Treasury Secretary Timothy Geithner told skeptical Republican senators Tuesday that it is simply not possible to correct the nation’s fiscal problems without raising taxes.
Geithner defended President Obama’s 2013 budget proposal before the Senate Finance Committee and said the plan is the only option he sees for helping the economy and addressing the deficit without hurting the middle class.
“I do not see how you get there if you are unable … to contemplate and to embrace modest increases in revenue through tax reform,” Geithner said. “I just don’t think it’s possible.”
There’s no solution without massive spending reductions and acceptance of the reduction of GDP that will come from it.
Entitlements are ~64% of our budget, and are growing. Under Obama’s proposal these entitlements will go to 78% of the budget within 10 years.
This won’t happen because it can’t (mathematically), so what you’re seeing here is the literal proposal of destruction of the nation’s political and economic system — on purpose.
Anyone who says otherwise is simply nuts. Deficits are in fact taxes by another name; they simply devalue the currency by creating fake demand, and as a result whether the CPI reflects it or not purchasing power is destroyed. This is exactly identical to measured inflation and there is no escape from it in any asset class, as capital gains tax makes it impossible to “keep even” with any sort of investment other than a bubble that you time correctly and exit before it blows up.
Don’t kid yourselves folks — neither party in Congress and neither major party in this election has any intention or plan to deal with the issue. The only way out of the box is to stop spending more than the government takes in via taxes and accepting the GDP contraction that must come as a consequence. There is no other plan that works, there is no other plan that can work, and there is no intention to take this path or even talk about the issue in an honest fashion with the American people.
The budget may be political but mathematics is not. The mathematical realities simply do not care if you’re Democrat, Republican or Martian. They just are, and we’re stuck with them and their consequence.
Geithner knows this, incidentally. So does Obama. So does Hoyer, and Bohner, Reid and Pelosi. They all know. They don’t care. They won’t tell you the truth because they’re afraid you’ll throw them out of office — perhaps with pitchforks, torches or worse. They’re all so drunk on power and fearful of the political consequences of the truth that they have, and will, lie right up until we make impact upon the granite mountain before us, even though they know the consequence of that impact is likely to be that Washington burns exactly as has Athens.
This morning we have news that part of the Greek government has refused to sign the “unconditional” promise to enact their “austerity”, and the Euro is moving strongly downward. There are further reports that the Troika may disburse just enough money to pay the bonds due the banks, preventing their collapse while hosing everyone else. Such an act would be pure theft and deserving of the literal employment of guillotines, but I doubt the people have either the mental acuity to figure it out or the stomach for dispensing justice when the alleged “law” refuses to. Instead they will almost-certainly do what they’ve done up until now, which is to commit random acts of violence, burning and looting the very productive assets they need in order to be able to survive.
It is undoubtedly part and parcel of the “big lie” in Europe to try to keep out of the public eye any actual discussion of the mathematics of the issue, because if you do then two inescapable and inconvenient facts come to the fore:
- The correct place to address your grievance is with the government. That is, they lied. They made promises they knew they couldn’t keep simply to secure their jobs, and in doing so destroyed the national economy. This is the same dynamic that has played out here in the United States, and in the case of Europe means that if the people are going to rise and revolt burning the local grocer is not the correct focus for popular anger.
- Popular anger, however, must be tempered with understanding that the people are ultimately responsible for this as well. In other words in fact there is no cogent argument for “rebellion”, other than a refusal to pay and demand for both massive cuts in the size of government and ejection of all of the current political class at all! The politicians delivered what the people demanded, and guess who “the people” is? Yep — those who would currently riot (or revolt.)
I wish there was a good answer to this problem but there is not. Everyone wants a “painless” way out — a way to “grow” from where we are to fiscal prudence and prosperity.
That path does not exist.
The claim is often made that if we can “just return” to 5% GDP growth we can “grow out of it.” This is what those who are intentionally lying are claiming:
Wait, I hear you say! We did have a significant period of ~5% GDP growth — from 1980 forward, and in fact in the 1960s and 1970s we did even better! We can easily do that again simply by reforming government regulation and returning to the light hand of that time, right?
We did not have actual 5% GDP growth (on average) from 1980 through 2007.
See that red line? You have to subtract that off. In other words when the red line is above the blue line you have a negative rate of GDP growth!
Here is GDP growth restated to subtract off annualized debt growth:
Find me any time when, for more than two quarters since 1953, we have managed to put in a debt-adjusted GDP growth rate of more than 5% or when we have ever put in one greater than 6%.
You can’t, because we haven’t, and the two quarters in which we posted 5% rates were both due to massive debt destruction in 2010! In point of fact since 1980 the actual realized GDP growth rate has been, net-net ex of new debt taken on, negative.
There is no time during the last 60 years in which the United States has actually done what both the left and right claims we must do in order to “grow” out of our debt malaise. This fallacy — an intentional lie — is why it hasn’t worked in Europe and why it won’t work here.