CBO Report: U.S. Will Go to Hell in 2009
By Robert Higgs • Friday January 9, 2009 6:16 PM PDT • 13 Comments
According to a report just released by the Congressional Budget Office (CBO), “the [federal budget] deficit this year will total $1.2 trillion, or 8.3 percent of GDP.” This seems about right for a banana republic. The bad news is that neither commercial banana cultivation nor a republican form of government has proved viable in this country.
Bananas, of course, must be imported into this country from Latin America and other places where their commercial cultivation has proved profitable.
As for the republican form of government, the American people have progressively repudiated it almost from the time they won their independence from the British Empire, and during the past century, they have increasingly favored a form of electoral dictatorship cum empire in which, every four years, the people cast ballots for one of the candidates put forward by the two wings of the one-party political apparatus. This system, vigorously promoted by the imperial running dogs known as the mainstream news media, brings great delight to the masses, who love a good horse race, even if it has been fixed. They are also kept contentedly semi-comatose by the bread and circuses their masters provide in the form of the welfare-nanny-therapeutic state and its Hollywood adjuncts. The few who object strenuously are tased or shot dead by the police, who are ever ready to serve and protect the state that employs them.
The CBO’s projection does not take into account any addition to the federal budget deficit that may arise from enactment of a “stimulus” bill after the Obama gang takes charge of administering the empire. If the magnitudes now being discussed for this so-called stimulus should prove to be in the right range, the deficit for fiscal year 2009 may turn out to be not $1.2 trillion, but something in the neighborhood of $2 trillion, perhaps 15 percent of GDP. If so, the deficit will be as large in amount as the entire federal budget was as recently as 2002. This prospect may be what cranky commentators such as yours truly have in mind when they speak of “out-of-control federal spending.”
The 2009 deficit arises in part from the CBO’s taking into account outlays of $238 billion as the net subsidy costs for Fannie Mae and Freddie Mac, plus $18 billion of cash infusions from the Treasury to Freddie and Fannie. It is entirely possible that the estimated net present value of Fannie and Freddie’s future earnings will prove to be too large, and therefore that the subsidy will be greater than projected and the overall federal budget also greater by that extra amount.
With little fanfare, the CBO report ventures to mention that “foreign lenders, who have recently been willing to lend to the U.S. government on very advantageous terms, may become less willing to do so in the future, which would tend to raise interest rates in this country.” To be sure. Indeed, if the Japanese, Chinese, and Arabs, who have been carrying a major part of the load in covering the federal deficits in recent years, should substantially reevaluate the risk of dollar depreciation (or even U.S. repudiation of its debt) and greatly reduce their purchases of U.S. Treasury securities, then drastically higher interest rates and, in response, hyperinflation (with or without price and wage controls) might well be the next chapter of this unpleasant story.
Meanwhile, my advice is: eat bananas while they are still available from producers who will accept U.S. dollars in exchange for them. If the U.S. dollar is totally destroyed, as recent and impending government actions suggest it might be, then we may be reduced to barter, at least for a while. I wonder if we can trade Hollywood films for bananas. And, most important, I wonder whether I can get a job in the movie business, perhaps as an extra for the crowd scenes. I think I have the talent needed for that role.
Tags: Bailouts, Budget and Tax Policy, Economics, Money and Banking, Politics, The State 
Robert, if you hate Government, the Media, the Masses, the Police, and Hollywood, who the heck is left?
I would have liked more about the deficit and why people should care and do something in response to this kind of inconceivable situation...Educate us poor, dumb masses, why don’tcha!
I’m here to learn more about what my instincts tell me is true – I like the Independent’s positions on most issues, even if I can’t fully support my views.
Looking for smart guys like you to provide the facts, analysis, and reasons that I can pass on to friends even more ignorant than me, rather than despair that everyone else is so stupid. Have a good weekend.
Thanks
Paula Cassin | Jan 9, 2009 | Reply
“Robert, if you hate Government, the Media, the Masses, the Police, and Hollywood, who the heck is left?”
The vast majority of those living in this country.
Brent | Jan 9, 2009 | Reply
Paula,
Are you a writer for the Onion? If not, send them your job application. You’ll be hired on the spot, which is something – given the current economic conditions.
The facts? The U.S. is screwed.
The analysis? We’re screwed because we have the largest, most expensive government in the history of the world, and they are planning every aspect of our lives. They’re doing a piss poor job of it, if you ask me.
The reasons? I could list them for you, but you and your ignorant friends wouldn’t understand and don’t want to know. Ignorance is bliss.
Thanks for the weekend wishes. Go back to sleep.
Steve Hogan | Jan 9, 2009 | Reply
And the total public debt (the sum of all the budget deficits over the years) is probably $10 trillion by now.
Sukrit | Jan 12, 2009 | Reply
Brent’s comment is exactly right. The unions, government, lobby groups, media, and the rich socialites the media parades on tv all day, are not America. Everyone else, just working and getting by wanting to be left alone to live our lives, are.
Billy | Jan 12, 2009 | Reply
Paula, the reason we’re headed for tough times economically is because government is rapidly extending its reach into every corner of our lives. This grasping for still more coercive power is rationalized by the economic crisis of teetering banks and rising unemployment. But that crisis is itself the product of pernicious prior state intereventions into our economy: rampant Federal Reserve inflating, the destruction of capital through heavy government spending (40% of national income) and high taxation, plus an endless and ever expanding web of regulations that make it increasingly hard to get things done (the Federal Register is 74,000 pages and growing constantly!).
Sadly, the world has become a dangerous place to live, because most people (and their governments) believe that it is morally appropriate to expropriate individual lives in pursuit of some supposedly “greater collective good” that people are not willing to support voluntarily. So states wage aggressive wars withour restraint or conscience, their victims respond with indiscriminate vengeance, and states grow more ugly and intrusive.
I understand that you want answers, not nap time. I hope you keep thinking, looking for good answers.
Mark Humphrey | Jan 13, 2009 | Reply
Steve, your response to Paula was uncalled for. Just because you didn’t like her criticism doesn’t mean that you should imply that she is “ignorant” and “asleep.” Personally I enjoyed the sarcasm in your article, but that doesn’t make me more intelligent than Paula (perhaps it makes me less so). To quote Shakespeare from ‘Henry V’; “settle you fools, we have enemies enough”
joe4liberty | Jan 13, 2009 | Reply
For many years it has been obvious to me that our government will fail under massive debt or under massive inflation. But I can’t get anyone to talk about what will replace it.
Everyone I talk to assumes that our government will not fail, it will collapse into dictatorship, or we already have a dictatorship.
In any of these cases, if we want to have something different, we have to have a plan. We have to identify the core problem(s) and find workable solutions to them.
As I see it, the Constitution provides a fundamentally sound form of government, but our method of electing our representatives sucks. As long as people are elected by people who don’t know them, the mass media (i.e. money) controls the election.
I think the founding fathers had it right with the electoral college. The idea is you elect someone you trust and they go debate, argue and compromise on who will be an acceptable president. I believe the founding fathers did not foresee how fast the population would grow and how important it was to limit the size of the voting block.
If precincts were limited to some number of voters small enough that they could all know each other (say 4,000 voters), and if precinct geography was required to be contiguous so that all members of the precinct could know each other (say 5 mile radius), then that precinct could elect (one to three) individuals from the precinct that were known, at least by reputation, to everyone in the precinct.
The precincts could be grouped into districts such that the number of precinct electors is manageable (say 300 electors). These electors could elect from among themselves electors to go to the next level.
These individuals now represent 1.2 million voters each. At current voter registration levels they would number about 140 people. This is about the size of the original electoral col ledge.
The chain from voter to elector is short enough that every voter could see how his vote came out. The pool of electors is small enough that everyone could know how the various districts voted. The pool of voters per elector (4000::1) is small enough that any individual will some resources could have an impact on the election, and elections are likely to become hotly discussed and debated rather than passively decided by emotional TV adds.
This is wedding cake model of elections is not just for presidential elections. It can be used for congressional and state representation also. In fact the state executive election can be used to select the state governor and the states senators (as the Constitution prescribed).
Peter Adams | Jan 13, 2009 | Reply
This comment is for the person wondering what form of government will replace what is in Washington now—look at the coming North American Union along with it’s new currency, the Amero. The U.N. appears to be the gradual formation of the One World Government. America wake up!
Raven Jacobs | Feb 16, 2009 | Reply
Paula & Mark,
I would suggest that we are actually in tough times because the government has attempted to plan the entire economy, a task that is inherently impossible.
The biggest problem is that the Federal Reserve is able to arbitrarily set interest rates. These rates have absolutely zero relationship to the money Americans have saved.
Essentially, the way interest rates are set, the Federal Reserve is trying to allow for the allocation of capital without adhering to supply and demand. As there are fewer dollars saved, it should be more difficult (in theory) to get a line of credit.
As they operate independently, however, it allows for capital to be allocated into areas where it otherwise would not be. Essentially, when the market does not set interest rates for savings and loans, it allows for people to make bad investments and discourages people from saving money for the long-term.
Ken | Feb 25, 2010 | Reply
Peter,
Brilliant insight there.
Anti-federalist John Yates voiced similar concerns. He said that the election process would only work so long as each person casting a vote personally knew the candidates they were electing.
As we have seen, character and integrity are something that mass media can fabricate if you do not know the person. That is part of the problem trying to maintain an empire as large as the United States has become; the anonymity of candidates allows for poor and corruptible leaders to be in charge.
Ken | Feb 25, 2010 | Reply