Mar

28

Pay now, pay later

March 28, 2008 |

How would you like to be $9 trillion in debt?

Well, after a fashion, you are.

That is, the United States government has racked up more than $9 trillion in debt for the people, by the people, of the people. And the people will, sooner or later, have to pay off that debt.

As of right now, economists warn, we can’t keep talking about extending those tax cuts without making the kind of deep, politically suicidal cuts in spending that candidates — like, say, the three currently in the running for President Bush’s job — don’t seem to want to mention.

In a very broad way, the idea of keeping some or all of the 2001 and 2003 tax cuts is about the only way in which all three candidates seem to see eye to eye.

(Pause for musical interlude)

Meanwhile, March has seen another double-digit dip in consumer confidence, as measured by The Conference Board. Small business owners, on the other hand, had a slight uptick in optimism in February, according to both the National Federation of Independent Business and the Discovery Small Business Watch. I’ll be interested to see what those numbers do in March.

The consumer confidence numbers are particularly worrisome to a lot of economy watchers, since consumer spending makes up roughly two-thirds or more of GDP. If said consumers are so spooked that the Expectations Index (consumer expectations of business and economic conditions in the near future) is now at a 35-year low, that probably signals a retreat in spending that will make the tepid 0.6% fourth quarter 2006 growth slow even further.

This whole living beyond our means stuff is not confined to consumers. The last recession was a relatively mild one but part of the reason for that was the available of cheap credit, including those exotic home mortgage financing deals, and a general vibe of encouraging people to borrow and keep spending, even if they’d been laid off or otherwise broke. That method of putting off the pain is now in the process of rising up to bite us in our collective butt, in the form of this economic slowdown that feels remarkably like a recession.

It probably isn’t helpful if the government does the same thing. It might not be politically popular but, if there is anybody at all who wants to lay claim to the mantle of fiscally responsible, then those person should be talking about reigning in spending and even (gasp!) raising taxes a bit on everybody — at least, until such time as we get our fiscal house in order.

Otherwise, we’ll keep on going with Wimpy-nomics (”I’ll gladly pay you Tuesday for a hamburger today”), until we get from downturn or slowdown or recession — however you want to phrase it — to total economic collapse.

That wouldn’t be pretty.

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Comments

1 Comment so far

  1. Robert on March 29, 2008 9:12 pm

    I have to say it is easy to make comments when we are not in charge of making the actual decision, but the simple logic of the situation can not be denied. We teach this to our children in the first couple of years in school.(if billy has $5 and he wants a toy that cost $7 can billy buy it?)

    As some one that lives or dies by how small business activity I hope they find a solution soon, better yet we have to get involved. We forget you can pick up your phone and call the folks that make these decisions after all they are elected official right?

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