Marc Cuniberti: Things are fine until they aren’t
February 10, 2019
Although reining in the national deficit is all but vanished from Government speak nowadays, the problem is still a problem. With the first trillion in U.S. debt taking somewhere about 220 years to amass, beginning in 1776, now we run up that amount or more each and every year. Talk about an overspending family member. From the lips of Dick Cheney in 2003 came the infamous quote and now apparently common belief in Washington: "Reagan proved that deficits don't matter".
Humm … Well they do in my house and I bet you a dime to a trillion dollars they will matter at some point.
In other words, all is well until it isn't.
The debate is hardly discussed now on most major news outlets and what once was a GOP political "go to" hot button, has been banished to the point of political incorrectness, or so it seems, but the debate is certainly still valid, at least in the mind of this analyst.
We should at least listen to an argument that might have dire consequences for the country. Historically deficits have been the death knell of many a civilization through history. 507-year-old Rome eventually fell for a few reasons, one of them being a degradation of its currency, having debased its legal tender coins so many times their money resembled ours today, meaning it had little precious metal contained in it toward the end.
So is the United States immune to such catastrophic endings as it brought about by a severely abused currency or is it really "different this time?"
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Sadly, we are not immune and no, it's not different this time.
Few are more qualified to weigh in on the debate then former United States Comptroller General David Walker. If you don't know what a Comptroller General does, from Wikipedia:
"The Comptroller General of the United States is the director of the Government Accountability Office, a legislative branch agency established by Congress in 1921 to ensure the fiscal and managerial accountability of the federal government."
Sounds like Mr. Walker would know. He held the office from 1998 to 2008 and I had the pleasure of interviewing him shortly after he left office.
In a Washington Times column entitled "Putting America's finances in order," Walker stated: "It is abundantly clear that neither of the two major U.S. parties is fiscally responsible. Republicans focus primarily on tax cuts, while Democrats focus on spending — and neither party focuses on the bottom line or long term".
So let's get this straight: the two main political parties that run our country are not fiscally responsible.
Given the United States is the largest economy on the planet, it being run by fiscally "irresponsible" people doesn't sound like such a good plan, neither for America nor the entire globe for that matter.
The Congressional Budget Office projects the federal government will eventually reach the "cut up the credit card" moment in about a decade, spending more on interest payments than national defense. Putting it in real figures, the United States will have to shell out $1 trillion in interest within 10 years.
A mild "ouch" may be in order here.
For those not willing to do the advanced math, let's put it plain English. A big chunk of the country's income will go to nothing productive. Basically you might as well pile up the cash and burn it, as interest payments are basically money poured down the proverbial rat hole.
Many of you will think the American government has never had a problem before. True.
But things are fine until they aren't.
Others will say the government will just print the money. True again, as borrowing just creates more interest payments.
So printing will save us?
Doubtful. In fact, let's retract that.
No, printing money solves nothing.
It's just colored paper with pictures of dead presidents on it. Really durable colored paper, but paper is the key word here.
Indeed the United States government thinks printing paper solves problems. If they didn't, they wouldn't do it. But they do a lot of it, so they must think lots of paper solves something.
So let's just break it down for you simple like: If printing money solves economic problems, why does the United States and nations too numerous to count still have economic problems?
Like I said, you don't need advanced math skills to see that one.
Marc Cuniberti hosts "Money Matters" on KVMR FM aired on 65 radio stations nationwide. He is a financial columnist for a variety of publications. Marc holds a BA in Economics from SDU with honors 1979. His website is moneymanagementradio.com and he can be reached at (530) 559-1214. Visit him on Facebook (FB) under Marc Cuniberti and also on the "Money Matters" and "Money Matters Investing in Community" FB pages. The views expressed are opinions only.
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