A 'Unique' Fiscal Crisis

Market old-timers (like me) have often said that the four most expensive words in the English language -- or, on Wall Street, at least -- are "this time is different." Nevertheless, the phrase usually refers to developments that the masses (or the trading crowd) view as bullish but which are, in fact, precursors to an unwelcome reversal of fortunes.

However, even though a growing number of people, including a former Treasury official whose perspectives are highlighted in a Capital Gains and Games post entitled "'Budget for a Declining Nation,'" see the meltdown in U.S government finances as "unique," I'm pretty sure we should not interpret this as a sign that the fiscal pendulum will soon be swinging back in a positive direction.

That was the title of today's luncheon talk to the National Economists Club by Urban Institute Fellow and former Deputy Assistant Treasury Secretary Gene Steuerle.  A video and slides will be posted here. These are the main points he made.

"What makes this fiscal crisis unique is that we can no longer depend upon economic growth to get out of it."

 

"World War II is always held up as an example of running the national debt over 100%, but no one remembers that we drove it down below 70% within 6 years by the end of the Truman Administration."

 

"We have a budget for a declining nation because we're increasing federal spending on consumption, and we're cutting federal spending for education and investment."

 

"The enormous budget squeeze of 2009 saw revenues fail to cover entitlement spending and interest for the first time."

 

"I call it my 'Index of Fiscal Democracy,' how much revenue is left after subtracting mandatory (entitlement) spending and interest."

 

"There is no give in this budget."

 

"The federal government has signed all of these contracts that can't be kept."

 

Check out Gene's many articles and publications at this Urban Institute web site.

Comments

[Dont Click Here]

There are two parts of the equation. Yes people saying we need to help the US and greece with money because they will collapse. But think about this....give them money and then they still collapse. It is throwing good money after bad.

Then you just get more lies from the government. So the real question should be should we reward the government for lying to use time and time again????

Greece will collapse. but let it collapse...it will be bad, but like All countries that collapse from the ashes will come a better, smart and more moral country. When america collapses, because it will, then let it collapse...so they can get a good cleanout and we can all start again.

[Marc Authier]

Greece is finito, kaput. Waste of time and money trying to bring back to life a dead donkey. Europeans should stop kidding themselves here. Greece is no Japan. Greece is no Russia. The country has strickly nothing to pay for this debt.

[dearieme]

Greece is, however, roughly California - Mediterranean climate, earthquakes and ruined public finances.

[roger]

In the old Industrial Empire ,wealth was derived from
the production line and to some extent benefited the
whole Nation.Its no longer the case, wealth now is
derived from finance as opposed to production.
Bottom line is:production, the exploitation of labor
no longer offers sufficient profits.
So yes Mr. gene Steuerle,this crisis is unique,and yes
economic growth in the industrial sense is no more.
Mr. Steuerle understands the dialectic, but he knows not
what to do about it.

[buzzsaw99]

It's not about Greece, it was never about Greece. It is about the billionaire kleptocrat bankers. No matter what happens the people will pay and the banks will profit.

[Rocky]

During the middle of the decade, Washington was more concerned about passing a Federal Marriage Amendment than about the growing national debt. The chickens have come home to roost. Blessed are the children, for they shall inherit the national debt.

[farang]

["The enormous budget squeeze of 2009 saw revenues fail to cover entitlement spending and interest for the first time."

"I call it my 'Index of Fiscal Democracy,' how much revenue is left after subtracting mandatory (entitlement) spending and interest." Posted by Michael Panzer.]

Huh. So, all those years (37 and counting) I paid my FICA and Medicare AND 1/2 my employees FICA, we were just GIVING that money into a "Trust Fund" called "Entitlements" when we go to withdraw it?

Who knew, Mr. Panzer? I guess the Generals are not Entitled" to golf courses world-wide :they earned it (with our tax dollars) right Michael? "Funny" how there is NEVER any discussion of DOD Trillion budgets on F.A. "Funny."

[HJames]

Yes, it is funny how there is also no discussion of the real entitlement spending -- repeated and widening gov't bailouts, subsidies and tax breaks for certain "entitled" industries. Certain special interests remain doggedly committed to selling the populace on various irrational propositions for breaking social contracts.