In many respects, blogging about our debt situation is a lot like blogging about the George Zimmerman/Trayvon Martin matter. Most of you have reached your own conclusions, and so anything I write really won't move the needle on your opinion meter. So I'm not trying to do that. Instead, I'm providing you with information which you can use to help refine your opinion or bolster your own position, whatever that might be.
Tonight, I'd like to share with you the latest missive from Larry Summers, the former Secretary of the Treasury for President Clinton and the former Director of the National Economic Council for President Obama. By pedigree, Summers ranks among the most qualified voices on our nation's debt situation. By reputation, his comments leave something to be desired. He once blamed the shortage of women "involved in science and engineering fields was partly due to the 'intrinsic aptitude' of the gender." Others on the left side of the political spectrum distrust Summers due to his alleged role in Clinton-era financial deregulation (y'all know President Clinton enacted the repeal of the Glass-Steagall Act, right?)
So what does he have to say about our financials? Summers' position can be summarized into two points:
- Quit worrying about budget deficits; focus on growing our way out of our problems.
- We're not spending enough money to stimulate the economy.
To be fair, I do agree with Mr. Summers that we need economic growth - and lots of it - really fast. And he does make some fair points about the need to decrease regulatory barriers that choke off private investment, for increased accountability in our education system, and for more self-reliance on our own energy assets here in the United States.
Since this is a preparedness blog and not a policy or political blog, let me share with you three thoughts on this kind of thinking from a prepper perspective:
- Those who focus solely on debts and deficits completely ignore the tsunami that are unfunded liabilities. Think about it: if the American people knew that "the actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP," the discussion we'd be having right now in Washington would look much different.
I love it when Summers says in his article to which I linked above: "Given the magnitude of forecast uncertainties there is a chance of close to 40 per cent that with no new policy actions the ratio of debt-to-GDP will decline over 25 or 75 years." Really? A 40% chance it will decline over 75 years? And you haven't even factored in the 86 trillion dollars we owe for the off balance liabilities? Where can I buy this guy's investment newsletter?
You need to plan your finances with this information in mind. You need to take whatever precautions you feel are necessary knowing that the liabilities of the government far, far exceed that of the official balance sheet.
- Growth alone cannot save us. If and when our political leaders ever figure that out, it will likely mean reduced benefits for Social Security, Medicare, and federal pensions. If you have people in your family who are relying on these benefits to sustain them, you need to start thinking about how to help them - or how they can help themselves - if we see dramatic cuts in these areas.In fact, we're already seeing this at the local level. Police forces nationwide are curtailing their services due to the fact that unlike the Feds, they cannot print money to pay their bills. And as a result, we get messages like this from our local law enforcement:
- This entire discussion misses a much larger problem that only a handful of Americans fret over. I talked about this last night - government spending fuels things that infringe on our liberty. Spending less on government means we necessarily have a smaller government - one that is not hell bent on regulating every aspect of our lives. The "modern" approach I see touted from time to time - tying the debt ceiling to a certain debt to GDP ratio - misses the point. The goal isn't just better stewardship of our public finances; it's also about financing the optimal amount of government.