The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

A Mere 1.2 Decades

06/14/2012

It was only twelve years ago — that most investment advisors still believed that bonds, especially U.S. Treasury bonds, were a safe investment.

It was only twelve years ago — that the U.S. had a balanced budget (ignoring some off-balance sheet entitlements).  The Berlin wall had recently fallen.  America clearly dominated the world.  Investment advisors expected the supply of U.S. Treasury bonds available for investment would soon start decreasing, as our budget surpluses grew.  What safe investment would take its place in client portfolios?

In those twelve years — we dug a huge hole.  We enjoyed two large tax cuts, without offsetting spending cuts.  We borrowed enough money from the Chinese to fight two wars, ignoring the thousands of dead Americans and tens of thousands of wounded Americans.  Oh, we also created another huge entitlement program to provide prescription drugs to seniors, without cutting any other spending or raising revenue to pay for it, adding almost a trillion dollars to our national debt since then.  And, there was a terrible financial crisis, increasing our annual deficits to over a trillion dollars per year.

Yesterday, I read a political column about how the trademark optimism of America, especially the sunny-Ronald-Reagan-America, is drowning in pessimism.  Even Jeb Bush, whom I respect, believes America is “in decline.”

It was only twelve years ago — that we dominated the world, and now we’re in decline already??  I strongly believe America can return to greatness within a mere twelve years!  But first, we have to stop the bleeding.  Neither the Republicans nor the Democrats are going to get what they want, and it is inconceivable to me that the November election will change that.  At what point will the radicals understand that?  At what point will Republicans and Democrats look in the mirror and see Don Quixote?

Our best hope is the Simpson-Bowles compromise — yes, I used the word “compromise” — it is not a four letter word, regardless of whatever Grover Norquist preaches.

Our national debt is now $15.8 trillion and growing another trillion dollars each year.  Do the arithmetic yourself and figure out our national debt in twelve years.  Now, tell me you’re not pessimistic or even scared.

The Simpson-Bowles compromise is not perfect.  After all, it is man-made.  But, it will help stop the bleeding now, and we can make it “perfect” later.

It won’t fix this country immediately, but we will be a far better nation in a mere twelve years.  I’ll bet we even recover our sunny-Ronald-Reagan-optimism again!

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