The media made a small fuss today about the near approach of
the 1000-foot wide asteroid Apophis, which just passed within about 9 million
miles of Earth, and is due for a return visit in 2029, when it is projected to
pass within about half a million miles of Earth, which is quite a close miss by
astronomical standards. There is a real, though extremely small, chance that it
will actually impact Earth on one of its later approaches in 2040 or beyond,
and of course if it did hit, it would cause a lot of damage.
But I find it interesting that the media make a fuss about
something as unlikely to occur as this asteroid hit, and yet largely ignore an
obvious looming catastrophe whose chances of occurring are at least 1:2 and
perhaps higher.
Real (as opposed to ”official”)
US government debt, including state and federal debt, is currently somewhere in the neighborhood of 350% of GDP (“official”
debt is about 100% of GDP). With the
changing demographics and aging population, projections put the added debt to
be imposed in the next few decades by current entitlement programs somewhere in
the $80-$100 TRILLION range. In
addition, bad (unrecoverable) debt in the private banking system is, as near as
anyone can tell, somewhere in the range of $2-3 TRILLION or so, and since the
government has made it clear to everyone that it will assume this debt if the
banking system fails, that adds another $2-3 TRILLION or so to the real debt
load. Never in history has an empire been so heavily in debt, yet past Western empires
(British, French, Spanish, Dutch, etc) were brought down by debt loads proportionally
much smaller.
Now one can argue endlessly about who got us into this
mess, but in fact there is more than enough blame to go around: feckless
politicians, greedy bankers, dysfunctional political parties, ideologically blinded academics, clueless media,
and first and foremost, we gullible voters who were perfectly happy to let politicians
buy our votes with our own taxpayer money, public debt and unrealistic
promises. In any case, it matters less who is to blame for getting us into the
mess than how we get out of it.
How will we get out of it?
There is almost no prospect that we will “grow” our way out of this
debt, much as politicians like to promise this. Even if we actually managed by some miracle to
create surpluses in our federal revenue, never in recent history has Congress actually
used such surpluses to reduce debt – they have always used it to buy votes by funding
ambitious new government programs.
So in the end, we will simply default on most of this debt. The question is how – slowly, for example by inflation,
or suddenly, with some sort of financial crisis. But default we will. Clearly
most of us are going to get hurt by this. Promised pensions will disappear or
be sharply reduced, either actually or by inflation reducing the real buying
power of our pensions. Investors will take haircuts, and since many investors
are in fact corporate or government pension funds, that will exacerbate the
problem for all of us. Eventually there will have to be a sharp contraction in
government, which will put a lot of people and companies out of work. Subsidies, which keep whole uneconomical segments
of the economy going (uneconomical by definition, or they wouldn’t need
subsidies), will disappear, putting even more people out of work. Clearly there is going to be, somewhere in
the future, a major dislocation in our nation.
Our current crop of politicians, in both parties, are just
putting band aids on the sores and whistling in the dark. Perhaps they simply
don’t grasp the magnitude of the problem. Perhaps they have made the mistake of
believing their own election propaganda. Perhaps they only care about their
next re-election campaign and could care less what happens after that. More
likely some of them understand perfectly well the dilemma we are in, but can’t
think of anything to do but try to keep the public calm with promises and lies.
I am reminded of the German Jews when Hitler came into
power. Many simply couldn’t believe, in a civilized modern nation like Germany,
that bad things could happen, whatever a politician said. And many believed
that until the day the Gestapo came to ship them off to concentration camps.
Are we repeating the experience: refusing to believe that a nation like ours
could suffer a major disruption from such a debt load? We are certainly acting like it. We just re-elected almost the same batch of
politicians, no one seems much worried that we just finished another year with
a trillion dollar federal deficit, and there are relatively few voices asking
the President or the party in power to explain exactly when and how they propose
to deal with this debt load.
We are all
acting as if things were normal. They aren’t.
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