The report the Federal Reserve release called the Z1 gives us an idea of what overall debt looks like. Denninger's analysis explains the problem. The federal government's debt is growing, which we knew, in an attempt to "buy" Gross Domestic Product. It is not working. We got a very sharp, needle-like spike from Bernanke's QE2 in September of 2010. It has now fallen into the negative range.
The federal government is sucking up all the oxygen and wondering why small businesses are sputtering. Cutting taxes is not going to fix this. The only option is to so drastically reduce the size of government that revenues cover expenditures. It is true that cutting government spending will cut GDP, but probably not at a dollar-for-dollar rate. Unemployment will grow as bureaucrats have to find new jobs.
I look at it like this. When I am trying to lose weight, I cut back on what I am eating. My wife's immediate response is to be somewhat insulted that I am not devouring as much of her cooking as normal. I feel guilty. I really hate to see food go to waste. But if I keep the refrigerator cleaned out, I am "waisting" food instead of wasting it. That can't be good. Better to feed the dog and the possums than to have to buy bigger pants with more material in them. Eventually, she adjusts her cooking volume to my eating plan. It takes a while, and it is painful. In the end, though, I avoid both wasting excess food and waisting it. Everybody wins.
I've been referring to Government jobs and government funded scientific "research" in and out of academia as "white-collar welfare" for decades.
ReplyDeleteI wonder what percentage of the educated, middle class, including academia, is directly or indirectly, related to the state and federal government? I bet it is huge.
It is huge. Police to prisons, firefighters to health care, schools, that's before you even start considering the layers of bureaucracies. My first job was for a state agency. Just in our state building there were hundreds of people, and hundreds more in the field, in just one agency. One of the things I did was go out to the local offices of "community action agencies" -- like ACORN -- and teach people how to fill out the right forms and reports to keep money flowing the federal government.
ReplyDeleteIt was so bizarre. I didn't last too long. Shoot, I just didn't know. I could have been President.