such a nasty woman | by maryann johanson
Sat Feb 13 2010, 02:56pm | 1 comment
All sounds sensible, but can it work? And can the federal government provide the kind of kick in the ass to the economy that we need without increasing the deficit?
To answer your question MaryAnn, no it won’t. Our economic situation is very similar to that of a drunken alcoholic. Just has the alcoholic’s body can’t function correctly because it is being choked with too much alcohol, our economic is choking on too much credit/debt (same thing, just depends on which side of the ledger you look at: abstract promise to pay in the future).
The “Pay As You Go” is like saying “now I’m going to drink responsibly.” If sober, the body can handle moderate amounts of alcohol just fine. If already sufficiently drunk, a steady amount of alcohol will continue to damage the body without letting it repair itself.
There are two types of recessions. The one most people think of is where this is too little demand to keep up with a surplus of goods and services. In this situation, government spending can be useful to pull this slack out of the system and help get things back on track. The other type is a credit recession. Too much credit has been extended to those who cannot pay (credit cards, loans, mortgages, etc). The last time we saw one of these preceded the Great Depression (which was caused by the same sort of speculative nonsense that got us to where we are now). Just like a drunk’s body can’t function normally awash in alcohol, our economy cannot function in a healthy manner until enough of the excess debt has been flushed from the system. The government adding more debt to the system in an attempt to “kick start” the economy is like trying to sober up a drunk with another stiff drink.
Those who don’t understand this stuff are going to continue to be surprised when programs such “Pay as You Go” keep failing to fix anything. Just like a drunk sobering up, the true healing process is going to be quite unpleasant. This debt detoxification process is coming, whether we like it or not. My gut feeling is a whole lot sooner than any of us want. The longer we put it off, the worse it will be.
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