Saturday, July 20, 2013

Caught Between Realities

The way the news is spun to fit the audience is interesting.  The way economists tailor opinions to fit their social belief is also interesting.  But whether we like to admit it, or not, there are some inescapable hard facts that even the most ardent social engineers cannot just wish away.
The first is unless you are allowed to print your own money, at some point all your bills will come due and you cannot escape your creditor.  There will come a time you will no longer be able to borrow money to pay your bills.  Creditors will be forced to stop lending you money, and/or they will seek judicial help to recover their investments.  If a city, over the long term, is paying more of its tax dollars out than it has coming in - it will fail.  Maybe not at first, not right away, but eventually it will happen.  It really doesn’t matter if you think this fair or not, it is a straight forward cause-effect relationship. 
As the infrastructure decays, and funds are diverted to meet the social demands the cities seem to enter into a kind of death spiral.  Businesses move out, jobs move away, and the poor need more help, drawing more money from the government, increasing the need to borrow.  It is true some cities have escaped this, through sound investment, good corporate management, or changing tax structures to encourage investment or growth.  All these choices counter the balance of income versus outgo.  But where a city chooses to increase its social engineering to put more people on a public dole, allow infrastructure to decay and pay rich contracts to connected people, bankruptcy seems an inevitable consequence.
Those who support the social engineering and the redistribution of wealth can find a number of villains to hold up and deflect the discussion, but at the end of the day it is all comes down to simple math.  If a city must pay its bills, like any family is expected to, then at some point the interest payments will exceed its ability to pay.   At some point they will default.  Mayors and City Councils can choose to ignore this reality, and for a number of terms they will get away with it, but the result is unavoidable. When this happens it is not the politicians that are hurt, it is the very citizens who placed their trust in those politicians.  Those human beings who thought their politicians were looking out for their best interests will all the sudden find their pensions gone, their security gone, and their lives thrown out of kilter.
Our politicians and voters seem incapable of learning this simple economic principle that $ in must be equal to or greater than $ out, or at some point the weight of the debt will crush everything else. 
I know we will continue to live in that delusional place between the reality of economic stability and the alternate reality of free money.  At the end of the day it will be the millennials and younger who will pay the price, for we have chosen to pursue the easy path and are passing on an unsustainable vision.

1 comment:

Jeannette said...

Perhaps the question is..who can be stubborn longer...people or facts?

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