Yahoo's Tech Ticker has a series a videos featuring David Walker, the former U.S. Comptroller General and head of the Government Accountability Office. Walker's evangel is the longer term threat of America's "structural" (entitlements) debt in health care and social security. Walker is concerned that these "unfunded" obligations threaten to sink the "ship of state" as time goes on.
David Walker means well, but he is naive. Make that very naive. Here's the video, with a roughed out quote. (There's no transcript.) Walker is interviewed by Aaron Task.
Task — Is what we're seeing in the [weak] bond market a sign that the chickens are finally coming home to roost [with respect to the U.S. debt position]?
Walker — Only time will tell ... [about the bond markets, markets are oriented toward the short-term] ... and there's a big difference between our short-term deficits, which are largely temporary, and our large, known and growing structural deficits that really represent the threat to our future....
What I'm saying is that all deficits are not the same, that the short-term deficit is caused largely because of the recession, because of two undeclared and un-financed wars, because of several rounds of tax cuts, because of additional domestic spending, because of bailout spending and a variety of things that will pass... what threatens our future is the deficits that will exist when the economy has recovered, when unemployment is down, when the wars are over, when the crises are passed, that's what threatens the ship of state...
Whoa, David! When the economy has recovered? When unemployment is down? When the wars are over? When the crises are passed?
This is THE crisis—we're in it now. This is it—The Big One! To his credit, Aaron looked a little skeptical & bemused as Walker talked about that not-so-glorious time in the future when the crises are over.
I explained (in part) why this crisis is The Big One in The Debt And The Deficit — Part I. This post commented on a roundtable discussion that took place on The Charlie Rose Show. The discussion included David Walker, Paul Krugman and others. Among other things, I said—
Another way in which the past determines the present is in the economy. Here, our prior internal commitment was to destroy our industrial base, outsource good paying jobs in software or manufacturing, handicap our export capability, gear our economy toward consumption (instead of production) and most importantly, base our future growth on ever-higher private debt levels to support that consumption. I described some of this in my blog post Keynesian Delusions.
And here again, in the economy, we are toast.
Oh, Yeah, I almost forgot—we're also broke.
The key to understanding our present circumstances is to understand how we got here. Consider unemployment. In When In Doubt, Blame China, I referenced the fact that in the decade 2000-2009, only about 1 million private sector jobs were created in the United States. In When Will "Full" Employment Come Again?, I explained why it will take 7 or 8 years, if all goes very well, before the United States will return to a "normal" jobless rate of about 5%.
All sorts of arguments could be brought to bear here. The housing market, which normally leads economic recoveries, is on government life-support. It will take many years to get the housing market straightened out, assuming we do manage to stabilize it sometime in the next decade. And Fannie and Freddie will be losing billions of taxpayer dollars until we stabilize that market. Also see my Housing Market? What Housing Market?
I hope some of you new readers will read some of the older posts I've referenced above. It is extremely naive for David Walker or anyone else to talk about threats to the nation when the "crisis has passed." Here's the Zen teaching that Walker and other cockeyed optimists need to understand—
Be here now. This is it. What you see is what there is. Wherever you go, there you are.
The widespread assumption that our current "difficulties" are just some particularly bad phase we're going through now —see my facetious Understanding The Business Cycle—is the real threat to our collective future.
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