Political Philosophy
Yes, I remember hearing that somewhere. And it seems to be the theme of foreign critics, who can only bring themselves to admit America's greatness when they want something from us (which they lack the greatness to do themselves). Foreign nations have been sharply critical of the U.S. for putting their delicate nerves in a flutter with our down-to-the-wire debate over the debt-ceiling. That cuddly Russian dictator Vladimir Putin went so far as to call Americans "parasites" on the global economy "living beyond their means and shifting a part of the weight of their problems to the world economy."
It seldom occurs to foreigners that we have great power precisely because we don't act as they act. Europeans have plenty of fiscal beams in their own eyes to divert them from the speck in ours. And yet, uncomfortable as it is for me to agree with a Russian, Putin is partially correct. America has been living beyond its means and, as a result, has been a drag on the global economy.
But Putin misses the fundamental point that it was precisely a battle to reject ruinous, European-style, beyond-our-means spending which just occurred in the American Congress - and, for the most part, the fiscally-responsible Republicans were victorious. While foreigners are relieved that Republicans will not cause America to default on its fiscal obligations, they fail to appreciate the broader and more important point that Republicans just forced the nation to take a small, first-step toward avoiding the bankruptcy and default endemic to Europe.
Long ago, Europeans lost the stomach for conflict - militarily, socially and politically. America has just concluded an important battle in a larger war of political philosophy. It was ugly and uncertain, but worth fighting. We recognized the potential consequences of a prolonged conflict and so sued for peace before the sun had fully set. That is, we waged war while observing responsible rules of engagement.
As the powerful American economy controls the temperament of the global economy, Europeans may be expected to protest when American strife sweeps the economic seas into a tempest and causes them fright. But they fail to understand that it is precisely this continuing civil conflict which has sustained our great power and preserved us from becoming like them.
Well any possibility of default would have been an unforced error, and america does have a huge influence upon the global economy. Personally I think the deficit discussion is a lot like the discussion about our trade deficit. Politically charged but misguided. On the one hand the fact that we import so much that we could get at home, means fewer jobs here, on the other hand essentially we are trading "points" or electronic dollars in accounts for real goods. So we give russia "points" or dollars and they send us oil.
So in terms of living beyond our means we actually don't, we trade points good for future goods and redeemable with the full faith and credit of the united states. Of course if Putin doesn't like dollar points, he can trade these points for euro's or the points of some other sovereign nation, alternatively he can redeem the dollars for american goods, thus boosting our exports and reducing our trade deficit.
"Bankrupcy and default endemic to europe."
There is no more gold standard, so the possibility of the US going bankrupt or defaulting is non-existant, whatever you think was taken off the table by this wasn't.
On the other hand this deficit reduction talk is born of a desire to make the federal government pro-cyclical like the states. By forceing the issue of the deficit, in fact we make the bankrupcy or default or budget problems of Illinois, California and New York more akin to those of Greece, Italy, Spain or Portugal.
The key is that none of these are monetarily sovereign. Not being monetarily sovereign means you can default.
A potential solution for Europe is to say distribute 1 trillion euro to each state on a per capita basis.
A potential stimulus for the United States would be to do the same. This would have done a lot to prop up state governments. And if the analogy is ever accurate: reduced the "Bankrupcy and default endemic to europe."(European states individually being akin to our states and not monetarily sovereign.)
The United States does live beyond its means in a certain sense, and that certain sense is measured by the trade deficit, not the budget deficit.
In fact the budget deficit is equal to private savings-trade deficit.
Post-1971 Ballanced budgets are an arbitrary and capricious objective.
If the federal government spends more than it takes in taxes this is not living beyond their "means".
This is the case because the "means" of the federal government are related directly to the mechanical ends, and the mechanical ends are no longer encumbered by a gold standard. Rather the treasury and federal reserve send out packets of 1's and o's, that correspond to numbers, they create numbers with numbers and award these numbers or points according to the rules of accounting. We can always put another zero on the credit side as long as we put the same zero on the credit side.
The means of the federal government are restrained prudentially only by a ballancing test between inflation and full employment (technically also by a debt ceiling that is archaic). That is there is actually no need to collect taxes appart from the effect it has on reducing the amount of money in circulation chasing limited goods.
The economy is in some sense always in a bubble, cutting taxes and raising spending inflates the economy, raising taxes and cutting spending deflates it.
But since the limit we are up against is inflation, there is no real ability for the government (which is the creator of money) to allow us to live beyond our means.
That is the old folks have already paid for the deficit via inflation, and all they are really passing on to the grandkids is a market basket where a gallon of gas cost $4, where lasik surgery costs $500 an eye, and an ounce of gold costs 1600, that is the deficit has already been paid for and all the clamour to pay down the deficit is simply a desire to suck money out of the economy.
Also to be clear about what the american people want... they want more jobs= inflationary/ pro deficit.
they want no cuts in gov services= inflationary/ pro deficit
they want no new taxes= inflationary/ pro deficit.
It doesn't make sense under a ballanced budget dogma where democrats favor higher taxes and republicans favor reduced government spending, but why are both parties unified against full employment, dedicated to a double dip and blatantly opposed to the will of the american people, when the federal government is monetarily sovereign?
A New pro deficit political party, called the National Savings Party, dedicated in large part to exposing the compositional fallacies prevelant in Washington rhetoric about Macro-economics.
Three quick solutions to our current macro-ills.1) Eliminate FICA. 2) Send 1 trillion to the states distributed on a per capita basis 3) Reduce abortion, halt demographic/ageing problems and go pro family by creating a $250k refundable tax credit per birth, to discourage out of wedlock births make it only a 125k refundable tax credit for single parents.
I have pretty much decided Cheney wasn't lying about deficits not mattering, he just didn't have an inclination towards popular opinion.