It is impossible for the United States of America to impact the national debt crisis without going into a recession and sustaining temporary job losses. If we are serious about reversing the debt trajectory that has grown by over 1 trillion dollars (that’s trillion) in each of the last five years, we will do what needs to be done now even given these serious consequences. Will we have the courage to do that? I doubt it.
The reason for this reality is that the US economy is based in large part on crony capitalism – that is on government transfer payments from taxpayers, from borrowing, and from printed money to government services, the military system, and to favored corporations. Too much of the GDP is directly connected to those transfer payments because we have relied on a flawed Keynesian philosophy for over eight decades. Consequently, if we wish to reduce the debt by cutting spending, which is the only logical way to do it, there will necessarily be a short-term deflationary effect on the economy. Despite what you might hear from politicians in both political parties, there is no way in the short-term to both reduce the debt and to grow the economy.
President Obama and Presidential candidate Romney will mislead you repeatedly in the lead-up to the November election because they believe you can’t handle the truth. Ron Paul, on the other hand, told you the truth.