This pretty much sums up the state of the US government’s finances after the shutdown.
When Washington raised the debt ceiling this week, the Beltway media breathlessly reported thatthe fiscal crisis had ended. Lawyers danced in hallways, bureaucrats twerked on the Metro, congressional aides kissed strangers in the streets — the Tea Party has been defeated! It was likeVJ day for wonks.
As our political class exchanged high fives and reporters praised a return to “sanity,” I wondered how these odd creatures defined insanity.
America’s fiscal crisis is not that our debt ceiling was too low, the fiscal crisis is that our debt is too high. When I mentioned this to left-leaning folks, they seemed indifferent. “Obama lowered the deficit.” “I think Bush spent more.“ “It’s Reagan’s fault!”
Here’s his chart:
Now. If you listened carefully to commentators talking about the shutdown, there was a subtle shift.
Originally, the talk was “if the debt ceiling is not extended we won’t be able pay for our debt”. That is nonsense. Rather obvious nonsense – if you don’t have enough money, you proprieties. And you place interest payments at the top of your list. So there was never any chance of a default.
So the talk shifted subtly to talking about “obligations”. This was intended to make other spending (social security for example) sound like debt repayments. It pretended that a contractual obligation was the same as a policy decision.
But the reality is that the US national debt is serious. And like New Zealand in 1990, serious decisions need to be made. The Tea Party is trying to push for those decisions to be made. They are the adults. Obama is the guy offering icecream.
The analogy is imperfect, but imagine the green is your salary, the yellow is the amount you’re spending over your salary, and the red is your Visa statement. Then imagine your spouse runs into the room and shouts, “great news honey, our fiscal crisis is over. We just got approved for a new MasterCard!” Your first call would be to a marriage counselor or a shrink.
Unfortunately in the US’s case, the counselor (the media) is joining in the celebrations.
But hey, I’m sure it’ll all be fine.