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The situation is pretty simple. The private sector is saving next to nothing. The federal government continues to borrow substantial amounts. As a result, national saving — the combined thriftiness of government, businesses and households — is at its lowest level since the Depression, and the nation is borrowing massive and growing amounts from abroad. All of this is coming at the worst possible time, as the nation prepares for the tremendous pressure on Medicare, Medicaid and Social Security created by the imminent retirement of the baby boomers and rising healthcare spending.
A family that saved nothing, borrowed a lot and lived well beyond its means just as it was nearing retirement would raise obvious red flags. The problems are no different — only bigger — at the national level. Low saving reduces our future national income. Borrowing from abroad is a deceptive palliative. Because our foreign creditors have to be paid back, foreign borrowing mortgages whatever future income the country generates.
The Bush administration and its apologists have responded to this situation with a mixture of denial and obfuscation.
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Denial and obfuscation, something the W, Rove and Co. has perfected in near 6 years in office. They are good at it to a superlative degree, and perhaps, that should be why we should all be very, very afraid.
2 comments:
A government is not a business
One problem of a business-oriented administration of any stripe, Republican or Democratic, is the tendency to run the country like it's a business. Businesses typically run at zero net worth. They try to take costs out to maximize profits.
The profit in a government is the well-being of its people. Government can tolerate many redundancies if they lead to greater well-being. The goal is to live well, not cheaply.
E. g: ''Tax Freedom Day,'' that mythical day of the year after which your money is your own. If your municipality puts in a public pool, tennis court, or golf course, that's one more delay added until the day of liberation. For ''Tax Freedom Day'' nutters, everything that government does is a cost.
Reducing costs isn't the purpose of government. A government is more like a household than a business. It has the same responsibility to save for a rainy day, not hock the umbrella to get a little more cash for today.
A government can always borrow, then use its soverign power to print more money to repay its debt. This is watering the stock of money, reducing its value. It's name is ''inflation.'' Inflation is a tax that the weakest government can collect. It is a tax like any other tax. A stealth tax raised by a government too cowardly to tell its citizens that they can't have the things they want without paying for them - one way or the other.
*Sigh*
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For a long, long time--it was 43 years ago when Bob Solow made this point while working for the Kennedy Council of Economic Advisors--it has been next to impossible for an economist serious about boosting national savings to avoid saying "balance the budget". Balancing the budget--indeed, moving it into surplus--is almost certainly very close to a magic bullet for increasing national savings, and it's a very good bet that it's the most effective thing the government can do to boost national savings. It's the first an highest priority for those who do care about boosting national savings.
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