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17 July 2011

Debt Panic

My sister-in-law just asked me about the media-induced panic about the debt and I was reminded of H.L. Mencken's quote:

"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."

The debt default is a totally imaginary concern.  Currently the debt payments amount to somewhere around 7%.  If we default it will be because the politicians choose to default.  They could keep paying the debt if they wanted to by laying off federal workers, imposing furloughs, closing departments or agencies or any number of other options.  Unfortunately for the politicians, that doesn't sound nearly as scary as "Default!"  Since there are obvious alternatives to defaulting, we can only assume that the politicians have an ulterior motive for trying to scare us.  They don't want to change the status quo of power politics.  That would end their gravy train.  Of course, it's not in the taxpayers' best interest to continue to accrue debt, so the politicians have to convince taxpayers that they should act against their own best interest.  And since it's almost impossible to get people to do something antithetical to their well-being unless they are scared out of their wits they have manufactured a default scare.

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