The staged posturing with its tragic-funny theatrics and lurid special effects in Washington about the Fiscal Cliff—and whether to fall off, jump off, fly off, dive off, climb down, or somehow avoid it altogether—has become an inescapable media reality, much like Y2K once was. I remember well the worldwide letdown on January 1, 2000.
I was in Berlin for the first time in my life to celebrate, well, Y2K on the street with about four million or so close friends and relatives—many of us have Neanderthal genes, it turns out. Like everyone else, I’d loaded up on cash in case the ATMs or the banking system would crash, or in case my credit cards wouldn’t work, etc., fears that had been mongered everywhere by everyone for well over a year. Computers and the world would come to a screeching halt at midnight.
Having partied through that point in time, I didn’t notice. But late that morning, I noticed. Still a bit groggy, I saw that everything was working, faucets, clocks, elevators, lights. I stepped out of the hotel and wandered into the perma-dusk that pervades Berlin in the dead of winter. People were strolling around, leisurely, trying to clear their heads, without the least sign of chaos. I noticed an ATM. Out of curiosity, I stuck in my US bank card, and wow, out came a neat bundle of marks.
Y2K wasn’t more than a big party. And a year-long media event. Ah yes, and something else.
Fearing the demise of their businesses, decision makers bought untold billions of computers and software and paid for custom updates so that they wouldn’t get caught with their pants down at midnight. A worldwide high-tech buying binge that had lasted for a couple of years. And after they’d bought everything they could think of in order to survive Y2K, they stopped buying. The run-up to Y2K was the last leg of the tech boom. The letdown on January 1, that I and the rest of the world felt, albeit with some relief, was a harbinger of the tech crash.
The Fiscal Cliff was invented by Congress to reduce the deficit, which would still be huge, but less huge, and the mountain of debt would still grow, but not quite as fast. Fiscal Cliff, the term, was invented by Fed Chairman Ben Bernanke. He should get an award for it. It’s a phenomenally successful term. Fiscal Cliff, the drama—we’re supposed to be riveted to the edge of our seats—was invented by the media. But the US government debt is real, gigantic, and rising at a vertigo-inducing speed.
Richard Nixon was the last Republican President under whom our gross national debt as a percent of GDP actually went down. Under Gerald Ford, it went up. Under Ronald Reagan, it jumped. Under George Bush père, it went up. And under George W. Bush, it defied gravity.
The record of Democrats in the White House is more mixed. Under Jimmy Carter, gross national debt as a percent of GDP went down (OK, a nasty bout of inflation was responsible for that, not Carter). Under Bill Clinton, it went down quite a bit. But under Barack Obama, it has been rocketing into the clear blue sky of brilliant false hope and is now over 100% of GDP—not long ago an unimaginably horrid banana-republic ratio, the stamp of what in the Eurozone has come to be called “debt-sinner countries.” Even Spain isn’t there yet!
During these administrations, Republicans and Democrats alternately ran Congress, and they bent over backwards to fill the big trough that corporate America, individual Americans, special interest groups, aid organizations, and whatnot, and even much of the rest of the world were feeding on. That’s why trimming the deficit—cutting outlays and raising revenues—is so impossible: everybody with any political power benefits from the moolah and the tax code.
In 2011, the debt ceiling, over which Congress fought hot and heavy for months, was $14.29 trillion. Now it is $16.395 trillion. Over $2 trillion more. And we’re already just about there. How could Congress and the White House borrow over $2 trillion in such a short time? I don’t know either. But they did.
As they’re going through another round of posturing and theatrics about the Fiscal Cliff, it’s time to lighten up and visualize just how high the debt ceiling is, though it’s not nearly high enough, the way Congress is going, all in crisp $100 bills, animated, with music that veers from melancholic to rousing and back. Amazing 2-minute video by Demonocracy.
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Kevin's got it right.
That big pile of government "debt" is a big pile of private savings. ALL private financial wealth comes from nett government spending.
If you don't want government "debt", don't issue government bonds in the secondary market. The government can still spend by issuing bonds or platinum coins or whatever it wants to the Fed.
The Federal government is the sovereign issuer of the currency (with the Fed) so it can always pay its bills in $US.