Josh Barro writes for Bloomberg:
Of course, budget deficits work because the government is different from a household. A government does not have a life cycle, does not ever expect to stop generating income to support itself, and, therefore, does not ever have to retire its debt.
Governments don’t have a life cycle?
Human history is littered with countless attempts to “make government work,” and the failure rate is a perfect 100%.
They all fail!
Sure, some may last 100 years, 500 years, 1,000 years, etc….But in the grand scheme of things, it’s a spit in the bucket.
And, of course governments don’t “ever expect to stop generating income” to support themselves. When you’re detached from reality, the tendency to think you have some super power to continually expropriate money from others can easily take hold. The financiers throughout history (The Medici’s, The Bardi’s, The Merrill Lynch’s, The Lehmans) also believed that they were permanent fixtures for all of humanity.
Yet, after a certain amount of time: Poof! Reality catches up, and a new crop of schemers take the reins.
Speaking of reins, Barro does pull in the reigns a little bit on his initial aforementioned statement:
It must keep its debts at a manageable size relative to the economy, which the U.S. has done over that 60 year period. If the economy is growing over the long term, that means the government can run a deficit and grow the debt every year — sustainably.
This line of thinking goes all the way back to one of the architects of America’s corrupt money system: Alexander Hamilton. It actually goes back even further, but for conversation’s sake, we’ll pick it up with Hamilton.
Hamilton is well-known for saying:
“A national debt, if it is not excessive, will be to us a national blessing; it will be a powerful cement to our union.”
By the way, when Hamilton said, “will be to us,” he didn’t mean people like you dear reader….he was referring to the expropriating class.
So does the “as long as it’s not excessive” schtick hold water?
Of course not!
Government borrowing is a double drain on the economy. First, because resources are withdrawn from the productive private sector to the unproductive and waste-driven government sector. Second, because private citizens will, in the future, be taxed to retire the debt, or pay the interest on it. If the government doesn’t directly tax to retire the debt, it will have to print money (a slimy tax) or borrow even more. But we’ve just seen that borrowing, in and of itself, is a kick in the chops for the economy.
And as for printing…in addition to robbing you of your purchasing power, it creates the boom/bust cycle that twists an already hobbled economy into a bigger knot. The same intelligencia then forbids liquidations at all costs, which fosters even more unproductive and zombie institutions on all of us. The waste just continues to pile up, until eventually something gives.
Once the road is taken that government debt, and money printing is good for the economy….and that these are solutions to the problems they create, then the “as long as it’s not excessive” nonsense goes right out the window. It becomes a matter of semantics. Who decides what qualifies as “excessive”? As we can see everyday from the scribbles in the various mainstream outlets, it’s never excessive!
Bottom line: While Hamilton (and his intellectual descendants) may think they found the golden key to infinite expropriation, the truth is that failure is built into the system. Government borrowing and printing is a lose-lose…all the time. There really are no free lunches.
Unless, of course, you’re a part of the “us” that Hamilton was referring to. Those few people do get to eat everyone else’s lunch for awhile. But to think that the charade can go on “forever” or “indefinitely” is testament to the fact that people really never do learn the lessons of history.
The only thing that the expropriators can hang their hats on is time….How much time do they have? How many more rabbits are left in the top hat?
No one knows the answer, but their books have never looked more horrendous.