I confess up front as I write this piece that I have only the most tenuous grasp of finance and/or economics (my willingness to admit this fact being the primary thing that distinguishes me from Ezra Klein). That said, you don’t have to be a money whiz to react with horror at the slow-motion trainwreck that is currently unfolding in Greece, that threatens to imperil most of the Western economic world. Reading Dan’s excellent piece on the Establishment, I was left wondering how many people really and truly understand what the possible consequences are of our current Federal spending policies – either within government or without.
As I scrolled through my Transom today, which contained a number of items on the Greek crisis, it became clear to me that a) it is entirely within the realm of possibility that someday in the relatively near future, the United States will not be able to meaningfully finance debt spending, which will b) lead to immediate, disorderly and probably panicked structural budget cuts of 40% or more, which c) will lead to massive economic disruption and possible massive civil unrest. Observe what is happening in Greece – default at this point seems imminent given a breakdown in talks between Greece and its private creditors, and Greece looks likely to be kicked out of the Eurozone as a consequence. Of course, being tied to the Euro prevents Greece from the utilizing the last refuge of financial desperation – issuing massive amounts of worthless currency without regard to inflation.
Nonetheless, even this is a temporary refuge. There comes a time – and that time is coming for Greece, absent major changes – when a government simply will not be able to borrow any more money; or will not be able to borrow as much as it needs, or will have to pay so exorbitantly for its credit that it becomes impractical. We’re not there yet as a country, but if we continue to dink around the margins of spending, cutting merely a few billion here or there (and dishonestly calling accounting gimmicks “cuts”) – or even worse, if we fail to stop Obama’s re-election and end up spending even more, we will get there sooner rather than later. And at that moment, like Greece, we will be faced with exigent circumstances demanding instantaneous and disorderly cuts just to keep the government operating.
The choice is not between making moderate cuts or making drastic cuts. The choice is between making drastic cuts now, in areas that make sense and don’t provide value or critical support to the private sector economy, or making drastic, panicked cuts later in the face of even worse economic crises and probable civil unrest. It is going to happen, one way or another. We, as voters, just have to decide whether we are going to continue to reward the cowardly politicians who are preaching ineffective half-measures and coddle the entitled protesters in our midst who shriek every time government is shrunk. We can do this the easy way, or the hard way. But either way, it’s getting done.