The Problem with Debt and Taxes

The problem with debt and taxes is that they are maximized when the people are thinking about something else. The real estate and financial bubbles were the recent distractions that allowed the debt and taxes to continue their inexorable climb. Now that we have run out of other people’s money to spend, our news media is compelled to cover the story until the financial conditions change.  Although the people cannot get away from discussions on the perils of debt and taxes, they have figured out “solutions” to shield themselves from these problems. Their “solutions” opens the can of unintended consequences. The unsustainable political trade-offs of the past will be discarded in an effort to match up government spending with revenue. The rigors of balanced budgeting already imposed on personal, city, and state finances will gradually be imposed at the federal level. Political parties who spent the last 70 years supporting and encouraging unsustainable spending habits for political gains will spend the next ten years trying to restore public confidence at the same time they are trying to put the worms back into the can.


“What we’re seeing is the real end game,” says Mauldin.  “We’re coming to the end of government’s ability to borrow money to fund current spending that’s beyond the growth of their economy.

That’s where Western governments are.  They’ve run out of the ability to borrow money to finance their current consumption.  This is a good thing that it’s coming to an end.  I don’t see this as negative in the longer-term.  It’s still going to be a bumpy ride for the markets.  It’s certainly going to be (an interesting) ride for the business as usual crowd.”


Sam Ro
Tue, 19 Jun 2012 08:53:00 GMT