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11.23.2004
Somedays I have a hard time deciding which is worse, the Republican social agenda with its theocratic leanings and big brother attitude or the Republican economic agenda which seems tailor made to drive us into economic ruin. Today, reading this, and this... it was an easy choice. Economics. According to the Stephen Roach, the chief economist at investment banking giant Morgan Stanley, our economy is running on fumes, with our nation borrowing money from foreign creditors and our individuals borrowing money from creditors. The result, he speculates, is "armageddon". In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants. How fun...a nice little transfer of burden, oh when will my wingnut friends learn that nothing (even tax cuts) are free? But then we have the ship of fools running the White House who have concocted a plan to "fix" social security by privatizing it. The problem though is that in order to honor the promise of those already paid in, the transition would cost TRILLIONS to implement. (Can you tell I think this is a horrible idea?) The "solution" to the problem of having to spend trillions to "fix" social security is to move it "off budget". They include treating the cost of Social Security reform not as a present-day expenses, but more as a prepaid benefit for future retirees that should not be counted against current deficits. Or they may take the costs "off-budget," meaning Social Security spending would not be included in the calculation of the annual budget deficit. Follow this... one of these days we're going to have a problem, there will be a greater demnad for benefits than there will be money to pay for it. So the "solution" they propose is to scrap the system by allowing people to have their own "private" retirement accounts which daddy Wall Street will happily watch for all of us. To pay for the transition we'll have to do both for a while; pay those people already in the system and let money drain out for people to invest in their Wall Street matresses. We'll punch a hole in the leaky bucket so to speak. The extra money needed to keep the whole thing afloat will be borrowed money. Bush will whip out the national credit card again. But we're already leaning heavily on other nations to buy up our debt and they're getting scared that we'll leave them hanging dry. They have people like Stephen Roach over there saying "Golly, America's not keeping its financial house in order, maybe we should stop loaning them money or we could lose our shirts". Of course everyone assumes that America will live up to its promises. Not an unfair assumption in previous times... I think I've mentioned before that I think privatizing Social Security is a really reall bad idea? Of course Bush and his cronies run a policy based strictly on political expediancy. When it comes to economic decisions the choice is always to just borrow more money; to pay for tax cuts, to pay for a needless war and to pay for pet projects. But with our foriegn debt buyers giving us the evil eye, the White House has decided that its best to make this Social Security "fix" look invisible while still costing trillions. How? Enron style accounting... Gregg and other allies of the president argue, in fact, that transition costs of $1.5 trillion or more over the next 10 years should not be considered an increase in the nation's debt. Instead, they say, such borrowing would be a prudent recognition of future obligations. The premise? This will work so well that it will pay for itself on down the road, so much so that we can choose to ignore the present day costs. You follow that? If not, you might take another swig of whatever you're drinking; alcoholic if possible. This plan reeks of the same "They'll throw flowers at our feet!!" thinking that led us into Iraq. I actually understand the premise and NOBODY would buy into it for any other reason than one driven by idealogy. What if I said that we should build a 1.2 trillion dollar national monorail system but that we shouldn't count the cost because we'll save so much money on fixing roads and importing oil that our creditors will think "Gee Wally, how forward thinking of them, let's ignore the current state of reckless spending!" (I would instead propose that should we decide to do this we pay for it up front with money we collect and pay out any future benefits when they come to pass. A transfer of benefit instead of a transfer of risk to future generations. ) By this logic all costs of public invesment should be ignored because of its future payoffs. I might be tempted to propose national health care with this kind of reasoning... considering the impact health care costs have had on individual borrowing. If you follow that, lay off the sauce, you've had enough. The funny part? The White House will borrow money from the SS trust fund to cut the deficit so they can claim prudent economic stewardship. You can stop laughing now, because despite what they say, we own that debt and we can't pay it off by borrowing from ourselves. We're starting to sound like gambling addicts that believe we can run up the credit card because we'll just pay it off when we win big at the blackjack table. We'll be spending trillions to finance a transition, borrowing that money from SS to pay off the deficit and somehow be making the claim that we came out ahead. The bucket analogy amended: We'll punch three holes in the bottom of the bucket, one for "fixing" Social Security, one for tax cuts and unaccounted for spending (Iraq), and one for paying out current SS benefits, we'll collect water from one of the holes, pour that water back into the bucket and claim that not only are we not losing water, but that we have re-filled the bucket up to half full again. Take another big gulp and enjoy the next four years. (as first seen on Eshaton!) |
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