Some chilling words from David A. Stockman in Saturday’s New York Times:
With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.
As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls. …
Without any changes, over the next decade or so, the gross federal debt, now nearly $17 trillion, will hurtle toward $30 trillion and soar to 150 percent of gross domestic product from around 105 percent today. Since our constitutional stasis rules out any prospect of a “grand bargain,” the nation’s fiscal collapse will play out incrementally, like a Greek/Cypriot tragedy, in carefully choreographed crises over debt ceilings, continuing resolutions and temporary budgetary patches.
These policies have brought America to an end-stage metastasis. The way out would be so radical it can’t happen. …
When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.
Boomergeddon, anyone? We’ve shot all our ammo. Interest rates are near zero. Five years into the business cycles, deficits still are close to $1 trillion a year. There are no arrows left in the public-policy quiver but economy-wrecking a slow-motion repudiation of the debt through inflation, and that will have hideous consequences of its own. You thought the Great Depression was bad? At least half the population lived on farms back then and could raise subsistence crops. Today many urban Americans, rendered supplicants to the government, have no ability to survive on their own.
The federal government is beyond salvation. Virginia is not yet there. We still have a few years to build “antifragile” state and local government institutions. Alas, Virginia’s governing class, though less reckless than their federal counterparts, are blind to the danger.
— JAB