With the start of QE3, I think we need to discuss what this means for all of us. With the Fed buying mortgage-backed securities, there will be more money available for speeding up the economy. However, even before the full effects of QE3 are felt the annual spending of the federal government have exceeded the 2007 level by $1 Trillion. With our slow economy and reduced tax revenue we have had “a string of federal budget deficits, $1.4 Trillion in 2009, $1.3 Trillion in 2010, and another $1.2 Trillion this year.” The current national debt is around $16 Trillion, with equates to about $51,000 per individual citizen in the US. This is a lot of debt, so I think it is time that we starting figuring out what to do.
I’d like to share a comment with you that was in the WSJ this morning. In an article written by George Schultz, Michael Boskin, John Cogan, Allan Meltzer, and John Taylor we see the magnitude of this problem. “The amount of debt is one thing. The burden of interest payments is another. The treasury now has a preponderance of its debt issued in very short-term durations, to take advantage of low short-term interest rates. It must frequently refinance the debt which, when added to the current deficit, means Treasury must raise $4 Trillion this year alone. So the debt burden will explode when rates go up.”
The article continues to discuss how this problem will impact us in the long run. The article mentions the reduction of real income, increased inflation, and a more complex monetary system. According to Schultz, et al, “The fixes are blindingly obvious. Economic theory, empirical studies, and historical experience teach that the solutions are the lowest possible tax rates on the broader base, sufficient to fund the necessary function of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform.” However, to get to this point there needs to be much more dialogue than has occurred up to now. In fact, what we need is what Paulo Freire calls cooperation.
All of us know trust is the foundation of good dialogue. An erosion of trust leads to an inability to properly communicate. This is what we see in congress today. In fact, we see what Freire calls antidialogical action. “In the theory of antidialogical action, conquest (as its primary characteristic) involves a subject who conquers another person and transforms her or him into a thing.” Philosophers call this the I-it or I-thou relationship. Because I see the other as a thing the person becomes an it. Someone I can take advantage of. This is in contrast to a person that I see as a person, resulting in an I-thou relationship, which has huge communicative implications.
Instead of practicing antidialogical methodology, our congress needs to begin to see each other within an I-thou framework. If they do maybe they can work together to solve our huge problems. Our economic situation is a mess, and the longer we wait to take action the harder it will be to solve.
And that is my thought for the day!