Saturday, February 25, 2023

#56 / I Just Want To Watch Things Burn


I have been worrying about the potential for massive economic dislocation (likely to be both national and global), since Republicans in the House of Representatives seem willing to tell the world - and United States citizens, too - that the United States will not repay monies that the government has borrowed (and that the government has, in fact, already spent). 
In early February, I stated my opinion that "we should be looking ahead to a real, and profound economic and political crisis, coming to our nation, and the world, in just about six months." My worries are widely shared!
So far, with time passing, I am not seeing any reason to be any less pessimistic. Amy Davidson Sorkin, writing in The New Yorker, seems to share my angst. Paul Krugman, in a New York Times column dated February 2, 2023, validates my concerns. Krugman says that "It's hard not to be worried. It’s dangerous when a political party is willing to burn things down unless it gets its way; it’s even more dangerous when that party just wants to watch things burn."
If you would like to join my worry group, you can click right here for the Krugman column (but be aware that paywalls may prevail for those who are non-subscribers to The New York Times).  

Another source of information on the government's debt repayment crisis is a CNN Newsletter titled, "What Matters." Clicking that link should take you to a conversation between CNN's Zachary B. Wolf and Robert Hockett, a law professor at Cornell University who specializes in public finance and consults for the International Monetary Fund and the Federal Reserve Bank of New York. 

The interview is extensive. Here are just a few excerpts: 

HOCKETT: You’ve probably heard this phrase before: Hamilton’s blessing. Alexander Hamilton famously wrote in one of his first state reports as our nation’s first Treasury secretary that a national debt, if properly funded and properly managed, will function as a national blessing. And it turned out to be correct.

But the debt is too big, right? Maybe not.

WOLF: On the other hand, our debt now is larger than the GDP. It’s larger than it’s been since World War II and the largest it’s ever been, I think. Is it too big?

HOCKETT: It’s nowhere near too big. When we measure a national debt, we look at it as a percentage of GDP. It’s much, much lower than the Japanese national debt is, for example, relative to Japanese GDP. And you don’t see anybody worrying about the integrity or the worthiness of the Japanese national debt or whether Japan’s economy can sustain its debt.

Japan, in fact, has had sort of the opposite problem. It has been concerned that there’s not enough national debt issued by Japan, which is one of the reasons that the Japanese economy is rather slowly growing relative to historic rates.

Seriously though. All these trillions of dollars of debt. It’s not unsustainable?

WOLF: You’re saying not to worry about the debt, but do you agree with the commonly held belief that the safety net programs and government spending are currently on an unsustainable path? I think that’s a bipartisan view.

HOCKETT: I don’t think that that’s a bipartisan view. And I don’t think that that’s actually a serious issue.

I think the only reason that has been talked about, at this point, is simply a matter of politics. It’s because of who has taken control of the House. They find political hay can be made by talking about that.

But of course, if you ask any of them what they actually want to cut, only a few crazies will talk about looking at Social Security or other programs that are not discretionary budget items.

And so then, if you ask them all, ‘What would you cut?’ They come up short; they don’t really have any answer for you.
So, if Hockett and Krugman, both expert economists, are correct, we don't have a "real" problem. We have a "political" problem, and that problem is that Republicans in the House may, in Krugman's words, just want to "watch things burn."
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