The Looming Debt Crisis and What Lies Ahead

Doug Casey on the Looming Debt Crisis and What Lies Ahead

Via International Man

People have been observing this trend since the late 1960s; the idea of the federal debt getting irredeemably out of control isn’t new. But I think that we’ve finally reached a genuine tipping point.

In other words, when you keep racking up debt at interest, with growing deficits every year, bankruptcy is inevitable. But now it’s also imminent.

90% of the US government’s spending is baked in the cake. It’s not just that the spending is mandated by law and enthusiastically promoted by the agencies that dispense it. Government spending has totally corrupted the country, from welfare moms to giant corporations. They’ll all squeal like stuck pigs if the spending stops. I expect the accumulated distortions it’s caused to come unglued in the next few years.

I think that Trump is sincere, as are Elon and Vivek. But what we’re dealing with are absolutely massive entrenched programs. What’s worse, Trump has promised that he would not alter Social Security, Medicaid, Medicare, and military spending. Those things alone add up to something like 80% of the federal budget. It’s very hard to get the number exactly, because the US government’s accounting is so complex. I’m reminded of Defense Secretary Rumsfeld’s comment on 9/10/01, saying that the Pentagon couldn’t track $2.3 trillion of spending.

On top of those things, you have to add the interest on the official national debt, which is over a trillion dollars a year. That debt is absolutely going higher as the debt burden grows, compounded by rising long-term interest rates. I’m not even counting another perhaps $150 trillion of contingent liabilities and off-balance sheet debt.

Can Elon and Vivek do anything about this trend?

I suggest everybody visit https://www.usa.gov/agency-index. You’ll see hundreds of government agencies and departments listed—page through it. Few of them serve any useful purpose. In fact, almost all of them are wasteful and destructive. They’re bureaucracies employing drones (all of them with fat salaries, benefits, and pensions) to shuffle paper, basically to distribute tax dollars to favored entities. They should all be abolished.

Elon and Vivek should have a field day abolishing scores, even hundreds, of these departments and agencies. But will they be able to do it? I really question that, because individual Congress-critters have vested interests in their continuation—as do the other groups I mentioned earlier.

Can Trump do it by executive order? It’s highly questionable. Could he arm-twist the Senate and the House to abolish these agencies? Not much, especially since most of the Congress is not really ideologically aligned with Trump, even the Republicans. Forget about the Democrats.

The government’s running a $2 trillion per year deficit right now.

The only way out is to totally delete these agencies. Just replacing the personnel with “better people” is a mistake. Why? Because cutting costs means you’re just filling the piggy bank, so the next administration can gleefully empty it, and be heroes when they hire even more of the very same zombies that you fired.

The only way to solve this problem is to abolish these agencies. Don’t reform them, but make sure they cease to exist. Pull them out by the roots and sow Agent Orange in the soil where they grew.

The US Constitution has mostly been interpreted out of existence. Or blatantly ignored, like the 9th and 10th Amendments. The government is force and should be limited in a civil society. The implies a military, to protect citizens from force from abroad. Police, to protect them from domestic crime. And a court system to adjudicate disputes without reverting to force.

All the other requirements of society should, could, and would be handled by entrepreneurs. In fact, a good argument can be made that the “essential” tasks of government are too important to be left to the type of people who are inevitably drawn to governments.

Let me make a radical proposal that will shock almost everybody reading this now. I suggest defaulting on the debt, for several reasons.

Number one, it’s immoral. It’s criminal to impose the repayment of that debt on the next generations of unborn Americans. The debt is so large that they’ll be turned into serfs or indentured servants to pay it back.

And the question is: Pay it back to who? We don’t “owe it to ourselves,” which is what the liberals always used to say. It’s owed to particular people and institutions who have enabled the government to do all the destructive things that it does. They should be punished. I have no sympathy for the owners of government debt. In fact, these politically-wired people have enriched themselves at the expense of the average guy, who has few assets. It’s correct that they be punished.

There’s another reason. The debt the US government has is like a 100-story building that’s wobbling and is about to fall. There are two possibilities. You can wait for it to fall randomly and unpredictably. Or you can devise a controlled demolition. That’s the best alternative.

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