Monday, February 27, 2012

The U.S. 'debt doomsday' opportunity

Whenever I hear about economic policies in the West, be it the draw-out Greek rescue, or the US policies (of the socialist-lite Obama administration): "... eventually, you run out of other peoples money". That, of course, is the problem with socialism, according to Margaret Thatcher. A very steep price in lives has been paid to observe the historical veracity of this phase. The juxtaposition of the moral and fiscal hazards is not merely cynical, it's insightful. For example, USSR ran out of moral justification for the one-party rune long before it's financial collapse.

I see the same fate befalling countries in the West, as the slide off towards greater 'collectivization', such as the increasing EU control over the Greek economy as a price for the second bailout. U.S. has also been sliding in the socialist direction. U.S. has recently surpassed 100% debt-to-GDP ratio.

The U.S. debt may exceed $16.4 trillion debt ceiling before the 2012 presidential election. characterized this scenario in an article "Debt doomsday may come sooner than expected". However, with various accounting tricks, the U.S. Treasury could delay the absolute deadline until February 2013. Charles Krauthammer recently called Obama the lawless president, and the Obama administration will undoubtedly do everything legal and semi-legal to try to avoid face the reality of its unsustainable largess. Meanwhile, the U.S. external per capita debt exceeds that of Greece, for example, and is the highest in the West.
The debt ceiling debate is a crucial opportunity to check the growth of government, because it exposes the fiscal bankruptcy of the socialist malaise brought about by the Obama administration. This fiscal failure is readily apparent and can easier to attack than the ethical bankruptcy of socialist policies for weak-need politicians. However, the socialist nature is egregious and should be denounced in its own right - it pits the majority against minorities, for example different generations against each other. Obama's use of short-term borrowing for political gains, which benefits the old, comes at the expense of financial future of the youth, saddled by vast debts.

Regrettably, the U.S. is at a point, where a painful debate about the ethics and finances of government largess before the 2012 elections is the best medicine we can hope for.

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