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Be Careful What You Wish For

October 26, 2012

I’ve spent a lot of time in the last few weeks crunching numbers. I’m good at it. Too good. I have bad news.

If you are a Republican, you might want to vote for Obama. If you are a Democrat, you might want to vote for Romney. Like I said, it’s bad.

First, some context. When Reagan was in office, the federal government collected about 18% of the GDP in taxes and spent 22% of GDP. Every year we borrowed 4% of GDP and the national debt went up, up, up. In those days, the national debt was about 33% of GDP.

Today, we are collecting about 16% of the GDP in taxes and spending 24%. This is a huge and unsustainable disparity.

When the crisis began in 2008, our debt had grown to 75% of GDP. By the time Obama took office, we had hit 85%. Today we’re over 100% (a level not seen since WWII) and there’s no end in sight; our debt is increasing at an enormous rate; if things don’t improve soon, 24-16 will be an appropriate epitaph.

No one, no voter, no candidate, no one currently in office has the slightest clue how to fix the 24-16 problem. People are not interested in tax increases. People are not interested in spending cuts. The economy isn’t growing nearly fast enough to support debt-based government. Whoever wins the 2012 election will be looking at the proverbial immovable object.

Both presidential candidates spoke to the Des Moines Register recently and both sketched out their positions in the clearest way I’ve seen throughout the whole campaign: it’s worth a look (the Romney interview, audio only, is at the bottom of the transcript of the Obama interview).

Romney talked about cutting funds that go to PBS and pointed out that PBS would do just fine without government funding. Romney knows of course that such cuts are merely symbolic and will have no effect. He was very clear with the editors of the Register: there will be spending cuts but no tax increases; if we somehow (magically) achieve a 4% rate of economic growth again, we’ll be okay. If not, not (he didn’t say that part).

Obama told the Register that he was going to make a “grand bargain” with the Republicans on revenue increases and spending cuts: $2.50 in spending cuts for every $1.00 of tax increases. It is possible that the grand bargain is figment of Obama’s imagination. If so, we get automatic cuts (“sequestration”) which may cause an economic disaster that God himself won’t be able to fix. If the grand bargain actually goes through, the 24-16 gap will still NOT be closed. Obama needs 4% growth too, and he doesn’t have a magic wand any more than Romney does.

In a nutshell: Obama thinks he’ll be able to work with Republicans in Congress; Romney thinks just the fact of his election will boost the economy; they both think 4% growth will happen.

I wouldn’t bet on any of it.

Corporations are making big profits, but are not expanding simply because there aren’t enough customers to justify expansion. Europe is stuck and spiraling downward. U.S. jobs have gone to China and aren’t coming back. Our capital is firmly controlled by a small number of big players to such an extent that George Will, that famous bleeding heart liberal, is proposing breaking up the banks. The social security surplus is gone; spending and revenue got a divorce and went their separate ways; bipartisanship is a joke.

Of the litany of scary tidbits from the paragraph above, the worst by far in my view is that George Will said the banks should be broken up. George Will. Not Dennis Kucinich. Not Bernie Sanders. This is like Sarah Palin suddenly calling for unilateral disarmament. Nothing that has happened since 2008 is more frightening than George Will saying we should break up the banks.

If anyone asks you how bad it is, just say this: “George Will thinks the government should step in and break up the banks: NO, REALLY.”

Mitt Romney is a solid businessman. Barack Obama is a visionary technocrat. Neither of them will break up the banks. Neither of them is Harry Potter (“What was that spell for 4% growth again? Where is Hermione when you need her? Damn!”). There may be a real crisis coming. If so, whoever is in charge will be blamed along with his party. And it might be the kind of blame that sticks around for a long, long time.

Want your guy to win on the first Tuesday in November? Be careful what you wish for.

Addendum: Obama won. Liberals are happy. My recommendation: Go easy on the Champagne.

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