Two items on the front page of yesterday’s Washington Post: “Record U.S. Deficit Projected this Year” and “Two lawmakers from Michigan propose billions in incentives for buyers of electric cars.” What’s wrong with this picture? That’s the problem. We don’t see anything wrong with this picture. We want it all. But we can’t have it all.
Some people think electric cars are nice, because the pollution they generate is off-site. But as Charles Lane, a liberal, writes: “If the cars were cheaper than gas-power cars of equal performance,” that would be one thing. “But electrics are substantially more expensive than cars of greater quality.” So we have to heavily subsidize them to get them out the door. On the other hand, gasoline-powered car owners are forced to use ethanol. That’s a subsidy to the everyone involved in the ethanol industry, and again it has to be subsidized because it’s inferior to gasoline. It cuts your mileage and does essentially nothing to reduce pollution. You just can’t go around subsidizing everything.
True enough, the main problem is entitlements. Which, not incidentally, are subsidies. Social Security, Medicare, and Medicaid already absorb 40 percent of the budget and grow inexorably without anybody casting a single vote to increase them. Left untouched, they will destroy the country. But earmarks are readily controllable and yet still uncontrolled.
Our nation has a spending addiction. And our politicians don’t have the guts to tell the public that no, we can’t have it all. And so we will continue to borrow and the Fed will continue to print money. In other words, subsidize the government so it can subsidize special interests.
But as Peter Orzag, Obama’s former budget director, writes in the Financial Times, “International investors would be wise to pay close attention to fiscal trends within the U.S.” Don’t worry, they already are. And at some point, although it will be very costly to them, they will get nervous enough to stop subsiding our subsiding.
Orzag adds, “I hope it does not ultimately require a crisis to restore fiscal sustainability at the federal level, but I fear it will.” Indeed, it will. At some point, some point soon, it will all come crashing down.