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Source link: http://archive.mises.org/16575/uncle-sam-busted/

Uncle Sam: Busted

April 21, 2011 by

The federal government is digging itself deeper and deeper into debt at an alarming rate. FULL ARTICLE by Robert P. Murphy

{ 10 comments }

Beefcake the Mighty April 21, 2011 at 9:21 am

You appear to believe that the Federal Govt is in the same situation as a household or business, or even a state govt; why is that?

Del Lindley April 21, 2011 at 12:05 pm

You know he doesn’t believe that. It is just the assumption underlying the S&P analysis.

Beefcake the Mighty April 21, 2011 at 12:09 pm

Well, then why does he write this:

“S&P’s downgraded outlook for US debt is one of many objective signs that those of us warning of a fiscal crisis aren’t crazy. The federal government is digging itself deeper and deeper into debt at an alarming rate. “

Del Lindley April 21, 2011 at 1:10 pm

The recognition of a crisis does not presuppose knowledge of its dénouement.

Allen Weingarten April 22, 2011 at 5:30 am

The primary issue is that the government should not spend money that it doesn’t have. Here, it is in “the same situation as a household or business” namely *there can be no solvency when expenditure continually exceeds revenue*. It is true that the government has powers that households and businesses lack, but that doesn’t include the power to create solvency by fiat.

Mr. Murphy is correct in noting that the Ryan plan cannot create solvency by going further into debt for the next decade. As he notes, Ryan’s plan assumes the validity of CBO estimates, as well as the conscientious behavior of future politicians. If we make those assumptions, we might as well assume that we will become solvent or are already solvent. One might justify the Ryan plan by saying it is the only feasible thing that can be done, but then it should be stated as a defeat, not a victory. The reality is that we are headed to default as we are engaged in the pretense that our politicians will deal with this seriously.

We could seriously deal with solvency by the simple requirement that the government can only spend on next year’s budget, what it has accumulated this year, which is how most of us manage our households.

J. Murray April 21, 2011 at 9:56 am

There can be no talk about deficit reduction without hitting Medicare, Medicaid, Social Security, and the Department of Defense. When expenses are high, you always look at your big ticket items first. Anyone who ignores what amounts to 80% of the annual spending isn’t serious about fiscal sanity.

Don Levit April 21, 2011 at 11:26 am

Can you provide more specifics on the $2 to $4 trillion of debt for entitlement programs, per year?
Maybe just for the next 10 years.
Thanks,
Don Levit

Patrick Barron April 21, 2011 at 12:24 pm

We will never get government under control until we regain sound money. Any improvements, as in the Reagan years, are only temporary. The reason is found in Mises great book Socialism. Fiat money is a socialist enterprise. There is no way to rationally calculate anything using socialist money–which is what fiat money really is. It appears to government that it can accomplish anything it wishes, because it can manufacture as much money as it desires. The masses are misled also–each special interest group demanding a piece of the socialist pie–because the government does not have to tax or borrow the money honestly…at least for awhile. But this house of cards will come crashing down. I believe, as I think Murphy does, that the house is wobbling right now. The Libyan adventure is a case in point. There is no American interest there, yet we are hemoraging money we do not have doing something that no one can explain. But this is par for the course with government operating on fiat money…it doesn’t have to explain anything to anybody…or so it believes.

J. Murray April 21, 2011 at 12:58 pm

Correction – there were no improvements during the Reagan years. Government grew at a ridiculous clip during that timeframe. Read Rothbard’s thoughts on Reganomics to get a full view.

Bennet Cecil April 23, 2011 at 9:49 am

The federal debt has increased ane average of 8-9% each year for the past century. Check the historic numbers on the government website. Plug them into the exponential growth equation and run your own calculations. Many Americans want a cheap dollar. Politicians like to spend fiat currency. Unless prices and unemployment punish average Americans they will continue to demand circuses and bread. This could go on for years until savers refuse to buy federal debt.

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