Home » Welcome to the Third World » Welcome to the Third World, Part 11: Suddenly, Being a Politician is Hard

Welcome to the Third World, Part 11: Suddenly, Being a Politician is Hard

by John Rubino on October 8, 2013 · 10 comments

“How did you go bankrupt?” “Two ways, gradually and then suddenly”
- Ernest Hemingway, The Sun also Rises

Senate majority leader Harry Reid is on C-SPAN this morning lamenting the republicans’ unwillingness to negotiate even after Reid and his party agreed to what they consider to be painful cuts. “[Speaker of the House] John Boehner won’t take ‘yes’ for an answer,” Reid keeps repeating.

Lately, business-as-usual federal budgets have been getting harder to pass because a few dozen congressional districts have elected people who simply don’t want to vote for more debt and believe they can keep their jobs even if they close down the government. The result is a fascinatingly concrete form of protest, an “occupy” movement that takes over the legislature instead of a park or street. Finally, “extend and pretend” is getting a little push-back.

So now we have budgeting by sequester, where a handful of programs are cut by some prearranged amount when a predetermined deadline is passed. Since the main priorities of the big parties (Social Security and Medicare/Obamacare for democrats, the global military empire and corporate welfare for republicans) are off the table, the cuts fall hardest on discretionary items like national parks, after-school programs, first responder funding and scientific research. In other words, things that affect narrow rather than broad sections of the population.

This is the “gradual” part of the process that Hemingway alluded to in the quote that opens this article. An over-indebted country sinking into poverty does so a little at a time, by stiffing the people it can get away with stiffing rather than the people who deserve to be stiffed. Parks get shabbier, roads rougher, police and fire protection less certain. For regular people life becomes less certain.

But of course (irony alert) the real victims are the politicians who have grown used to spending play money and then running for re-election on their generosity. They’re suddenly faced with limited funds and the need to prioritize. And they’re finding that they’ve lost that skill. They have no idea how to stand before an audience and tell hard truths, perhaps because they’ve literally never done it. Think about it: Harry Reid and Nancy Pelosi – and for that matter their main Republican counterparts – have never in their careers had to take anything away from a major constituency. They’ve always been able to find the money.

Now they’re beginning to realize what an unnaturally easy gig they used to have. Being a politician is suddenly hard, unpleasant work, and the current crop is, not surprisingly, terrible at it.

Give incompetent leaders insufficient money and the inevitable result is a chaotic mess. Programs that are on auto-pilot will go up, programs that are subject to automatic cuts will go down, voices will be raised in anger, and the system will drift further into dysfunction. This isn’t an accident. It’s just what happens when a rich, spoiled society runs out of money. Things that used to be easy become hard and what used to be hard becomes impossible. And a whole generation finds itself in 1930 wondering how to get back to 1929.

Pretty soon the pain of the current stalemate will become overwhelming and some new coalition will form to raise the debt ceiling and buy another two years of fantasy spending. In 2015 the drama will repeat, and life will get even tougher for park rangers and librarians. And so on.

If this is the gradual part of the bankruptcy process, what’s the “sudden” part? Probably the next big crisis, which will reveal that we’re out of ammo. In the late 1970s and early 1980s, for instance, the government responded to surging inflation by raising interest rates to double-digits and accepting a nasty recession to stabilize the dollar. Could we do that again? Not a chance. Most of the world now depends on low interest rates and would implode if rates were to rise much from here.

In 2008, the US met the banking/mortgage crisis by pushing interest rates down to zero and giving the big banks an extra trillion dollars of free money each year, while Europe and Japan chipped in with their own, nearly-as-generous QEs. Could we do all that again if JP Morgan Chase’s derivatives blow up next week? Not likely, since interest rates are already near zero and the US federal debt is twice what it was back then.

So “gradually” will continue until “suddenly” happens.

{ 8 comments… read them below or add one }

goldengates October 8, 2013 at 3:34 am

It’s cold out here for a “P”olitician.

Reply

Suzanne October 8, 2013 at 4:32 am

I just found this article… http://cnsnews.com/news/article/terence-p-jeffrey/open-business-treasury-issued-106b-new-debt-3rd-day-shutdown $106 billion more issued last Tuesday the 1st… on top of the $85 billion in QE.

The interview with Jim Willies on USA Watchdog was also telling… http://usawatchdog.com/systems-are-breaking-in-treasury-bond-market-dr-jim-willie/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+UsaWatchdog+%28Greg+Hunter%E2%80%99s+USAWatchdog%29 He says the reason for all these political histrionics is the bond bubble collapsing because of the derivatives.
Holy sheep-dip!

Reply

john.s October 8, 2013 at 12:45 pm

Great Article.. Hard truth..

Reply

hellbentgerbils October 8, 2013 at 4:20 pm

yet no one listens

Reply

Anthony Sanders October 10, 2013 at 1:43 am

Good article!

Here are some charts to go along with it. Blames The Fed along with Congress.

http://confoundedinterest.wordpress.com/2013/10/09/under-obama-debt-has-increased-6-trillion-fed-balance-sheet-increased-2-78-trillion/

Reply

Bruce C. October 10, 2013 at 2:07 am

It’s mildly satisfying to hear certain politicians taking a “hard line” against funding another boondoggle (i..e, “ObamaCare”) and even acknowledging the implications of raising the debt ceiling for the 75th or so time since 1971, but they still undermine their stance by insisting that every other wholly unconstitutional expenditure should remain.

Believe it or not, I would actually like to witness the complete and final implosion of all this fiscal and monetary insanity, but I fear that I won’t. Everything seems to take so damn long. The willful ignorance, evasion, can-kicking, false optimism, denial, lies, political covers, dysfunction, enabling, etc. – ironically – seems incredibly successful.

We shall see what happens, but the financial markets seem to expect the government “shutdown” will end soon and the debt ceiling raised yet again, so all will be well (i.e., low US Treasury rates and a rising stock market), and they’re probably “right”. Amazing if so, but I hope not.

Will the “sudden” please happen soon?

Reply

Bruce C. October 12, 2013 at 12:17 pm
Jason Frost October 10, 2013 at 8:29 pm

Very well written. Stuns me that the American people stand for it. The thing is everyone else in the world knows you are going broke, its just the American people that dont, or if they do, boy there must be a lot of sand in America to absorb that many heads

Reply

Leave a Comment

{ 2 trackbacks }


[Most Recent Quotes from www.kitco.com] [Most Recent USD from www.kitco.com] [Most Recent Quotes from www.kitco.com]