So this afternoon I'm going to the tag office to renew my vehicle tags, and I have Rush on the radio. I must have been touched by God or something, because just as I turned it on he started with a long monologue on how everything we've had for the last 20 years has been fake.
Cars, houses, flatscreen TVs, unlimited medical care for the poor, Medicare, etc, you name it - all fake.
Oh sure, the car, the TV and the doctor are real - you can touch them. But we never paid for them. We borrowed more and more money.
In short, Rush woke up to the reality of this:
Yes, he put a nasty partisan spin on it but you have to give the devil his due - he finally awoke from his long slumber. For the last several years I've wanted to smash the radio whenever he has gone on his "Republicans good, Democrats bad" mantra when it comes to deficits, taxes and spending.
Well, not today. Oh sure, today he had to say "Obama has been worse", but that's to be expected.
But he acknowledged - for the first time I've heard on his broadcasts - that what we've been doing, and are still continuing to do, not only hasn't worked but can't.
The people are waking up. Oh, it's slow, but they're doing it. And the small number who are awake and really, really*****ed off are going to turn into a very large number of extremely*****ed-off Americans in short order.
With good cause.
We've been sold a bill of goods in America. From the "Great Society" programs onward to some extent, but especially in the 1980s and forward. The lies of the George Bush with "Medicare Part D", Obamacare, "unlimited" (or close to it) unemployment, SNAP, you name it. We didn't have the money for two new hips for Granny, but we gave 'em to her. Instead of doing the right thing we have serially tried to send the bill to our kids, and those not yet born.
Well, we're out of suckers. Believe me, the young people are not going to pay. I know my daughter won't. She "gets it", and so do her friends. You might think I spent hours educating all of them.
You'd be wrong. They're not asleep - they're wide awake, aware, and not going to accept $40,000+ of debt each.
Forget it.
So what does this mean?
It means we're going to have to face the music. That those of us who thought we could "slide another one by" are going to get a rude awakening. All of the things I've talked about for four years - they're becoming emergent right here, right now.
Oh you can bet the government will try to kick the can once again. They always do. Washington DC is full of liars, and nowhere are there more of them than under the Capital dome and in the wings to each side. Never mind the White House and the Treasury building next door.
It doesn't matter. Mathematics have caught up with us.
As I explained to a legislative aide today by email, I understand the political issues with passing a balanced budget amendment. That doing so is politically "un-possible" today, and will be tomorrow.
But mathematics doesn't care about politics. It's like the laws of physics - you can legislate that light travels at 100,000 miles per second, but that doesn't make it so. You can legislate that we can replace all of our gasoline with corn ethanol, but you can't change the factual yield-per-acre of corn, nor can you change how many gallons of ethanol come out of a bushel. The numbers simply don't add, despite the fantasies of the eco-greenies and their sympathizers on Capitol Hill.
Thus it is with the debt situation in our nation today. The important ratio isn't debt to GDP, it's debt coverage - that is, debt as a percentage of federal income - otherwise known as taxes. That, and the interest rate, are all that matters. But coverage is going down, as employment has gone in the tank. And having blown its wad on useless "stimulus" programs that didn't stimulate, government no longer has the ability to toss a trillion dollars around here and there to try to create "jobs." The leash has been yanked back and we're now forced to "heel."
While The Fed and others believe they can control interest rates the fact remains that if the amount of debt grows faster than economic output (real output, not paper-pushing) does, then the strategy is doomed to fail. If fails not because someone didn't come up with a better scheme, but because it mathematically must fail. No amount of "MMT", Keynesian nonsense or other sorts of machinations can change the outcome. Oh sure, they can hide it for a while, but the outcome is mathematically certain.
We argue only over when, not what.
My argument this afternoon was that we'd have been far wiser to take our medicine in 2007 or 2008, and we should have taken it now by refusing to raise the debt ceiling. Balance the budget today, contract government by 40%. That sounds horrific, and it is. But it was 15% or so in 2007. Who's fault is it that we're at 40%? It's the House's fault. The House must initiate all revenue bills. It's their responsibility, like it or not.
So why take the medicine now, even if it will contract economic output ferociously and require cutting the government nearly in half?
Simple: The longer we wait the worse it gets. Isn't going from 15% to 40% in three years proof enough of that? If we lose control of this mess revenue could be cut in half and then the government has to shrink by some 70%, leaving little money to do anything other than pay interest. Even if we default (and in that case we would - with certainty) you couldn't even cover Medicare and Social Security. Social Security alone along with interest would exceed revenue!
That, my friends, is what we are staring down the barrel of if we don't cut this crap out - right now.
El Rushbo "gets it", but he hasn't quite figured out how serious it really is. The reason I've been frothing at the mouth for the last few years in The Ticker over this exact subject is that it's instantly obvious with nothing more than 10 minutes with Excel exactly where this path leads, and the longer we keep on it the more of our fingers, toes, and ultimately arms and legs we're going to have to sacrifice to change course.
I understand the political issues. There are plenty of people, including some I really like in the political sphere, who believe we can work this through over time, and that we start in 2012.
They're wrong. We might get away with finishing in 2012, but we won't get away with starting in 2012. That implies the next round is in 2014, then 2016.
But I don't believe we have five years to get to a sustainable budget. I know we don't have ten, certainly not at the pace being discussed thus far.
We probably have two.
But that's not much time, and if we go "over-center" before then, and it's entirely possible we will this year, then the acceleration of the destruction of coverage ratios will effectively preclude making choices, as they'll be forced on us.
I wish there was a better way to look at this, but there's not. We made our choices with trillions in faux stimulus and money printing. That's over now.
The experiment was run and it failed.
Period.
All you can do is be prepared, because our government has sold us out for 30 years, and as of today they're still doing it by shining us on with promises of solutions in the future.
We don't have time to wait for the future that never comes any longer; the wolf - the real one this time - is at the door.
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