Most of you have probably heard that the Congressional Budget Office is predicting $9 trillion in federal deficits over the next 10 years. Politicians are kvetching about this. They won’t do anything serious about it, though. Too unpopular.
Understand something: You could create a comedy using CBO 10-year budget projections. They change constantly and they are almost always inordinately rosy. Some examples: In 2000, the CBO estimated a budget surplus of over $1 trillion for the next decade. In 2008, they projected that deficits would turn into a surplus by 2012. And now, in 2009, they are projecting steadily increasing revenues and economic growth beginning next year. If that sunshine happens, the deficits will only be $9 trillion over the next decade. Yee haw! You can revisit almost 35 years worth of “Budget and Economic Outlooks” here. Vast amounts of comedy.
Central planners always hope for the best. They think they can tinker with the economy and create a winner, but as Hayek explained long ago, central planning fails because bureaucrats do not have the knowledge of tens of millions of people making transactions in their various endeavors.
It’s hard to blame the CBO in the sense that no man can predict 10 years of the U.S. economy. No one can predict the future because no one knows the future. That said, all you have to do is look at what’s happened in the past and the economic trends (monetary policy, unemployment, debt and spending levels) and it’s evident that things aren’t headed in the right direction. When they tell you there will be $9 trillion added to the deficit over 10 years, it’s safe to hazard that the real number will be at least twice that. However, I think a crisis, perhaps even a collapse, is coming before that, which means that all bets are off the table.
When I ran a business, I had a woman ask me once if I paid a living wage. I replied that I paid a competitive wage. I wanted to tell her that if she were willing to pay me twice as much for the job, I could then pay my workers $25/hour. Many people are so clueless that they actually think that there’s a golden egg hidden somewhere– some vast store of wealth– that more regulations and taxes and righteous indignation at “profiteers” will uncover. Instead it just smothers the goose.
Similarly, politicians yearn for economic growth. They love to foster artificial booms using gimmicks like low interest rates. In times of prosperity, the populace isn’t as concerned about the government skimming more cream off the top. This suits the government just fine. The boom proceeds and everyone is rocking and rolling, and the government is expanding like Jabba the Hutt. Then the bust happens and there’s a mad dash to come up with more gimmicks. Politicians don’t understand– perhaps they don’t want to understand– what makes sustainable economic growth occur. They think borrowing and consumer spending and regulations, not production and savings and freedom, are what lead to sustainable economic growth. In their greed is the seed of destruction.