By Terry Coxon, The Casey Report:
It was Otto von Bismarck who explained that "politics is the art of the possible." We can thank him for that much, but he didn't tell the whole story. I'll give you the rest of it. Politics is the art of the possible fictions you can get away with.
Politics is mostly dissembling, and the dissembling is mostly about dodging personal responsibility for the messes governments make. It works out that way because making messes is most of what governments do. So when we ponder how the U.S. government will go about defaulting on its debts, a good way to approach the question is to consider how a default might be presented.
At this point, there is no room for doubting the government will renege on the commitments it has made to give people money. The $9.2 trillion in Treasury securities held by the public is just the tip of the iceberg. Estimates differ, but if you add in the unfunded obligations for Social Security and Medicare, it's hard to avoid getting a total that exceeds $80 trillion. That works out to $260,000 for every man, woman, and child in the country, including the two-year olds. It can't be paid, so it won't be paid.
But don't expect any clarity about the matter. Whatever happens, you can count on it not being called a default. No one in the U.S. government is going to say, "Tough luck, Treasury bond investors. We're not going to pay you another dime. Go pound sand." And no politician is going to tell the 51 million Americans on Social Security, "If you're fit enough to pump that rocker, you're fit enough to work." It will all be done far more diplomatically...
Politics is mostly dissembling, and the dissembling is mostly about dodging personal responsibility for the messes governments make. It works out that way because making messes is most of what governments do. So when we ponder how the U.S. government will go about defaulting on its debts, a good way to approach the question is to consider how a default might be presented.
At this point, there is no room for doubting the government will renege on the commitments it has made to give people money. The $9.2 trillion in Treasury securities held by the public is just the tip of the iceberg. Estimates differ, but if you add in the unfunded obligations for Social Security and Medicare, it's hard to avoid getting a total that exceeds $80 trillion. That works out to $260,000 for every man, woman, and child in the country, including the two-year olds. It can't be paid, so it won't be paid.
But don't expect any clarity about the matter. Whatever happens, you can count on it not being called a default. No one in the U.S. government is going to say, "Tough luck, Treasury bond investors. We're not going to pay you another dime. Go pound sand." And no politician is going to tell the 51 million Americans on Social Security, "If you're fit enough to pump that rocker, you're fit enough to work." It will all be done far more diplomatically...
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