Empty Promises

I don’t think I am psychic, but sometimes I wonder. Last night, in thinking over the implications of Unicorn Care, the problem of Federal Debt arose. Despite the wailings of the leftoids and their rigged CBO scores, economics cannot be fooled.

The U.S. economy probably cannot support another massive program of waste. We ar still in the early stages of a depression, somewhat masked by financial shenanigans between Washington and Wall Street. Not only the costs of TARP and Spendulus; we suffer from the uncertainty as all the rules of business are in flux. There simply will not be enough production to keep up our lifestyles and make payments on the Federal debt. Even if lifestyles are made to suffer, Congress can’t tax what is not produced.

I thought that it would take only one person, or perhaps a handful, at a bond rating agency to knock the whole edifice down. A slight drop in credit rating would begin a chain reaction. Real interest rates would rise in response to the increased risk. And that squeezes every debtor, from Main Street to Wall Street to Capitol Hill.

Here’s where my psychic potential is revealed:

The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama. Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity…

While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week.

Not many economists, even Nobel-winning ones, understand that debt is what built up the modern U.S. economy. Most of what we consider money is actually just promises of money in future: debt. As Vox Day like to say, the government can print money, but it can’t print borrowers.

If nobody wants to buy Barry’s promises, he can’t pay for hopenchange.