Uncle Sam may need life support by 2013
By now, you must know that the ill-fated congressional super committee crashed and burned last week, a spectacular, yet boring and predictable failure that shocked few.
Like several others, I talked about how failure was a good thing, preferable to acquiescing to those who forbade new revenues and insisted on limiting sacrifice to the less well off.
Failure, I said, would enable the President to let the Bush-era tax cuts expire and enable automatic, across-the-board cuts that would affect military and domestic programs equally.
While I still believe failure was better than yielding to the ‘trickle-down’ crowd, failure will still have its undesirable consequences.
The most serious consequence is that deficits are going to continue to climb as fast as they are now before new elections, meaning that by the time 2013 rolls around, well, we will have racked up close to another $1.2 trillion of debt.
That means our $15 trillion debt will have surpassed $16 billion as we swear in a new President in 2013.
I’m not sure how Western nations do this, but we have this zombie state we get into where we imagine that the sky cannot fall in on us, regardless of how foolish we are.
In America, we call it exceptionalism, in Europe, they still perhaps suffer from the faded glory of their past empires. Suffice to say, Europe has got that notion whipped out of them in the last few months and no one really knows which of many bad endings will play out there.
In America, we continue to roll along with trillion after trillion of dollars of debt, hoping, just hoping the sky never falls. Guess what? It will fall if we keep it up, and fall without warning.
We have debt that is now over 100% of GDP and all the warning lights are flashing – the politicians are just not watching.
The President will seek another payroll cut for 2012 and may get it. He will seek to have it offset by higher taxes on the rich, but he will not get that.
Pork spending will continue by Congress – that’s guaranteed. Cuts to doctor Medicare payments will be deferred by another year (thanks to their powerful lobby), Afghanistan and Iraq will suck up tens of billions even as they wind down; unemployment benefits will likely be extended again; and AMT will be adjusted to let off a chunk of middle class members.
Finally the House will seek as their pound of flesh from the President by asking for Bush’s tax cut to be extended, possibly permanently. He may fold and they may get it. If all this happens, we’ll be awash with debt.
In summary, the super committee’s failure means we’ll be broker a lot faster than we think. We are likely to spend like sailors before the automatic cuts kick in. And we’ll be the worse for it! What do you think?
