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Deficits and Smoking

Arnold Kling in a fair but pessimistic post:

Absent an effective constitutional brake, deficit spending is like smoking. In theory, the politicians can quit at any time. In practice, in many cases we end up with cancer.

I would add to that, a history of how the US got into its fiscal mess.  After the Second World War, the US was able to spend money in excess of income tax revenue by ‘borrowing’ from the Social Security ‘trust fund’.  When that did not provide enough funds, we went into frank deficit spending by borrowing on the open market.

What did we spend the money on?  Our politicians bought gifts for favored constituencies — defense contractors, labor unions, progressive causes, doctors, homeowners.

Now we have reached the point that even with borrowing the Social Security/Medicare revenue stream, even with borrowing on the open market, even with the Fed printing money to buy the bonds the Treasury is issuing, we do not have enough money for both major parties to fund all of their priority constituencies.  The consequence is legislative deadlock while the two parties try to negotiate whose stakeholders will get the shaft.

Meanwhile, a reckoning is looming.

Have a nice day.

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