Fox News interviewed Republican Senator Tom Coburn of Oklahoma on Sunday, and he quickly dispelled any lingering Christmas buzz by warning of “apocalyptic pain” in our near future, if we don’t bring our national debt under control. Coburn is a medical doctor, and also a cancer survivor. He brings a certain level of informed precision to the discussion of pain.
Predicting the exact date of the Great Crash – when our unsustainable system of high taxation and spending ends, as it must, in catastrophic failure – is a challenging proposition. Until the coming of Obama, conventional wisdom put it somewhere around 2025, when the Social Security and Medicare bombs would detonate to consume the entire federal budget… and more. Now the hands of the doomsday clock are spinning like the altimeter on a crashing airplane, and it’s harder to plot the exact moment when spending commitments intersect with dwindling revenue from a collapsing economy. The new trillion-dollar ObamaCare entitlement was our last engine catching fire. Pulling out of the dive will be impossible until we extinguish it.
Coburn believes we’ve only got three or four years. If you think today’s economy is the leading edge of the Great Crash, think again. This is just an unusually deep and prolonged recession. Warning of the consequences for failing to get government spending under control, the Senator says, “I think you’ll see a 15 to 18 percent unemployment rate. I think you will see an 8 to 9 percent decline in GDP. I think you’ll see the middle class just destroyed if we don’t do this. And the people that it will harm the most will be the poorest of the poor, because we’ll print money to try to debase our currency and get out of it and what you will see is hyperinflation.”
Keep in mind that we’ve got 18 percent unemployment now, if you look at the real unemployment figures, not the carefully massaged numbers released for public consumption. Coburn is talking about the “cooked” numbers hitting that level, which would put real unemployment close to 30%.
The decline in GDP is key to understanding why our crisis point is much closer than an actuarial calculation of Social Security and Medicare bankruptcy. GDP is currently growing much more slowly than government spending. This is partly due to the incompatibility between compulsion and freedom. The growth of one obviously contracts the other, for they are mutually exclusive. Freedom is a vital component of growth – no government can command its people to prosper.
Government spending is compulsion. It encourages the behaviors it subsidizes, including a good number it subsidizes unintentionally, and depresses those which do not receive subsidies. To fund this spending, the State either seizes the money of today’s citizens through taxation, or tomorrow’s through budget deficits. Coburn addresses this by saying “The very fact that we have $1.1 trillion in tax expenditures every year that directs capital in a way that the government says it should be directed rather than the way it should be directed based on markets, tells us that we have a terrible tax system.” Value is a function of choice, and dollars lose their value when the State marches them where they don’t want to go.
Senator Coburn has been nicknamed “Dr. No” because of his stalwart refusal to toss around taxpayer dollars with abandon. His recent “Wastebook 2010” outlined billions in wasteful and fraudulent spending that could be cut immediately. The public should respond with outrage and scorn to any politician who advocates tax increases or further deficit spending, without first using Dr. Coburn’s surgical guide to cut government waste. A government that spends $175 million per year on buildings it doesn’t use does not need a single dollar of fresh tax revenue.
Coburn concedes it will take more than trimming the waste from discretionary spending to bring financial stability, but the State cannot begin a serious diet plan until it lays off the cookie-dough ice cream. If it doesn’t start on that diet soon, it’s cruising for a coronary. It’s essential to understand that the Great Crash will come as a surprise to the political elite, because it will be triggered by massive capital flight from high income earners, who have a proven ability to forecast our financial future. When that happens, we’ll be looking back on 2.6% GDP growth and 10% unemployment as the good old days.