Ben Stein: No more voodoo economics!
So where do America's finances stand on this Tax Filing Eve? Here's our contributor Ben Stein:
As I wend my way around the nation these days, travelers come up to me and ask me about the federal budget. "Are we about to go broke?" "Will we have a crisis?" "Whose fault is it all?"
So, here's a little lesson on the subject:
We are not about to go broke imminently. Our total federal debt, is roughly equal to our yearly national output as an economy, the gross domestic product.
This is a very high ratio of debt not seen since World War II. But we survived that high debt largely because the economy was growing fast, the big deficits stopped and the federal debt shrank.
Nowadays, we have immense deficits adding to the debt for years to come, with no end in sight. And the economy is growing slowly.
At some unknown point the debt will be so large relative to the national output that our U.S. Treasury securities will be downgraded in terms of credit quality. That will raise borrowing costs, already a massive expense.
But we cannot actually go broke as a government because the Federal Reserve - a part of the government - can literally print money, as much as it wants.
And that money is, well, money, accepted as such. We can't run out of it.
The problem there is that, if we print too much, we will probably have inflation, and that's bad for most Americans.
Can this all be solved? Well, as my old dad used to say, "If something cannot go on forever, it will stop." So, these huge deficits will stop.
The Republicans - who started the problem with excessive tax cuts in the Bush years - will have to agree to raise taxes, at least upon the truly rich (of whom there are plenty).
The Democrats will have to agree to major spending cuts. I hope these will not be at all in defense, but some probably will be. Social Security and Medicare will have to be changed ... a lot.
All in all, we Americans just promised ourselves more than we could deliver. We lived in a dream world.
No more Voodoo Economics.
The grown-ups like Bill Clinton and Robert Rubin, his Treasury Secretary (who actually balanced the budget) left the federal fiscal scene ten years ago.
Now, it's time to live within our means. We can do it.
The first step is back through the looking glass into reality. We've got to do it
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