Arthur E. Sowers is a resident of Harbeson.
Thomas Patterson’s recent letter was about Argentina’s experience making big government spending cuts (“Has Argentina’s leader cracked spending code?”). And Patterson just beamed and bubbled all over the place about how good that was.
But he also left out a lot of important things from his story. Here, I will talk about some of those things.
Part of Patterson’s problem is typical political bias dominating economic decision making. The absurdity is like a person who is in one of two groups of people. One group wants all cars painted red, but the other group wants them all painted blue. The missing sentence is: Why can we not have other colors or even mixtures of colors? Or, even better, let’s look honestly at our problems and leave the political bias at home and then talk about best ways to address a problem instead of saying the only way is to reduce spending or shrink government.
The situation in Argentina is regrettable, but I can think of many, many examples where an economy went off the rails (e.g., recessions, asset bubbles, credit bubbles) in the past. Lots of innocent and powerless people got hurt badly. And they got hurt through no fault of their own. Patterson did fairly point out Argentina’s 50% higher poverty rate due to President Javier Milei’s draconian government spending cuts. But the long-term damage cannot be estimated. The lives of millions of people will be permanently ruined. It can take years for government institutions and even private-sector businesses to become established again and get the bugs out of what they do.
But, before Melei’s economic ax surgery, Argentina was already in serious trouble, basically, with inflation and with such a poor credit rating that it could not borrow money or service its debt. Here, our economy is not (repeat, not) at all in trouble like Argentina’s economy. And, as I write this letter, the giant Trump-Musk economic argument/boxing match/food fight pandemonium is going on very chaotically. According to incomplete statements, leaks and Musk tweets on X (his own propaganda bullhorn, with reports that some of his tweets contain misinformation), we can hope that minimum stupidity will be used to form final plans. But rumors of massive government spending cuts are rampant. And one report by Robert Kuttner, dated Dec. 21 and titled “How Musk Outmaneuvered Trump: Musk got the only thing that he wanted. Did Trump realize it?” gives a hint about how selfish interests that are at play are likely to help only a few people, while the majority of the rest of us go the way of used Kleenex.
All capitalist economies are unstable. “Recession” is a dirty word, so the preferred term is “business cycle.” When “the economy” causes people to get laid off and paychecks to stop coming, people cannot pay their rent or buy food. A recession is a bad experience for them. This country had as many serious recessions in the 1800s as it had in the 1900s. Read U.S. economic history for details.
The two government things we have that never get proper credit are the Federal Deposit Insurance Corp. and the Federal Reserve. Also, Wall Street can now stop stock trading if it gets chaotic. All these institutions and policies stabilize economies, and many countries besides the USA have such regulatory systems in place. I think most economists would agree that these are good things. But wild talk in recent months about massive government spending cuts could lead to an “overreach” cut that could badly hurt a lot of innocent people by throwing the USA into a recession we should avoid.
Arguments about government debt are a joke. You need to look at private-sector debt, too. It is just as big as government debt. But this rarely shows up in the media. My earlier Daily State News letter explained part of this problem (“Debt ceiling drama shouldn’t worry us too much”). Corporations sell bonds all the time, and sometimes, they default. If large numbers of big corporations go out of business in a serious recession, they will not easily come back to life when the economy comes back.
Consumer mortgage debt might let most of us own our homes by the time we retire, but car financing and carried credit card debt make finance companies rich and keep you poor.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
