Monday, August 17, 2009
The United States is functionally bankrupt. Our collective capacity to deal with this astonishing fact is seemingly nonexistent. Our national politics have become show business, exhibiting a complete refusal to strategically respond to this reality.
Let's look at the simple numbers of our national debt. Our on-the-books national debt is $11.6 trillion. But off-the-books federal debt, including Medicare and Social Security, is $107 trillion...
add the $11 trillion to the $107 trillion, and we get $118 trillion. These are big numbers but still just fifth-grade math. Now our total annual national output, or gross domestic product (GDP), is about $14.3 trillion. Total federal receipts, or income if stated in business terms, are about $2.5 trillion...
Ask any accountant, banker, or anyone remotely familiar with simple accounting knowledge if we can service this debt, and the collective answer is a resounding "no." Any business with these ratios would be a complete basket case, hopelessly bankrupt
In Britain our deficit is £800 billion ($1.3 trillion) which with officially 18.7% of US GNP would be equivalent of about $7 trillion. This looks a bit better than in the US but not much & probably mainly because the £ has recently fallen against the $ & in general we are in the same mess.
The Office for National Statistics (ONS) said the nation's overall net debt ballooned to £798.8bn (€923.7bn) in June - the highest proportion of gross domestic product (GDP) since records began in 1974.Getting British estimates for other, mainly pension, liabilities is more difficult but I do not believe they will be, proportionately, significantly less.
The WT article mentions the obvious, arguably only possible, way out with a strange response
I once asked one of my federal senators, Sen. Tom Harkin, Iowa Democrat, how we would handle this nightmare, and he simply replied, "We'll grow our way out of this."What I find intriguing about this is that though the WT dismisses supporting growth as not politically acceptable it implicitly accepts that (% growth, as in many countries from China to Ireland, is feasible.
Senator, I challenge you to lay out this cheery scenario. We are not politically set up to grow at 8 percent or 9 percent like China. We would have to adopt extremely aggressive pro-growth policies, and those are not politically acceptable at this time.
I simply do not believe that, outside of political activists who are slightly unusual bunch, the idea of getting a lot wealthier is going to be unacceptable.
On that basis I recommend Sarah Palin's facebook. Currently it is, understandably, all about the healthcare row but she has, on a number of occasions, specifically mentioned the importance of growth. Reading this will also show that, agree with her or not, she is most definitely not the uninformed, foolish, ingenue so often claimed by opponents. Her detailed mastery of the subject is obvious (as Obama's isn't) & suggests if anything her intelligence is to great for popular electoral politics.
As Habits of Highly Effective Countries (a pdf i have recommended before & will again) says "Fortunately, higher growth tends to coincide with more economic
freedom regardless of how its protagonists define it" so basically it can be achieved simply by politicians getting out of the way. If Britain & America have managed to bankrupt ourselves, while France, German & today japan give signs of coming out of recession, we may have limited our options so that economic success is the only one left.
UPDATE The Daily Politics has done an assessment of Britain's total liabilities & it comes to £6,561 billion, 4 1/2 times our GNP which makes it a bit less than America's 8 times but not good.