Papered over with loans

You do not need a degree in economics to understand the financial dilemma we face. Just imagine your family in this situation:

Over the years you increase your income by 32 percent. You increase your spending by 221 percent.

That is all you need to know about what ails us and ails a good part of the world.

Since 1970 Washington has increased its spending 220 percent, adjusted for inflation. Since 1970 median household income has increased only 32 percent.

Now, step back and imagine your family was worth millions in the 1920ís. Beginning in 1932 or so, the family increased its spending rapidly. While its income edged up only slowly. The family papered over the deficits with loans.

That is what happened in this country. Our horrific situation did not come solely from the spending increases of the last few years. It came from the increases that began in the 1930ís and never abated. The country papered over the deficits with loans. Otherwise known as the national debt.

If your family was in the situation described above you would know it cannot continue down that path. The interest on your debt has snowballed. The pressure on your income has grown too great.

The country cannot continue down its path. It cannot afford to pay what it has promised. Not in Social Security. Not in Medicare. Not in debt repayments. No can do.

Cities and states are in similar predicaments. They cannot afford to pay what they promised their workers in pensions. They are in the situation car companies were in. †They cut deals with unions they could not afford. You see what happened to them. Just like GM, now California, New Jersey, New York and others are going broke.

Many countries cannot afford the benefits they foolishly promised. Greeceís financial house of cards is about to collapse. So is Spainís. So is Irelandís. And Portugalís. Icelandís already has.

The President wants to create a commission to tell us where we should cut our spending. This is like thinking about whether to cut out our bedtime snack or our morning Danish, when we weigh 900 lbs.†

Politicians will no doubt devise clever camouflage for what must be done. The camouflage will have to hide cuts to pensions, Social Security, Medicare, other programs. For cuts there will be, must be. The camouflage will have to hide tax increases on everything that moves. The camouflage may include nasty inflation, devaluing the currency.†

Daniel Henninger put it nicely in the Wall Street Journal this week. After a nonstop, nearly 80-year upward climb, government spending has hit a wall.

Politicians will want to do what they always have. They will want to kick the ball down the road for kids and grandkids to grapple with. But when you hit the wall, there ainít no place to kick that ball. It caroms back into your face.

From Tom ... as in Morgan.††††††††††††††††††

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