Wednesday, October 16, 2013
Countdown To Armageddon
Felix Salmon: The Default Has Already Begun.
North Carolina Suspends Welfare For Duration Of Federal Shutdown.
(Via Ad Orientem).
Actually, with $2.7 trillion in annual tax receipts and a huge private economy, I think us plebes will still have to show up for work and pay our bills [sadly places popcorn back in cupboard, puts rifle on 'safe'].
Talk of blame is not really constructive. Voters elect legislators who promise something for nothing, nobody wants to pay for it. A Democratic Senate wants to fund Obamacare, a Republican House does not. There are enormous structural problems which will never be debated, like the direct election of Senators which upends the state-federal balance and gives us huge, leveraged monstrosities like Obamacare, Homeland Security and others in a very long list. There is redistricting to create majority-minority districts, so the neighboring districts become super-majority and Congress populates with representatives holding antithetical views.
I will grant the Republicans' critics this: if you believe in government, shutdowns are uneconomic and unjust. A parliamentary system would be better so voters really could change the government when they wanted to. The root problem is that Americans are fundamentally divided on important, even ontological issues that cannot be settled by a vote. (Historically, they are settled by violence.) Democracy is the town council voting on road repairs, not on how to confiscate 40% of a citizen's earnings and run his life for him. The US is just too big and too diverse to govern effectively. We should scale it back now or future events will scale it back for us. Perhaps that is happening now.
Felix Salmon talks about broken promises but this too is misplaced. Current taxpayers have no obligation to honor promises made by past legislatures, no more than a father can pledge his child's future labor. Bondholders should bear that risk and charge interest rates accordingly. For the past 20 years, the Fed and its primary dealers network have used financial legedermain to keep interest rates low, hiding non-systemic risk to the point it converts to systemic risk, manifested in a thirty-year cycle of booms and busts: M&A in the 80's, dot-com in the 90's and real estate in the double-oughts. The whole shebang would have finally, mercifully ended in 2008, but Democrats and Republicans united to protect the duopoly over the massive opposition of society's net payors. If we weren't coasting on so much accrued capital, at any other time in history the nooses and pitchforks would have come out. Now here we are in the 10's and facing the Mother Of All Bubbles, the one in sovereign debt.
We keep reaching these impasses which are eventually broken by incurring more debt. People think this can go on forever because it has so far.