Government Bubble

The end of the Clinton era saw the bursting of the dot com bubble. Rampant speculation had driven tech stock prices to unsustainable levels, and what went up came crashing back down.

We just witnessed the housing bubble's big bang, with resulting downsizing of irresponsible lifestyles. There is talk of bulldozing entire vacant neighborhoods in some failed cities like Detroit.

Unfortunately, government gamblers who are incapable of learning anything continue to pump hot air into the increasingly unstable big government bubble. California voters repudiated their politicians, and now no one knows what to do, since slashing spending doesn't come naturally to a political candy man.

President Obama, fresh from blowing $4,000,000,000,000, brazenly says we are borrowing too much money from China, we're broke, and the irresponsible spending must stop. Oh, and he also wants to fund windmills and free health care for everybody.

Paul Krugman can always be relied upon for liberal doses of economic advice.

Like practically all liberals, he stubbornly pins California's fiscal disaster to proposition 13, the conservative ballot measure that capped property taxes. Krugman goes a step further, predicting the same disaster for the US for the same reason: Those angry, stingy conservatives are blocking "responsible" tax increases that would pay for all this spending.

It's always too little taxation; never too much spending.

We all want something for nothing and the politicians are too cowardly to tell us no, so we end up with more government than we can afford.

China and the US are in a Mexican standoff: We can't stop irresponsible borrowing, they can't stop irresponsible lending, and the negative synergy has us on a mutual downward spiral.

Why doesn't it occur to anyone to downsize our overleveraged government?

NYT - Krugman