Baker is making a most dangerous and, frankly, irresponsible assumption.
Any good, nonpartisan, market-savvy economist would tell you that markets move in cycles, that inflection points are impossible to predict, that the further the pendulum suspends in one direction--the longer its momentum pushes against gravity--the more forceful will be its move in the opposite direction when it finally capitulates.
Indeed, there was this one day when Greek bond prices subtly began their decent. When something began to unravel, when some bondholder somewhere woke up to the reality that even a country can't spend beyond its revenues forever. That a country whose leaders promote an entitlement mentality is doomed to squeeze its private sector to the point of exhaustion--to the point where the prospects for growing its way out of its bloated predicament is so dim that its creditors will demand a rate of return consistent with the risk they're taking. Thus the awakened, forward-thinking bondholder began dumping his Greek debt, and the rest followed his lead.
The inflection point for the U.S.--the home of the world's reserve currency--may very well be years away. And perhaps our policymakers will make better policy that will avert our creditors' exodus in the meantime. But that of course would depend upon us voters getting a clue. For as Harry Reid suggested yesterday, when the voter says "tax producers and don't touch entitlements", the self-interested policymaker has zero incentive to make better policy.
Here's an excerpt from my upcoming book Leaving Liberty?, Essays on Politics and Free-Market Thinking. This will be my plea to everyday consumers who typically wouldn't touch a book on politics and economics--who tend to believe most of what the media (both liberal and conservative) throws at them...
DAY 19: A Bloat of a Different Color
If I told you youre spending 70 percent more than your annual income, you tell me: Will you be richer or poorer a year from now?
What if I told you youre currently netting, on average, 250 calories per meal more than youre burning off daily? You tell me: Would you be fatter or skinnier a year from now?
If you arrange your daily activities so as to net minimal physical stress, you tell me: Will your bones and muscles be more or less dense, and will they possess more or less capacity a year from now?
What would you say if I told you that you could lose weight by increasing your caloric intake by 70 percent daily? And what if I told you that you could become physically stronger while exerting even less over the next twelve months? As much as youd love to believe me, youd tell me Im full of it.
But what if I were the recipient of the Nobel Prize in nutrition (were there such a thing)? Would you believe me then? Sadly, some of you (those whod do just about anything not to diet or exercise) would. But alas, my academic prowess notwithstanding, my saying it wouldnt amount to a hill-a-pork-n-beans twelve months from now.
Now what if I told you that youre spending 70 percent more than your annual income? You tell me, will you be richer or poorer a year from now?And what would you say if I told you that youd be in better fiscal shape if you spent even more over the next twelve months? Id be full of it, right?
But what if you were a company? Still full of it. Ah, but what if you were a nation? Now theres a bloat of an entirely different color. For at least one Nobel Prize-winning economist, many other not-Nobel-laureate economists, and oodles of pandering politicians would have you believe that very thing. The question is, do you?