An interesting column in yesterday’s Globe op-ed, calling for the government to reign in spending and the deficits. No doubt a minority view at this point, and almost laughable with the government throwing around $700 billion dollar bailouts like quarters. And with interest on the national debt included in the FY2008 budget at about $431 billion we spend more on that line item than just about any other item. I wonder if we could build some infrastructure, or help struggling cities and towns by spending $430 billion on them instead of bondholders. But I digress.
The austerity piece calls for the government to begin enacting fundamental fiscal reforms that address the issue of America spending beyond its means.

Many politicians decided reelection depended on cutting taxes and offering more benefits. Increase Medicare, postpone Social Security reform, hire more bureaucrats, and pay for a two-front war. Debt grew to pay for this party. These were not true tax cuts, just postponed debt; now we owe more and the bill has come due with interest.

It is no doubt true that at this singular moment cutting back would likely have dire financial consequences. But in my view you just cannot keep spending beyond your means forever. If that were the case why would we worry about the future solvency of Social Security. If there will be a shortfall then we can just borrow it. The authors of the article point to the potential disaster of a currency collapse.

The United States requires a massive restructuring to address its debt, cutting back on its borrowing, spending, and wars. The bailout package is essential to keep the credit markets open. But absent sentences that include the word austerity all the bailout will accomplish is a temporary postponement. Bailout and stimulus are a stopgap.

A solution requires the country to begin to spend what it earns, reduce its mountainous debt, and address massive liabilities, restructure Social Security, pension deficits, military, and Medicare. No wonder politicians would rather spend more of your money now rather than address these problems. Because we have been spending 5 to 7 percent more each year than we earn, a forced restructuring, triggered by a currency collapse, would have the same effect on wages and purchasing power that the housing collapse had on housing prices. So let’s learn from our Latin and Asian friends and act before it is too late.

But then again that prescription would require someone, somewhere to tell people things that might mean lost votes and lost elections. So we continue the debt ride and see where it takes us. Read the Globe article here.