course, the dollar would instantly devalue by say 50%? 60%? thus taxing those of us who are savers at a relatively high rate, and destroying the worlds economy, but thems the breaks right?
Has there ever been an equivalent situation, where a country’s debt was in it’s own currency, and thus the value of the debt was controlled by said country? The British pound was once the worlds powerhouse, but the Brits were always a lender nation, at least until WWII?
Maybe when I was laughing at G. Gordon’s gold advertisements I should have been LISTENING! It was 600 at the time, and I was thinking it was a bad time to buy. Oh well, too late now.
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February 8, 2010, 2:32 pmsardonic_sob says:
Imperial Rome, for starters. When the Emperor got broke, he’d just cut the silver content of the Denarius.
No, it didn’t work out very well, but there is a lot of ruin in an Empire, as we are finding out.
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February 8, 2010, 2:43 pmHalifaxCB says:
Whoops, sorry, that’s 400 billion 2005 USD (the rest still holds).
Tim — IIRC, the German WWI debt was in their own currency, which is why they could inflate their way out of it (and into a world of other pain...)
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February 8, 2010, 2:44 pmricky says:
Come on, let’s be honest here. There will be no “borrowing from our children”. The beneficiaries of government largess today either won’t have children or will raise children in poverty who are thus unable to contribute to any repayment. The more accurate phrase would be “borrowing from everyone else’s children”, or at the very least “borrowing from the children”.
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February 8, 2010, 7:28 pmA. Zarkov says:
Not true. Fish always had mercury. See here:
If you don’t like the above reference then read this from Mercuryfacts.org
Don’t worry about eating fish because,
You really should check yourself out once in a while before making this blanket and easily refuted statements.
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February 8, 2010, 8:46 pmRicardo says:
Former Republican Bruce Bartlett once stated that conservatives today are so opposed to the idea of raising taxes that they would rather default on the debt. Some of the comments here very much support Bartlett’s observation.
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February 8, 2010, 9:19 pmTim McDonald says:
Well, I am a conservative, and I DO NOT want to default on the debt. I understand it to be 55000 for every man woman and child in the US.
I hereby volunteer to take 110K out of my 401K and pay for my share and my wifes share. In exchange, I want ONLY those people who pay their share to be able to vote in any election.
That would INHO fix the problem for all time, as the deficit problem would go away pretty quick. Right after the next election I suspect.
Has to be a constitutional amendment, wonder how many people would give up their freedom to keep their stuff?
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February 9, 2010, 3:52 pm