Friday, February 27, 2009

What Repayment Plan?

I occasionally find myself in agreement with liberal columnist and pundit, Michael Kinsley. He sometimes drops observational tidbits that are quite accurate, regardless of your political leanings.

So, I took note when I found Kinsley quoted in the Wall Street Journal’s opinion section, which leans generally conservative. I don’t know if Kinsley is only talking about the latest ‘stimulus’ spending or all such spending of recent months (and future months), but what he says clearly applies to the whole shebang:
“[E]ven if the stimulus is a magnificent success, the money still has to be paid back. The plan of record apparently is that we keep borrowing, spending and stimulating, faster and faster, until suddenly, on some signal from heaven or Timothy Geithner, we all stop spending and start saving in recordbreaking amounts. Oh sure, that will work.

“There is another way. If it's not the actual, secret plan, it will be an overwhelming temptation: Don't pay the money back. So far, even as one piggy bank after another astounds us with its emptiness, there have been only the faintest whispers about the possibility of an actual default by the U.S. government. Somewhat louder whispers can be heard, though, about the gradual default known as inflation. Just three or four years of currency erosion at, say, 10 percent a year would slice the real value of our debt -- public and private, U.S. bonds and jumbo mortgages -- in half.

“Anyone who regards the prospect of double-digit inflation with insouciance is either too young to have lived through it the last time (the late 1970s) or too old to remember. Among other problems, inflation works only as a surprise or betrayal. It can never be part of any public, official plan. Plan for 10 percent inflation, and you'll get 20. Plan for 20 and you'll need a wheelbarrow to pay for your morning Starbucks. But if that's not the plan, what is?”
A worthy question indeed. Every American should be asking it.

2 comments:

David said...

"we keep borrowing, spending and stimulating, faster and faster, until suddenly, on some signal from heaven or Timothy Geithner, we all stop spending and start saving in recordbreaking amounts"

I think that says it all right there. Thanks for sharing.

JHP said...

Amen to that. I'm still trying to figure out how we're going to spend trillions today to "fix" the economy and somehow cut the deficit in half by the end of Obama's first term. The Laffer Curve might work somewhat for tax cuts, but I don't think it works for increased spending.