Yesterday, in my post about the latest jobs report, I said that “our massive looming government debt bubble” will “precipitate the biggest economic disaster of them all.” A commenter at RedState asked what I meant by a “government debt bubble.” I have talked about this before, but it is an important enough topic that it is worth revisiting.
In short, we’re in a bus speeding towards a cliff. We’re probably already past the point of no return. The bus is going over the side. It’s not a matter of if, but a matter of when. About the only thing we can do is bail out of the bus before it goes over.
It’s going to be a hell of a crash. And the thing is, most of the occupants of the bus are acting like there is nothing wrong.
Let me introduce the topic by quoting myself from two days after election day, 2012:
First there was the stock market crash. In the 1990s, stocks kept going up and up and up. It seemed wonderful on one level. Everyone was watching their stock holdings grow and grow and grow. Everyone knew it couldn’t go on forever, but somehow it seemed like it might. So nobody seemed very worried.
And then there was a crash.
Then we had the real estate bubble. In the 2000s, property values kept going up and up and up. It seemed wonderful on one level. Everyone’s house value was skyrocketing. You could take out loans on the equity and do fun stuff. Everyone knew it couldn’t go on forever, but somehow it seemed like it might. So nobody seemed very worried.
And then there was a crash.
Now we have the government debt bubble. Government spending keeps going up and up and up. It seems horrific to us, because we are paying attention — but to most people, frankly, it seems wonderful. We’re getting all these government services and we don’t have to pay for them! It’s utterly unsustainable, and everyone knows it can’t go on forever, but somehow it seems like it might. So people don’t seem very worried. Certainly, they’re not worried enough to vote out of office someone who has exploded our national debt to unimaginable levels. [Note: I was referring to Obama, who had just been re-elected two days earlier.]
There is going to be a crash.
Now, there has been no major crash since 2012, and you could be forgiven for assuming that our economy is in decent shape, with the stock market booming and the jobs report looking pretty solid. And one could always reply to doom-sayers such as myself by saying: hey, the economy is cyclical. There probably will be a crash, but the fact that you predicted it doesn’t make you some kind of economic Nostradamus.
Fair enough. But here’s the thing about the popping of the stock market and real estate bubbles: 1) most people realized, deep down, that we were in a bubble at the time, if they thought about it for two seconds, and 2) while people may disagree as to why the bubbles inflated, there has been no question that the economic pain we felt afterwards resulted from the popping of those specific bubbles. In other words, the cause was clear enough even during each bubble that, after it popped, most people said: “We should have seen this coming. I mean, it was pretty obvious.”
And so it will be with the popping of the government debt bubble. We all know it’s happening. We all know this is unsustainable. Yes, there are leftist nincompoops like Matthew Yglesias who make cartoons about how we can painlessly inflate our way out of the predicament — but those people are idiots. The rest of us know this. We have to pay interest on what we borrow. That interest eats up a larger part of the budget each year. The only solution is massive taxation or inflation, either of which will ruin the economy.
And after the government debt bubble pops, people will say: “We should have seen that coming. I mean, it was pretty obvious.” You’ll hear some people say: “I didn’t realize it was going to get this bad.” But nobody — well, nobody except the Matt Yglesiases of the world — nobody sensible is going to say this came as a total shock.
But President Trump isn’t talking about what it would take to make a dent in the debt. That would take entitlement reform, frankly — and that’s the least popular topic on the planet. Indeed, preserving ObamaCare, our newest and shiniest entitlement, seems to be the top priority for our elected officials these days. Actually reforming entitlements is out. Get with the times, man!
Why talk about this today? After all, it’s not the fashionable topic of conversation. Palace intrigue at the White House, Russia investigations, transgender this that and the other, and whatever other stupid story of the day is occupying all the talking heads — that’s what brings in the clicks. I’m surprised you actually clicked on this post and read this far. It makes you among a distinct minority in this country.
And as long as only a distinct minority cares, we’re going to keep careening towards that cliff.
Once we leave solid ground, the flight through the air will be exciting and fun.
As long as you don’t think about what comes next.