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Disaster Capitalism, the Federal Deficit, and the National Debt

Disaster Capitalism, the Federal Deficit, and the National Debt

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Published by Lyle Brecht
The primary reason for the skyrocketing federal deficit and the rapidly growing national debt is not that the federal government has profligate spending on social programs, but that it is the primary sector that recognizes the real economic costs associated with an aging population.
The primary reason for the skyrocketing federal deficit and the rapidly growing national debt is not that the federal government has profligate spending on social programs, but that it is the primary sector that recognizes the real economic costs associated with an aging population.

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Published by: Lyle Brecht on Jul 09, 2010
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08/07/2013

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You know that the best you can expect is to avoid the worst.
1
 A wise person will not spend time installing a burglar alarm when the house is on fire.
 2
 ALARM
Deficit Hawks decry the federal deficit and the mounting federal debt. The sky isfalling! We must cut social programs to save the nation from going bankrupt! Thecourageous even deign to cut the military budget. The President has convened adeficit reduction task force meeting in secret to “get the deficit under control.”
3
FIGHTING SHADOWS NOT ROOT CASUES
The national economy has four accounting buckets: (1) private sector (businessesand private individuals), (2) government (federal, state, and local government), (3)charitable organizations (not-for-profits, foundations, NGOs, academia), and (4) off-balance sheet (externalities, contingent liabilities). For example, if the BP Gulf oil spillultimately
costs
the national economy ~$60-$80 billion all total over the life cycle ofthe economic impacts of this spill, these economic costs must be allocated overthese four accounting buckets. There are no other places to put these real economiccosts. Thus, the tension, the political conversation, is
 always
to which bucket do wewish to allocate real economic costs.
4
 The primary reason for the skyrocketing federal deficit and the rapidly growing na-tional debt is not that the federal government has profligate spending on social pro-grams, but that it is the primary sector that
 recognizes
the real economic costs as-sociated with an aging population. For example, cutting Social Security and/orMedicare payments may not
 save
the economy any money. Such legislative actionsonly transfer real economic costs off the federal government’s books to another sec-tor. Things often cost what they cost irrespective of whose books these costs resideon. The
economics
of various social and military government programs is a whollydifferent issue of how should one pay for them or if these programs are accomplish-ing their intended purposes.Instead of worrying about the absolute size of deficit, more productive thinkingmight be focused on questions such as, for example: (a) can the country continue toallocate half of the federal government’s cash flow to military spending when the restof the world all together spends less than this amount annually; (b) can the nationaleconomy continue to allocate 17% (soon to be 20%) of its gross domestic product(GDP) to health care when the rest of the industrialized, capitalistic, democraticcountries of the world spend less than 10% of their GDP, yet achieve comparable orbetter health outcomes; (3) is it moral or ethical to force a citizen who has contrib-uted to the productivity of the national economy to the best of his/her abilities duringtheir working life to poverty when they reach old age?; etc.
DISASTER CAPITALISM, THE DEFICIT & THE NATIONAL DEBT
 
Lyle Brecht DRAFT 1.3 -- Friday, July 16, 2010 CAPITAL MARKETS RESEARCH
Page 1 of 3
 
DISASTER CAPITALISM AS A DRIVER OF PUBLIC DEFICIT & DEBT
Despite the hand wringing and distress over the federal deficit and mounting publicdebt, the larger deficits and mounting off balance sheet debts are being generatedby the private sector in the United States via disaster capitalism. Disaster capitalismis a particularly pernicious form of aberrant capitalism that is dis-economic (wealthdestroying) rather than wealth producing. This form of capitalism is often rationalizedby the myth of free markets unencumbered by government regulations.
5
But, unfor-tunately, the end-result of disaster capitalism is market inefficiencies that radicallymisprice the economic costs of inputs and outputs to the economy. When theseparticular markets fail (which they always will), often the economic costs of marketfailure are accounted for by the public sector. Essentially, the private risk from disas-ter capitalism is socialized to the public sector.Presently, for example, markets under disaster capitalism are not prone to efficientlypricing systemic risk.
6
Fundamental and structural inefficiencies in the market pric-ing mechanism enable domestic (and global) markets to misprice inputs to and out-puts of the economy by either deferring known economic costs to the future (exter-nalities) or failing to account for known economic costs in the current period andpushing these costs to public taxpayers (contingent liabilities).If markets were efficient in pricing systemic risk and/or government regulations wereactually effective, by definition, there would be no threats from anthropogenic cli-mate change due to excess carbon emissions to the earth’s atmosphere, the na-tion’s groundwater resources would not be depleted, the global destruction of eco-systems, and the extinction of species due to anthropogenic causes, etc. would notbe occurring.
7
For all these consequents of not managing the systemic risks of mar-ket transactions are dis-economic. That is, the economic costs for not managingthese risks are greater than the profits derived by pushing the economic costs ofthese risks to the future or to public taxpayers. These systemic market risks are amuch, much larger economic problem than the federal deficit and growing publicdebt. Not only are they larger, but these private sector unaccounted for real eco-nomic market costs are growing much faster than the federal deficit and public debt.
The universe in its persistent becoming is richer than all our dreamings.
8
ENDNOTES
:
DISASTER CAPITALISM, THE DEFICIT & THE NATIONAL DEBT
Lyle Brecht DRAFT 1.3 -- Friday, July 16, 2010
Page 2 of 3
1
Italio Calvino,
If on a Winter’s Night a Traveler 
(1979) inWilliam Poundstone,
Prisoner’s Di- lemma
(New York: Doubleday, 1992), 53.
2
Nick Bostrom and Milan M. Cirkovic, “Introduction,” Nick Bostrom and Milan M. Cirkovic,eds.,
Global Catastrophic Risks
(Oxford: Oxford University Press, 2008), 28.
3
See
 AmericaReport: A Common Sense Report to the Citizens of the United States
for addi-tional detail. Athttp://www.scribd.com/doc/9717658/AmericaReport.
4
 
Private Sector versus Government: Which is Better 
:http://www.scribd.com/doc/12548397/ .

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