The Path to Fiscal Sanity - Stop Spending What We Don't Have!

The Greeks, the Italians and the Spanish don’t need to be told that.  They’re already paying a price for their profligate ways.  The cost for these countries to borrow more money is rising to high-risk levels (Greece is already there).  Because their economies are on the Euro, meaning they can’t simply print more currency on their own, there is a real possibility that they won’t be able to pay their debts.  In effect, they’ll be bankrupt.  Thus, lenders are demanding higher interest rates for loans which, in turn, makes repaying them more difficult.  

Nonetheless, these examples give little pause to President Obama and his congressional allies.  Demands for greater spending still mark the administration’s fiscal policies despite public relations claims to the contrary.

Note the recent brouhaha over Congress’s “super budget” committee.  It floundered on the shoals of budget-cutting because Democrats refused to sanction significant reductions in government expenditures.  So our nation’s debt continues to mount. 

Are they so smug (or unconcerned?) to think that European examples of spending more than one takes in can’t lead to financial catastrophe here? 

A respected measurement to assess a nation’s financial health is to calculate debt as a percentage of the country’s gross domestic product  (GDP).  Last year Greece was at 166%.  Portugal and Ireland, other troubled economies, were 106% and 109% respectively.  The U.S.?  102%!

During the entire Twentieth Century, the GDP percentage in the U.S. exceeded 100% only during World War II (120% plus).  At the end of World War I, it was about 25%.  During the Vietnam War era, it was well under 50% and in 2001 the GDP ratio was only 56%.

Sure, the U.S. is not Europe.  We are attracting lenders willing to accept low interest rates because of our perceived national strength relative to others.  And we can always print more dollars to pay our bills (hyper-inflation, anyone?).

Does arrogance prevent some from recognizing that inevitably we, too, will pay a steep price for our profligate ways? 

An anonymous pundit overcome with common sense once remarked “to stop making the hole deeper, stop digging”.

Stop spending what we don’t have!

But today’s liberal is likely to respond “Don’t worry, we’re looking for the money tree”.