Despite enormous federal spending, deficits, and debt, many
Americans remain relatively unconcerned. With evidence of
uncontrolled debt’s consequences so clear in Europe, how can so
many so easily ignore it at home? The answer is that competing
economic realities divide America, obscuring our fast-approaching
tipping point.
Under the President’s own budget and estimates, the deficit this
year will be $1.327 trillion. If correct, this will be the fourth
consecutive budget deficit over $1 trillion and the highest deficit
since 2009. Prior to this, America had never had one deficit over
$1 trillion.
This year’s $1 trillion-plus deficit will amount to 8.5 percent
of GDP. Excluding those of the previous three years, it will be the
largest since WWII. Under the President’s own assumptions, the
deficit will not fall below 2.7 percent of GDP — and not reaching
that until 2018 — in any year of the next decade. As recently as
2007, the deficit measured just 1.2 percent of GDP.
Under the President’s own budget and own estimates, the size of
government never drops below 22 percent of GDP — meaning
government will consume almost a quarter of all America produces
for the foreseeable future. Excluding the previous three years, the
budget’s lowest level would be the government’s
highest in 20 years.
Finally, under the President’s own budget and estimates, debt
held by the public will reach $11.6 trillion this year — double
2008’s $5.8 trillion level.
Prior to the recession, such levels of spending, deficits, and
debt were unthinkable. During the recession, they were seen as
unavoidable. Now, many seem to believe them acceptable. How can so
many not see spending and debt’s danger? It is not unseen, but
rather seen through an alternate economic reality.
In the real world, the private sector is the producer and
government is the consumer. In the alternate economic reality now
pervading much of America, the reverse is believed true. This
alternate reality is increasingly accepted by the increasing
numbers who are decreasingly dependent on the private sector and
increasingly dependent on the government for their economic
means.
The engine of their economy is government. For them, government
does not consume from them, it produces for them.
According to Congress’ official tax estimator, the Joint Committee
on Taxation, in its 2/24 estimate of taxes paid for 2012, 52.9
percent of those filing taxes will pay just 6.8 percent of total
taxes — social insurance, excise, and income. Their share of
income taxes — due to refundable credits, which pay
recipients in excess of their tax liability — will be a
negative 3.1 percent.
We marvel at Greek rioting over reduced government benefits,
even when bankruptcy is the alternative. But seen from an alternate
economic reality, it is perversely understandable. They simply are
fighting for the only economic reality they know.
Assuredly, the cries of impending collapse have been made there
— as they have been made here — for some time. Yet government’s
response — both there and here — has been to increase the size
and scope of its extent and spending. As in the fairy tale, it is
hard to believe the cries of “wolf,” when the wolf neither appears
nor is even regarded.
California offers a closer view of the same picture.
Government’s spending and extent creep inexorably until many no
longer know anything else. What they then “know” — their daily,
lifetime experience — is that the relevance in their lives is not
economic theory, regardless of analytical soundness, but
government.
Its fullest manifestation becomes that of the Greek rioters.
They become worse than the Luddites, who merely sought to stop
progress, and instead seek to refute reality itself.
While government can enable people to perceive a “reverse
economics,” it cannot in fact reverse economics — any more than
Canute could command the tide recede. Economic reality can only be
put off temporarily by ever-widening circles of subsidy: the
government’s redistribution of wealth through taxes, then
redistribution through borrowing at home, and finally
redistribution by borrowing abroad.
With each widening circle, its cost escalates. Ultimately
someone, if not everyone, balks — producers’ efficiency
diminishes, creditors cease to lend. The nation goes from tipping
point to tipping.
Until then though, the alternate economic reality creates an
alternate perception. People see the same things, but interpret
them entirely differently. So, here and now. Despite our horrific
spending and the debt problems America faces, a large percentage of
Americans do not fail to see, but their altered economic reality
causes them to not see crisis, so long as government keeps
spending.
