The Discerning Texan

So it wipes out your bank accounts. What’s in there? I mean, really. The average American household is carrying $121,953 in personal debt. What would be so bad if something goofy happened and all the meters got reset to zero? And Joe Schmoe’s credit card debt is as nothing compared to what the government’s signed him up for: USA Today recently calculated that the average American household is on the hook for $546,668 in federal debt—i.e., not including state and municipal. The Atlantic crunched the numbers further and reckoned that, to pay off the federal/personal debt over half a century at three per cent, the average household would have to write an annual cheque for $25,971. U.S. median household income is 50 grand, before taxes—and that $26,000 cheque assumes no further increase in federal or personal liabilities.

Critics of USA Today’s methodology say they’ve conflated two separate things—hard government debt, and the rather more amorphous obligations of Medicare, social security and other unsustainable entitlement programs. But, insofar as that’s a distinction with a difference, it’s the entitlements that are harder to slough off. A couple of decades down the road, Greece’s public pensions liabilities will be approaching 25 per cent of GDP: for the political class, it’s easier to default on foreign debt and risk unknown consequences than to renege on social commitments and ensure the certainty of violent insurrection. As attractive as it might be to tell ingrate geezers to go eat dog food, it’s not politically feasible in a democracy in which they’re the most electorally vindictive demographic group.

Besides, in a society that’s all but eliminated the concept of moral hazard, who isn’t entitled to government largesse? The North American auto industry pays its workers so much that it’s unable to make a car at a price anyone’s prepared to pay for it. So naturally it’s been delivered into the corporate control of the very same unions who demanded those salaries. Under the hilarious Canadian bailout, “social justice” requires that auto workers who make $70 per hour be subsidized by taxpayers making less than a third thereof. If it’s unreasonable to expect a guy on 70 bucks an hour to make provision for lean times, why should anyone else? The advanced Western democracy has, in effect, jumped the bounds of temporal and spatial reality: America lives beyond the means of its 300 million citizens to pay for it, so passes the check to its children and grandchildren. Most of the rest of the West does likewise, but demographically has no kids to stick it to.

Professor Glenn Reynolds, America’s Instapundit, noted that USA Today figure of $668,621 federal/personal debt per household and observed tersely: “Debts that can’t be repaid won’t be repaid.” Or to extend the old saw: if you owe the bank a thousand dollars, you have a problem. If you owe the bank a million dollars, the bank has a problem. If everyone owes a million dollars, civilizational survival has a problem. When I first heard about EMP a few years back, the big worry was that in a split-second it would vaporize trillions of dollars of wealth. From the perspective of 2009, vaporizing trillions of dollars of debt has something to commend it.

Read the whole thing.