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Requiem to an Improvident Generation
Jesse Richman, 1/5/2010

In his most recent column, Cal Thomas provides a sweeping summary of the financial difficulties faced by the American Republic. He argues that the projected 9.1 trillion next-decade budget deficit is actually overly optimistic, and that a more realistic figure would be 13 trillion. Thomas concludes with the warning that

If we don't [ask government to let us take care for ourselves and vote accordingly], the future belongs not to us but to China, Japan, Qatar, Venezuela and Saudi Arabia, among others -- all holders of our national debt.

Thomas' warnings concerning the improvidence of American government are well placed, but they are likely to go unheard. The last four decades have been decades of improvidence, a period in which government has heeded the calls of a narciscistic generation unwilling to plan and cooperate effectively for the future, whether personal or collective.

At the personal level many Americans have abandoned thrift and saving for improvident waste. Personal savings rates have recovered slightly over the last year, but this probably reflects the inability of the irresponsible to get additional credit more than a true change in national culture.

At the collective level the Federal government has run budget deficits through most of the last four decades. The current levels of deficit spending would be far more modest were it not for the massive interest payments that are already due, currently running about 400 billion per year. Democrats favor spending increases and Republicans favor tax cuts. Unless balanced by painful tax increases or spending decreases the result is quite the same in the end.

The Federal government under both Democratic and Republican administrations has also done little or nothing to stop three decades of massive trade deficits that have transformed the United States from a creditor to the worlds largest debtor. In the process, trade deficits (and the government policies that sustain them) have eviscerated American comparative advantage across a wide range of fields, diminishing the prospects that the U.S. will be able to successfully pay back decades of borrowing without suffering broad declines in living standards.

The illusion persists among those in the improvident generations that have wrought the current and coming crises that somehow they will escape. That this will all be passed on "to the kids."

Thomas remains in delusion. He writes "(the kids will be paying for this)." It is unquestionably the case that the kids will (and are) paying for this. But the assumption that only the kids will pay for this is an illusion of the first order. Perhaps Thomas plans to die soon. But it is us, and our parents as well as our children who will be and are paying for the improvidence of ourselves and our forebears. We have met the improvident and it is us.

It is also a delusion of the first order to claim that either the Republican or Democratic parties stand for fiscal responsibility or serious efforts to right our international balance of payments. Such efforts would smack too much of the self control, care for the future, and discipline that the improvident have ever lacked.

Thomas calls for mobilization:

It's our money, not theirs. They are now stealing it before we make it. Let's hear some outrage about this. Let's sustain it through the next three election cycles, beginning next month with the governors' races in New Jersey and Virginia.

Vote for a Democrat who supports substantial and specific spending cuts or a Republican who takes a stand for real and sizable tax increases if you can find one. They are rare in this improvident land.
[This is a re-post of an entry originally dated from October 2009 on our old trade and taxes blog.  I'm reposting it because the old blog is currently not accessable, and I like this piece.]




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