March was a momentous month in Washington, DC, what with ObamaCare's passage and all.
"And all" refers to other scary but less-publicized news out of DC, to wit:
* As lawmakers debated reconciliation "fixes" to the health-care overhaul legislation, there came news that Social Security this year will pay out about $29 billion more than it takes in. By law, Social Security cannot pay out more than it has on hand. To meet obligations, it must start cashing IOUs, promises the Treasury will dip into government funds to keep Social Security payments flowing. This "tipping point" of Social Security running short of money has hit us seven years earlier than program administrators had predicted just a few years ago.
* Credit ratings agency Moody's warned that the United States is going so heavily in debt that its AAA credit rating is in jeopardy. A lower credit rating would force the government to spend more money to make interest payments on the national debt, which would reduce the amount of money available to spend on other things, such as health care. Unless, of course, the government decides to: (1) raise taxes, which would leave citizens with less money to spend and invest in ways that help the economy; or (2) increase debt further, which would make the interest payment burden even heavier and raise pressure for tax hikes.
* Shortly before the ObamaCare vote, the Congressional Budget Office estimated the cumulative Obama budget deficits would be about $10 trillion ($12.7 trillion if we include the 2009 and 2010 budgets) with an annual deficit of $1.25 trillion by 2020. Public debt would more than double by 2020, from 40 to 90 percent of gross domestic product. And this assumes the rosy Obama projections of 5 percent unemployment (about half the official level today) and a strong economic recovery.
In an interview for the April issue of Budget & Tax News, University of Maryland economics professor Carmen Reinhart said, "At gross debt levels above 90 percent of GDP, growth slows. Median growth falls 1 percent, and mean average growth rates fall a lot more."
By the CBO's own estimates – which accept at face value the dubious Obama numbers and promises – we will soon be at that dangerous debt level.
History bears Reinhart out, as she notes in her 2009 book co-written by Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly, which studies financial collapses around the world going back 800 years.
The ironic title is a reference to the many people who have tried to fool themselves and others that somehow they could do essentially the same financially stupid and reckless things so many others before them have done, yet somehow avoid calamity.
They never do avoid disaster, of course, which is why we should all be scared of where federal spending and debt are headed.
Research fellow at The Heartland Institute in Chicago