Life in the fast lane

With the national debt sitting at 13.7 trillion dollars, the president and minions (not onions, but those 535 legislative folk elected by us) are "fighting" for us trying to come to a deficit reduction agreement. Will this work?

The Republicans want to accomplish budget balancing without increasing taxes. The Democrats want the wealthier among us to pay more. The Republicans want drastic cuts in spending. With a budget deficit at roughly 1.5 trillion dollars both seem to have a mathematical arguement.

The rub is they are not talking about balancing next year's budget. They expect us to believe things will get better if they take 10 years to get to balance. That means there could be an additonal eight to ten trillion added to the national debt before the budget is ever balanced. With the current national debt equal to our current Gross Domestic Product and Moody's bond rating service downgrading our debt instruments publicly, how can we rationally expect to sell that much new debt over the next ten years? At what interest rate? Who will buy it as an investment expecting a rate of return and return of the principal amount?

The current budget "negotiations" will result in a market for U.S. Treasury securities limited to those with ulterior motives. Those who want a position that will give them power over the United States. The average investor will not want to take the risk becasue they cannot afford it. The average financial terrorist will have the finances to take the risk and the inclination to press the advantage. That is to dictate to the debtor nation policy, economic decisions, etc. Think it can't happen?

We have engaged in deficit spending for decades and have little tangible to show for it. The attempt to create a socially less riskye society was noble to the more charitable of us, but left us with a deteriorated education system, less manufacturing capacity and jobs, and loss of control of our financial resources since we have to pay the debt service and entitlements first. We borrow just to stay even.

Nothing short of immediate budget balance will yield a tangible financial benefit in the near future. That is a long shot for one reason. The government is too big to control. Try asking people from who and from where one would get a consolidated statemnet of operations for the federal government. How much was the deficit really? All the information that is published is estimated long after the fiscal year is closed. There is no set of documents that a leader can sit down to review with his department heads and say "you are over budget, get it fixed now!!!!!!". That is how any CEO leads his "successful" company. If this can't be done by the federal government and done now, then it is too big to control. It must be smaller
and manageable.

It is against this background that the current negotiation in the government should be viewed. Think its impossible? Only if you don't try. It would be drastic action. It may have to play out over a budget year. But it most certainly must be the yardstick against with all candidates in 2010/12 are measured.