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11/24/2009
Burri: You and I ate all the nuts – AND part of the tree

The New York Times reports it like it’s new or something:

The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead…

(You saw the Times article included in FoxPolitics News yesterday…) The national debt over $12 trillion. Just the interest will cost the U.S. over $200 billion this year, and the optimistic estimates say that’ll grow to $700 billion by 2019. Oh, and that’s all before the Baby Boomers really start retiring.

It’s not like we didn’t know it was coming. We all did. We all do. But we – and by “we” I mean all of us, candidates and voters all – did nothing about it. And now:

…the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

…“The government is on teaser rates,” said Robert Bixby... “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”

But, like I said, this isn’t news. We all knew. So why talk about it? Let’s talk instead about…metaphors.

I love metaphors, but they can be tricky. Trickier than balancing a budget, which is why we can forgive bond manager William Gross for this one, in the same NY Times story:

“What a good country or a good squirrel should be doing is stashing away nuts for the winter…The United States is not only not saving nuts, it’s eating the ones left over from the last winter.”

Yeah, but that’s not what we’re doing. If we were eating last year's nuts, well, that's why we saved them, right? To eat later on? But we didn't save any last year – we ate those already. And then some.

What Gross means is: the squirrel ate all of last year's nuts, and then also ate parts of the tree, meaning less tree to produce nuts next year. Because, you know, it tastes good, and he was out of nuts. In order to live large now, he risks hunger next year. And next year, he’ll do exactly the same thing, except more so. This year’s gorging, you see, will leave him with fewer nuts next year, so he’ll have to eat even more of the tree, meaning even fewer nuts the year after that.

And so on, and so on…until there’s no more tree at all.

Making a feast of the dairy cow, knowing that you’ll have to live without the milk. Taking out a fourth credit card to buy groceries because the first three are maxed out.

Killing the goose to get the golden eggs, instead of being happy with getting one egg every few days. Yeah, that’s right. We should have learned this lesson in nursery school.

Please notice: I haven’t mentioned a single politician. I haven’t mentioned a political party. Yes, the current administration has taken past excesses to new heights, but those past excesses were there to be built upon. This is everybody’s fault.

And why? Because political power isn’t won by telling people “no.” We are the squirrels eating the trees. We keep electing political “leaders” based on what they’ll do for us. Based on what they’ll give us. Based on how much pork they bring home. Based on how much of our neighbor’s money they can grab to spend on us.

That's not new, either. Maybe the Times will report it, too.

Lance Burri blogs regularly via his site, The TrogloPundit.

COMMENTS

Jo,
It is sad that George the 1st was the last President who was willing to sacrifice his presidency for the better good of the country when it comes to paying for what we spend. In classical Keynesian economics you save for a rainy day and deficit spend during the rain. We have spent on sunny days and on rainy days and now, when the spending is really needed (yes it is really needed and we would have had a meltdown if George the 2nd and Obama didn't do what they did) we have nothing left. Well, watch out for inflation. Congress won't pass a tax increase to pay for anything and inflation may be the only way out.

Dave Allen (Tue Nov 24 06:45:42 2009)

Sadly, "the privileged" (those who are in places where they can spend everyone else's money - be it government officials, CEO's, or educrats who are held accountable for nothing and answer to nobody) will never be responsible for the fantasy spending. While they're the most capable to do something about it and have the most resources to step up and fix this mess, they're also putting themselves LAST IN LINE to pay a dime toward this outrageous deficit.

Instead it will be the employees, the taxpayers, and the independent business people who actually have to 'produce or loose it all' who will end up picking up the tab. Those who struggle to pay bills on time - to pay ALL the taxes due - and those who have to think hard when it comes time to either put money in to an auto repair or purchasing a different vehicle ... those are the folks that will be expected to shoulder the debt. AND their kids.

Those with "the birthright" will have 'people' that help them avoid the taxes which will pay off the debt. Those who are connected will have the laws written so their every day expenses are 'tax exempt' in just the right circumstance - while those who really sweat, really produce, and have dirt under their nails at the end of the day will end up "fixing" the mistakes of our privileged class.

Two things can fix this. A flat tax ... no loopholes, no exemptions, no progressive rate - plain and simple ONE PAGE tax code and a constitutional amendment requiring congress to pass a balanced budget each and every year with NO off-budget spending. If a disaster arises (like Katrina), something else gets cut to pay for the Federal assistance which has not been budgeted.

Simple, clean, no wiggle room.

Nobody in Washington today (on either side of the aisle) has the necessary anatomical hardware to make these changes.

So much for "all men are created equal". At least until 'we the people' decide that it's time to fix Washington.

Jeff Riedl (Tue Nov 24 08:16:25 2009)

I get a little tired of both parties writers/bloggers/politicans jumping on Bush everytime the deficit is mentioned. While he wasn't perfect, situations arised that prompted him to permit money being spent for various problems, but all OK'd by the Democrat Congress elected in 2006. Bush's deficit went down for three straight years...05, 06, and 07. The Dems took over Congress so they had the purse strings since 2007. That's when the deficit started going out of sight and unemployment started booming. I'm not saying Bush was completely innocent, but everything did go wrong when the Democrats took over Congress in 2007. Up till then..not much of a problem. Perhaps I'm a little naive, but Bush seems to get as much blame as Obama for this whole massive problem, especially when the Dems were responsible for the housing bust with Frank, Dodd and company and started by Carter. Bush came out of the depression left by Clinton, faced 9-11 then Katrina and two wars, but managed to have record low unemployment, record highs in the DOW, and the deficit went down for three straight years, record numbers going to college, record numbers in home ownerships, etc., etc. But yet some like Allen and most others continue to throw him under the bus everytime they talk about the deficit.

John Hyland (Tue Nov 24 09:07:44 2009)

John,
You clearly did not read what I wrote.

dave allen (Tue Nov 24 09:12:33 2009)

I like the seed corn analogy: we ate last year's seed corn and now have nothing left to sow for next year.

Brian Dunbar (Tue Nov 24 10:20:53 2009)

John, you have a very convenient memory. It wasn't just Frank and the housing crash, it was also the Gramm-Leach banking deregulation bill that in 1999 had 90 of 100 senators signing on the line, and Clinton signing it (a veto would have easily been over-ridden). And it was the Bush tax cuts that in a time of war were stupid (though his contributors thought they were smart). And the Dems didn't "have control" until Pawlenty finally gave them their 60th vote. And even now neither the D's or R's have control; the insurance industry does.

And let's not even talk about the Bush/Paulson giveaways.

Isn't money great?

Jack Lohman (Tue Nov 24 11:25:33 2009)

Dave- You mean GHWB, whom Milton Friedman once described as the worst thing to happen to the Republican Party in 75 yrs? The GB's were both responsible for the decline of the country in not standing on principle, and piling up the debt. Oh, AND discrediting the "Republican" notions of free markets, constitutional government while supporting policies that were anything but. I find very little to admire in either of the GB's.

Ken Van Doren (Tue Nov 24 12:09:31 2009)

Ken, George the 1st raised taxes and lost an election. But he did what was right at that time. George the 2nd, after having been largely responsible for the meltdown in the economy that we suffer from injected huge amounts of borrowed funds to prevent a total meltdown. He did what was right. I certainly don't think either Bush was on balance a good president but at least George the 1st knew taxes were necessary.

dave allen (Wed Nov 25 06:38:52 2009)

Dave, at first I thought you were talking about George WASHINGTON and the Whiskey Rebellion. You would do well to read up on that, and also read "Not Yours to Give" by David Crockett.

Why do you suppose it is "right" to raise taxes? After all, we DID fight a war to get rid of an oppressive bloated government and its taxes. Just remember, GOVERNMENT DOES NOT CREATE WEALTH, private individuals do. No society ever TAXED their way to prosperity!

emily matthews (Wed Nov 25 16:46:55 2009)

Emily, that's great. George W.

Jo (Wed Nov 25 18:46:45)

Emily, I forget who said it: "taxes are the price we pay for civilization," and more importantly, why is it that we can tax the poor to feed the rich, but we can't tax the other way around?

We need two things: to reduce government SPENDING so the number of tax dollars can be reduced, and we need to fund the elections with public dollars rather than private dollars, which drives the taxes you hate so much.

Jack Lohman (Wed Nov 25 19:12:01 2009)

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