Washington Post covered the riots in Athens, including burning of vendor vehicles, just across the street from where [my wife] stayed two weeks ago. The protestors told her they didn’t want to lose their entitlements, like retirement at age 55, even though there was no money to pay for them, and they couldn’t even create the debt to pay for them. It’s a shame that they burned the trucks, since those are peoples’ livelihoods, and an actually productive part of the economy.Not getting debt under control can lead to bad outcomes. Worse, it can lead to the election of demagogues who promise to spin gold out of straw.
On the other hand, cuts in the Federal Budget, while fundamental, are not sufficient in the short run. That means tax increases. There are two problems with tax increases. The first is that tax increases are often an excuse to not cut the federal budget, and thus are self-defeating, in that the problem doesn't go away. The second is that we are not going to be able to tax our way out of our problem. Someone asserted to me that 20% of the GDP in taxes is the knee of the curve and above 20% the economy starts to bog down. We are above 20%. I don't know why 20% would be magical, although it has been the traditional ratio from the beginning of the nation, but it is the historic number, or so this person says.
I worry about what happens in this nation when some of our programs, such as social security, run out of money in ten or twenty years. Will we be burning vendors' trucks?
As for the President's News Conference yesterday, the idea that Defense needs to be included in the round of cuts is both true and also not news. The call for defense cuts began earlier ($400 Billion over ten years by the President since the submission of the 2012 budget) and will continue and will impact our national security strategy. Such cuts will not be the end of the Republic as we know it.
Regards — Cliff