Quick take on a new paper from the Committee For A Responsible Federal Budget (CRFB) - A PREVENTABLE CRISIS: EXPLORING FISCAL CRISIS SCENARIOS FOR THE UNITED STATES

Sober-mindedness is a deeply embedded characteristic of the Committee for a Responsible Federal Budget (CRFB). There is an impressive array of former senior policy makers, deep thinkers, and assorted movers-and-shakers from both parties on its board.


The Committee released an uncharacteristically provocative short new paper entitled A Preventable Crisis: Exploring Fiscal Crisis Scenarios for the United States.

In the absent of extraordinary political compromise, preferably delivered as fast as one can buy a Whopper with Cheese, a financial crisis of unprecedented magnitude appears to be riding down upon us.

CRFB (pronounced "kurfba") notes that the jitters have begun. Financial markets are getting queasy about lending money to the US government.

So what's next? CRFB muses that we could muddle along as we have, with Washington lacking the political courage to address the problem. In fact, politicians can even make the problem worse by expanding entitlements, leading to a Catastrophic Budget Failure. Lenders cut off credit to the government, it cannot pay its bills, and public spending is sharply curtailed, pronto. Imagine the unemployment rate then!

Another path to the same end passes through inflation first. This path is widely anticipated among both professional and armchair economists. The Federal Reserve bows to political pressures to pump up inflation and print money to buy government debt and - presto - high interest rates detonate a cut-off of government borrowing and a fresh recession with no rescue in sight.

Or, the US could continue to borrow until the debt reaches such heights, and the interest costs become so burdensome, that Washington simply decides the pain of paying the interest is less than the pain of trashing the United States' credit score. It simply walks away from the obligations - an outright default.

CRFB concludes "...while most economists consider the worst case (default) to be unthinkable for the United States, we unfortunately live in an era where the unthinkable has become thinkable."

Carrying this line of thought to the next step beyond the paper's scope quickly leads one to ponder the impact on families and individuals.

How does widespread and lengthy unemployment affect families? How do curtailed defense budgets affect global stability, most immediately in the Middle East? How do tumbling public budgets affect retirees and children in school?

What calamity are we courting? What can individuals do to avert it? (One thought, let your federal elected representatives know what you think either by calling, emailing or via MyGovSpending.com.)

If the ship doesn't turn, what can ordinary people do to minimize the damage to their families?

How much damage will be done to you, your family, your country, your world?

What will emerge?