Greetings from the Future
This is a very scary essay, by Eric S. Raymond, an Internet developer and historian of “hacker culture.”
A presidential administration in the near future — perhaps the one we’re electing this fall — is going to be forced to make a painful choice between doing the right thing and risking impeachment, or doing the wrong thing and being condemned by history as placing his or her own political survival ahead of avoiding a ruinous calamity.
At some point, the U.S. government is going to lose both the ability to increase revenues and the ability to sell bonds. At that point the entitlements system will crash. Transfer checks will either stop issuing or become meaningless because the government has, like some banana republic, hyperinflated the currency in order to get out from under its debt obligations.
Unlike the oncoming European demographic crash, the entitlements crash will be survivable in that there will still be people around to make things and trade things with. But it’s going to be ugly. probably rioting-in-the-streets ugly. People dependent on income transfers will starve or die of preventable diseases in large numbers, unless they can find work or private charity. Since many of those people will be old, work will be unlikely unless they are exceptionally capable at something. Families will have to re-assume the burden of caring for their elderly; retirees without children will be in especially severe jeopardy.
Violent revolutions have been fought over less wrenching economic changes than this one promises to be.
Every so often, it’s a good idea to contemplate the fiscal Moloch of uncontrollable entitlements spending. Raymond’s blog post may go off the rails into speculative paranoia at moments. But perhaps that’s necessary to shake the political class’ apathy, wishful thinking and selfish short-sightedness.
Here’s what Raymond considers his “optimistic” scenario:
The pain-minimizing strategy, from an economic and human-misery point of view, would be to voluntarily crash those programs now. Learning the adaptations required to live without them would be easier in today’s strong economy than it’s going to be in the world after an uncontrolled crash. This is impossible, however, as it would create immediate grief for the political and bureaucratic class that runs them and for various powerful interest groups allied to it. At present, this coalition is certainly powerful enough to block abolition.
My friend Ken Burnside argues for the near-term crash as follows: “The dinosaur killer on the economy is the 53 trillion dollars of accumulated debt on Social Security/Medicaid, which starts coming due around 2013, when revenues for the program are less than its obligations, and all those ‘IOUs’ that Congress has been writing against the trust fund start coming due.”
My best guess is that 2013 will fall in President Palin’s first term, after McCain steps down and she clobbers the living crap out of an aging and bitter Hillary Clinton. There’s still a possibility, though, that the economy-killer could strike early in an Obama second term. If it goes down that way, I think the chances of Federal flim-flam and hyperinflation go up considerably. Whatever his personal good intentions might be, Obama is heavily tied to interest groups for whom admitting that federal income transfers have to effectively end would be ideological and electoral suicide. Palin isn’t, and thus might — might — be able to administer the harsh medicine required to pull us through with minimum dislocation.
If you want some relief, Raymond’s commenters mostly think he’s being too bleak.
