DOOM! Special Edition: Locked and Loaded

The fault, dear Brutus, is not in our stars,
But in ourselves, that we are boned.
- Stuff Shakespeare Said, 3rd. Ed.

With the primary vote casting coming quickly upon us, here's a reminder of where we find ourselves, with a huge hat tip to coblogger emeritus Geoff.

First, we continue to make unrealistic assumptions about future GDP growth.

People talk about 4 – 5% GDP growth as if it were the norm, and they base all their budget projections on the economy returning to that sort of growth rate. Absurd.

We haven’t seen consistent 5% GDP growth for 35 years.

If it weren’t for the dot.com boom, we wouldn’t have seen consistent 4% GDP growth for 25 years. Our economy is settling in at 2 – 3% growth for the foreseeable future.

Second, even the most aggressive piece of legislation to deal with spending, the Ryan budget, is inadequate to the task of even dealing with just FY 2011's deficit, much less the additional like amount we'll run the debt up in FY 2012.

This is what the President and his crackerjack economic team have wrought. A one-year deficit that is so large that it can only be paid back if everything goes exactly right. And if everything goes exactly right, we're still looking at decades before we can get back to the debt level we had only 6 months ago.

Be sure to read the whole thing.

Since Geoff wrote the posts these graphs were culled from, we've had a few clear opportunities to address the problem. We whiffed on the FY 2011 continuing resolution showdown and the debt ceiling increase, choosing instead to punt to the "Super Committee" that failed miserably as it was designed to. Also, don't forget that we still don't have a FY 2012 budget thanks to the feckless Harry Reid.

Now the debt ceiling (and debt) has been raised to $15.2 trillion, with an additional increase of $1.2 trillion in the offing. We foolishly traded a theoretical $1.2 trillion of spending cuts over 10 years for an immediate increase in the new debt limit (ha!), and on the current path, we'll hit $16.4 trillion of debt by inauguration day 2013.

To bring these two pieces of Geoff's work together, does anyone care to hazard a guess as to the average annual GDP growth presumption in the Ryan budget? I'll save you the work; it's 4.7%. 4.7% per year for 10 years? Take a look at that first chart again and tell me how realistic that seems.

If you presume the Ryan budget achieves its spending targets on an absolute dollar basis but that revenues are a function of GDP - and then cut GDP growth to a realistic number, like, say, half of what's in his forecast - we'd add nearly $5 trillion of additional debt in the ten years over and above what's in his budget.

So the most aggressive spending reduction plan we have, that our candidates don't exactly shout their support for from the mountaintops, falls short of what's needed to keep us from ruin. And on the revenue side, everyone agrees that we have to grow our way out of the problem, but then they fudge the growth estimates beyond anything realistically achievable so they can avoid the pain of making adequate spending cuts.

But the fault lies not in the candidates; it lies in the electorate. Enough of us are content to let the cancer we know is there eat away at us because we feel o.k., if not entirely well, and will apparently continue to do so right up until the point that it kills us.

posted by Andy at 09:50 AM

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