Spending Crisis Locomotive Nearing the Abyss

The spending crisis is one of MLLG’s signature issues – along with climate change and school choice. Our last update was in our post of 2/7/21 and it is time for another. First however, we take a look back to our prior projections about the spending crisis.

Over 10 years ago I wrote a 24-page report entitled “The Crisis of Spending, Debt and Deficits“; it was printed and mailed (USPS) to our readers – which were much fewer in number back then. It is not on our website. I had not given this report any attention in many years and had nearly forgotten about it until one of our longtime readers asked for a copy. I reread the report and was flabbergasted to see how accurate it was!

Nearly 12 years ago, I projected that in 2021 GDP would be $21 trillion, public debt $26 trillion and the ratio 124%. The best data available for year-end 2021 are GDP of $23 trillion and debt of $25 trillion for a ratio of 109%. For reference, back in 2010 GDP stood at $15 trillion, debt at $9 trillion and the ratio at 60%. No one – absolutely no economists anywhere – and most certainly not the CBO – were projecting anything even remotely close to the data published by MLLG. Note: I actually published three projections; the one cited herein is the middle (or most realistic) case.

My projection was not a lucky guess. I spent hundreds of hours during the summer of 2010 while in Montana constructing a computer model of the US economy. I used that model to generate the data in the published report. I did not merely project a ratio, I built the data from the ground up. My projection was accurate because I made realistic assumptions about, inter alia, recessions, spending and taxation. Readers may decide for themselves, but my past accuracy should confer a strong presumption of present credibility about the spending crisis. As a reminder, I call it the spending crisis rather than the debt crisis because the crisis ultimately results from uncontrolled spending.

At its heart, it is not really a spending crisis – it is a moral crisis.

I again have spent many hours updating projections. Surprisingly, the 2021 (debt/GDP) ratio was better than projected in 2020 because of the stronger than expected economic recovery from the pandemic. Future debt ratios depend primarily on: (1) economic growth; (2) tax rates and collections; (3) interest rates; (4) timing, length and depth of recessions; (5) inflation; and (6) any spending blowouts such as BBB. There are many variables and uncertainties such as possible natural disasters and military conflicts.

I have run numerous projections with various combinations of economic growth, taxes, inflation, spending, interest rates and recessions. The best I now can project is that the ratio will be near 150% in 5 years and over 200% in 10 years – on its way to the moon. In later years the ratio would hit 500% and even 1,000%, but that is moot because the locomotive would go over the cliff long before the ratio reached such numbers. God may love fools, drunks and the USA, but nothing can save us from a ratio of 500%.

I call it a spending crisis, but at its heart it is not really a spending crisis; it is not really a debt crisis; it is not really a deficit crisis; it is a moral crisis! We chose – whether consciously or unconsciously matters not – to take from our children and grandchildren rather than to control our own spending. We refused to make tough choices, falsely thinking we could buy social peace. We elected politicians who promised the moon was made of Stilton. We chose, and are continuing to choose, to condemn our progeny to a lost generation in a Clockwork Orange world filled with existential threats.

Even worse, we stole from future generations – not to save America from some manmade or natural calamity – but to pay for a perpetual New Years Eve party.

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Next on February 20th – the origin and nature of government.

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More Liberty Less Government – mllg@cfl.rr.com – www.mllg.us

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