By John Lumbard.
When we launched this blog the federal debt was 12-and-something trillion, and we were fretting about the first trillion-dollar budget deficit. Really, I shouldn’t have been surprised to see the $14 trillion number at the top of our home page, but it touched a nerve anyway. And then they broke the news that this year’s deficit would be $1.5 trillion.
This torrent of cash is pretty much invisible to me. I do see American Recovery and Reinvestment Act signs that announce traffic jams on the highway. TSA is highly visible at the airport, and I just received an e-mail from a friend who is advising the Afghans on the safety and security of their border posts. I usually get a tiny subsidy from the taxpayers when I buy stamps at the U.S. Post Office.
Meanwhile, Japan—our bellwether and friend, who has been jolting her economy with Stimulus Packages for 20 years—just saw her credit rating downgraded again. Now she’s just an AA-. Until recently Japan’s growing debt was purchased by hard-saving Japanese citizens, but now great numbers of her workers are retiring. Instead of saving money and buying bonds they’re selling existing holdings so they can spend.
Do you remember the late ’80s, when Japan was the it nation? Everybody said we should try to be more like them, and it sure sounded like a good idea!
Here in the Land of Plenty we’ve stopped adding money to the Social Security Trust fund, and in a few more years we’ll start withdrawals in earnest. The Social Security trustees will reach into the vault, pull out a billion-dollar armload of U.S. Treasury bonds, and go to the U.S. Treasury to cash them in.
I sure hope that the U.S. Treasury has a bunch of money saved up, somewhere.