Monday, August 1, 2011

The Point Of No Return

One commentator on the debt crisis compared America to a family that has an annual income of $55,000, spends $90,000 every year, and has $360,000 in credit card debt. Those would be staggering numbers for a family, but the truth of it is that America is not a family, and this situation on the national level could be massaged away by sensible fiscal policies.

No, America is not a family. For a country, it is easier to adjust income upwards, through taxes. Countries also have much more flexibility for borrowing money. Plus, countries can print money. So comparisons are not apt, in general.

But the comparisons of America and a debt-ridden family may have one thing in common. For a family, as debt grows it reaches a point-of-no-return, at point at which it becomes a burden that is impossible to address short of winning the big Lotto. That aspect may apply to America too. From what I hear, the economists don't think that we've hit it yet, but it's probably out there somewhere.

The vigilantes that drove this recent manufactured crisis have a zero-tolerance policy towards taxes, similar to the Devil's zero-tolerance regarding holy water. The debt/deficit problems that we face will not be solved by small economies, however, and the revenue side will have to be adjusted. Unless someone can rein in the vigilantes, our beautiful brick house of happiness will begin to crumble at some point, maybe sooner rather than later.

4 comments:

Anonymous said...

What do you mean "our," ex-pat?

fred c said...

Everybody's got to have a country, and America is stuck with me. I'm just a guest over here. Even if I spent the fortune that it costs, and took the ten years that it takes to get Thai citizenship, I could live here for a hundred years and never be Thai. It's not like America, where you can wave your hand over your own head and become American in a heartbeat.

Anonymous said...

You now be more like The Man Without a Country. Will start calling you Phillip.

fred c said...

More like "Lord Jim," hanging out in Southeast Asia paying for my mistakes.