The old Bobby Bare song, Detroit City, has a refrain that centered on the desire to “go home.” Unfortunately, everywhere else is turning into Detroit City. Pretty soon there will be no home to go to.
Detroit’s bankruptcy, announced yesterday, gives us an opportunity to go over a few fiscal realities, always a good idea if you are careening toward a whole series of fiscal reality checks.
The first thing we must grasp is that we are dealing with levels of municipal debt, state-level debt, and federal debt, that mean a necessary default is coming. If our problems are left untended, we will default. If we wake up in time, and address the pending problem, we will default. This is another way of saying that every genuine solution to the problems created by our fiscal irresponsibility will be a form of default. The only solutions now are defaulting solutions.
The only thing we don’t know is what kind of default it will be. The only thing we don’t know is who the unlucky victim of our defaulting will be.
Government does not make wealth. If government has wealth, then this means it was taken. The only way that the government can acquire the means to pay its obligations and debts is by taking it. The only question left before the house is “who will they take it from?” There are a limited number of options.
When a politician says that we cannot allow our government to default on its solemn obligations, he either believes what he says, and is a fool, or he knows what he is saying is false, and wants us to believe that we must avoid Default A, which is what he is really talking about, and must select from defaults b, c, d, and e, which he does not really consider defaults “technically,” because the people who are going to get hosed by them are not part of his constituency.
The government does not make, and in order to have, must therefore take. Here are the basic ways in which such a taking can happen. The government can wage war on other countries, and take from them. The government can raise taxes, and take that way. The government can debase the currency, and take that way. The government can run up a big debt which it finds itself unable to pay, and take that way. And of course, given the realities of the ongoing political circus, the government can stagger between these options, like a drunk trying to make it to the next lamp post.
Beware of those reforms that hide the reality of the defaulting. Those kinds of reforms are probably the best way of proceeding, but only if they are honestly embraced as the least destructive way of defaulting. But don’t hold your breath. The government lies. The government cheats. The government welshes. The government steals. The government defaults, and hides it.
For example, if the retirement age for Social Security is extended by two years, this does make the program viable longer on paper. It does this by unilaterally changing the terms of a contract — by defaulting. It may be better than doubling down on the current lunacy and having the whole thing go up in a sheet of flame, but it is not better because it isn’t defaulting. It is just as much a default, but it may be less damaging to the recipient.
If you pay your creditor 50 cents on the dollar, that is a default. It does less harm to him than paying him 10 cents on the dollar, which in its turn is not as bad as paying him nothing at all.
Detroit is now defaulting on its bond holders, its pension holders, et al. Look at it straight on — it is hard to make out, but a line has formed and we are trying to make out who is next. Is it California? Illinois? New York? There are municipalities in there too. And if this spectacle becomes too grim, and a demand arises for the federal government to “do something,” this will just be an example of people opting for the coast-to-coast sheet of flame default, instead of the piecemeal approach.
One last thing. I would like to address a few words to those evangelicals who have been seduced by leftist economics, or who are in some way flirting with leftist economics. You may have cannonballed into the deep end, like Jim Wallis, or you may just be sidling sheepishly in that direction, with some cover provided by distributist literature. You think that the language of compassion is more biblical, and the idea of communitarian sharing makes you feel warm all over. You think that businessmen who know how to add and subtract are those who are in the grip of mammon-lust. You don’t like the hard lines of clear thinking, and the blinking sums on their calculators do nothing but harsh your mellow.
Do me a favor, and look at Detroit. Look at the failure of all the compassionate nostrums. Look at the collapse of real integrity. Look at the grasping and demented idiocy of the unions. Look at the abandonment of government’s true functions. Look at the wreckage of human lives. Look at the ruin of a once great city. Look at what aching greedlust does. Behold the handiwork of your compassion.
Look at what mammon in sheep’s clothing can do.