Where we are now

If secession is a joke in the U.S. (and it is, even if it is a bad joke), it is something more serious in Spain. From Walter Russell Mead:

Exit polls from the regional elections in Catalonia show that pro-independence parties are winning a huge majority: up to 95 of the 135 seats in the regional assembly, according to analysis from the Financial Times. Worse, from Madrid's point of view, the radical pro-independence forces are doing unexpectedly well. The next Catalan government will now be convinced that it has a mandate to hold a referendum on independence that Madrid says is illegal.

I don't expect the pain in Spain to split the plain, but this is clearly a sign of the perils toward which fiscal irresponsibility is pushing the world.

It's clear what is pushing Spain into its worst constitutional crisis since the death of Franco: the colossal failure of the European currency union. European policy makers foisted a currency they did not understand on a continent that wasn't ready for it, and the result is what may be the single most expensive economic policy fiasco ever seen. With neo-Nazis on the march in Greece, the extreme right making gains in eastern Germany, European public opinion everywhere turning harsh and inward looking and now a looming secession crisis in Spain, it seems evident that the final bill for the euro won't just involve money.

What is happening virtually everywhere is a colossal failure of leadership. We might want to keep that in mind as we deal with our own fiscal crisis. From the WSJ:

For years, the government has gotten by without having to produce the kind of financial statements that are required of most significant for-profit and nonprofit enterprises. The U.S. Treasury "balance sheet" does list liabilities such as Treasury debt issued to the public, federal employee pensions, and post-retirement health benefits. But it does not include the unfunded liabilities of Medicare, Social Security and other outsized and very real obligations.

As a result, fiscal policy discussions generally focus on current-year budget deficits, the accumulated national debt, and the relationships between these two items and gross domestic product. We most often hear about the alarming $15.96 trillion national debt (more than 100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of GDP). As dangerous as those numbers are, they do not begin to tell the story of the federal government's true liabilities.

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

Two things seem obvious from this. One is that millions of people are going to get a fraction of what they have been promised. The other is that the pressure to cushion that blow by taking more and more from the productive economy will only grow more severe as time goes on. Governments at the state and national level will bend under that pressure, and so cook the goose that lays the golden eggs. Welcome to the future.

Comments

[Donald pay]

Define "productive economy."

[Julie Gross (NE)]

Was secession a bad joke when Democrats spoke of it in late 2004?

The US supported the Czech Republic & Slovakia separating. The US supported Sudan & South Sudan separating.

[Bill Fleming]

It's always a bad idea to actually do it, Julie.

You are of course free to shoot your big mouth off about it all you want.

But if it actually goes down, just remember, that's when the guns come out.

And subsequently, other things besides mouths will get shot off.

So yeah, as jokes go, discussion of secession is one of the worst ones.

[Stan Gibilisco]

Wonder when we'll start talking about +quadrillions+ of dollars.

As for secession, it's the whole wrong way to go. Now is the time to come together, not drift apart.

As I see it ... When the fit hits the Shan, those who cooperate will survive. Those who compete will die.

[larry kurtz]

Mexico's economy is about the same as California's. President Obama is there now maybe talking about Statehood with her president-elect.

[Donald Pay]

No one can seem to define "productive economy." I can only conclude that taking more and more from some undefined entity that is thrown out in an blog to sound good is really not a problem that anyone needs to be concerned about.

[Ken Blanchard]

Donald: the productive economy is that part of the economy that produces more wealth than it consumes. When one nation has to be bailed out by other nations, that nation is consuming more than it produces. For that to work, other nations have to produce more than they consume and they have to be willing to fork it over. Am I going too fast for you? I thought so.

The $86,800,000,000,000 in Federal liabilities mentioned above is not wealth that will be invested in future production. It is wealth that will be consumed if in fact it is paid out, which it won't be. There is no probable scenario under which the economy can support those expenditures.

I can well understand why you think that this not a problem that anyone needs to be concerned about. Those of us who aren't fools take a different view.

[Rafter]

As a former absent for a long time, but now From the why That i used to love the site. Thanks, I will try and visit more frequently. How many times you improve your website?

[Mark Anderson]

Most red states like South Dakota get much more from the federal government than they put in and yet their citizens complain about federal spending, a big conundrum. It should be studied at the college level.

[Donald Pay]

KB,

You have a very limited view of wealth, and don't understand the difference between liabilities and investment. There is good debt and bad debt, just as there are good expenditures and bad expenditures. Wealth that goes into McMansions for the wealthy is not really as productive as wealth that goes into the middle class, the real job creators. A lot of conservative thought on this is really shallow, and just serves their rich funders. Glad to see you are getting out of the politics/economics blog and going into a field you are better at. We even agree on most things Darwinian.

[Julie Gross (NE)]

Bill Phlegm/Cory:

I'm so glad that you continue to read my posts, in spite of your multiple assertions that you're wasting your own time.

And no, secession does not mean that guns will come out, but your violent tendencies are informative. The violence of which you speak will come from the millions of poor minorities that your boy Obama continues to ignore. Meanwhile, he sends his tax-cheating treasury secretary to talk with the opposition--opposition that he openly placed on his hit list today.

The only violenece will come from the drones again sent by your president to murder US citizens.

And your lack of intellectual ability continues to be unsurprising.

NO JUSTICE, NO PEACE!

[Stan Gibilisco]

Forget about secession. That's ridiculous, that's rubbish.

We need a nationwide movement of mass recall petitions aimed at those idiots in Congress who would let billions of people all over the world take the hit for their inability to agree on how to run the country: the job we elected them to do.

Perfectly legal, perfectly sane, and in my opinion, perfectly called for. Why wait for an election? We should fire them now. Every last one of them.

[Bill Fleming]

Julie, one who advocates for secession surrenders all credibility when it comes to calling into question anyone else's intellectual capacity.