Sunday, May 23, 2010

We Are Out of Money: American governance won’t begin to inch forward until the political class faces basic facts.

In March the federal government created the most expensive new entitlement in four decades, even as the bond rating company Moody’s Investors Service warned that debt levels could soon precipitate a downgrade in U.S. Treasury bonds. The main opposition party fought the bill by decrying “cuts” to Medicare, and it has kept itself at arm’s length from one of the few politicians talking seriously about long-term reform.

Today may be terrible, but tomorrow is going to be much worse, at least as measured by such metrics as deficits, debt, and entitlement spending. In an April speech, Federal Reserve Chairman Ben Bernanke laid out the misery that awaits us. “The arithmetic is, unfortunately, quite clear,” he said. “To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”

Yet in the very next paragraph, Bernanke displayed the kind of cowardice that got us into and has helped extend our awful economic mess: “Today the economy continues to operate well below its potential, which implies that a sharp near-term reduction in our fiscal deficit is probably neither practical nor advisable. However, nothing prevents us from beginning now to develop a credible plan for meeting our long-run fiscal challenges.”

States, counties, and municipalities, lacking Bernanke’s ability to print money, do not have the luxury of “beginning now to develop a credible plan” for the future. They are flat out of money in the present. But they too refuse to face reality.



Read the whole thing.

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