Monday, February 09, 2009

The Government's Fiscal Irresponsibility

The government's decision to run huge deficits and huge debts for the past several years (decades) has been foolish and irresponsible.

A responsible person knows that, when a great many people depend on his situation, that his duty is to act in ways that protect and secure their interests. The responsible head of a family knows that, at any moment, some event might put the family in a dangerous financial situation. That her role is to make sure that some disaster does not destroy the finances of the family and that the people who depend on her are reasonably secure from harm.

The government of the United States has acted quite irresponsibly, and a people whose interests that those in power were supposed to protect has been put in danger.

First, we had a set of tax cuts that threw the nation into debt. When we are in debt we are at risk. Some unexpected event can come along and, because we have been thrown into an economic deficit, we would not have the resources to handle it.

And, in fact, we got hit with one of those unexpected events where it would have been nice to have a surplus - where it would have been nice to have had a little extra money to spend to cover a crisis.

In this case, we got hit with the 9/11 terrorist attacks. Those attacks alone caused a great deal of damage to the economy.

Then, we went to war with Iraq - a policy decision that also required hundreds of billions of dollars in outlays.

And we got hit with Hurricane Katrina, causing a couple hundred billion dollars in damage.

And now we have a major recession that requires hundreds of billions of dollars in expense to get us out of.

With all of this, we would have been far better off if the government had been responsibly managed before these crisis worked - if the government had been managed responsibly - it would have been managed with the recognition that these types of events can occur and a responsible government has a backup plan.

It is no different than the way a responsible business handles the fact that some emergency may destroy its information network. It has a mountain of data on a room full of servers, and the knowledge that some unforeseen event might destroy that room full of servers. The responsibility has a disaster recover plan - a plan in place that says, "if some catastrophe hits, this is how we will recover from it."

Governments should recognize that a disaster can hit at any moment, and it should organize its affairs in such a way that, when such a crisis hits, it has the resources to deal with it.

The Bush Administration's decision to run with huge deficits is like the technology officer's decision to run with the computers in the server room and no off-site backup.

Now, three of those servers have failed, and nothing has been set up to manage a recovery. The system is in serious trouble.

It was a matter of gross moral negligence to let this situation develop.


Justus Hommes said...

That's a problem with a Keynesian approach to the current financial situation. Running a huge deficit is supposed to stimulate the economy, but its ability to do so is limited since the government has already been running huge deficits for years. "Tax and spenders" maybe bad but "spend and spenders" are worse.

Unknown said...

The trouble is we're all so used to paying someone else to make the risk go away (i.e. buying insurance) that when there's nobody to pay we assume there are no risks or that any unmanaged risks are someone else's responsibility. If only we could set up some kind of World Bank that would insure entire countries against things like this... oh, wait...

But seriously, I think we need a national change at the personal level to deal with any of these problems. Legislators are just doing at work what they learned at home. I'm betting it'll get a lot worse before it gets better, and I just hope it happens fast so that we can figure out where to go from there.

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