Irony

When the fiscal irresponsibility of borrowers, lenders, regulators, and politicians came to a head in late 2008, we all experienced one of the worst economic collapses in modern history. As I watched my investments plummet, I told myself to stay calm and hoped that the markets would recover.

In the months that followed I continually asked myself how I had missed all the warning signs. After all, the fact that "mortgage brokers" were popping up on every corner, the fact that relatively low income people were buying expensive new homes that were well beyond their means, the fact that normal rules of borrowing disappeared, the fact that Wall Street had created exotic new instruments that virtually no one really understood, the fact that the markets were driven upward without regard to these impending problems, all provided plenty of clues. And yet, I missed them. Obviously, I wasn't alone.

It is frighteningly ironic that we're seeing another set of fiscal indicators that are the harbinger of a future crisis. The difference is that many of us who have worked and saved throughout our lives see the crisis coming, but the Obama administration and congressional leadership seem to have their eyes covered and their ears muffled. They continue to march forward on a government spending spree that is unprecedented in this country's history. In their attempt to achieve "social justice" they are putting the very people who they care most about in significant jeopardy.

Robert Samuelson comments:

When historians recount the momentous events of recent weeks, they will note a curious coincidence. On March 15, Moody's Investors Service -- the bond rating agency -- published a paper warning that the exploding U.S. government debt could cause a downgrade of Treasury bonds. Just six days later, the House of Representatives passed President Obama's health care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.

Should the United States someday suffer a budget crisis, it will be hard not to conclude that Obama and his allies sowed the seeds, because they ignored conspicuous warnings. A further irony will not escape historians. For two years, Obama and members of Congress have angrily blamed the shortsightedness and selfishness of bankers and rating agencies for causing the recent financial crisis. The president and his supporters, the historians will note, were equally shortsighted and self-centered -- though their quest was for political glory, not financial gain.

Let's be clear. A "budget crisis" is not some minor accounting exercise. It's a wrenching political, social and economic upheaval. Large deficits and rising debt -- the accumulation of past deficits -- spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.

Of course, the millions of citizens in the Center who are trying to sound the alarm are labeled uncaring, selfish, out-of-touch or even "racist." But the simple reality is that the profligate spenders in the Obama administration and in Congress (as well as their supporters on the Left) are the ones who are uncaring, selfish, and out-of-touch. Drunk on their power and blinded by their ideology, they're setting the stage for a series of calamitous events that could result in onerous budget cuts for the groups that they champion and onerous tax increases for everyone, including an inherently regressive value-added tax.

The "political, social and economic upheaval" that Samuelson describes will hurt seniors, poor people, working people, and the growing government worker class most severely. But the smartest guys in the room just don't seem to care. They'd rather feel morally superior in the short-term and risk calamitous economic events in the long term. After all, by then the smartest guys in the room will no longer be in power and instead adults will be in charge. The further irony is that when cuts are forced on the socially dependent and taxes are raised, when economic activity stagnates, it will be the current followers of Obama who scream the loudest, again charging that those who are forced to make the cuts are "uncaring, selfish, out-of-touch, or even "racist." It's win-win for moral preening, and lose-lose for the United States.