The members of The American Society of Half-wits were out in force on the weekend Washington talk shows. The regular guests must have been off celebrating the holiday that falls just after the Vernal Equinox. Among the guests who did show up, the best comments on Sunday came from Sen. Judd Gregg of New Hampshire who had agreed to be the Administration's Commerce Secretary and then pulled out at the last moment. Gregg remains the senior Republican on the Senate Budget Committee.
The odds are reasonable that Gregg came by his high office the same way that John Quincy Adams and George Bush did. Gregg's father was the governor of New Hampshire in the mid-1950s. Judd held the same job little more than three decades later and then was elected to the US Senate. His own accomplishments are so modest that he lists the "Legislative Recognition Award" from the American Ambulance Association as an important milestone on his CV. Gregg's contribution to the debate about the federal budget is a statement he made on CNN's State of the Union talk show. He observed that if Congress approves the budget as it has been proposed by the Administration and deficits consequently move up at the rate that the Congressional Budget Office has projected in its analysis of the budget, the nation will become bankrupt and people would stop buying American debt. (See the 25 people to blame for the financial crisis.)
Greg's actions over the last two months, moving in and out of the Commerce job and then immediately attacking Administration economic policy, appear to be the workings of a confused mind. His record as a member of the Senate may be unspectacular. However, it says a great deal about the state of the discourse regarding the budget that his observation is one of the few, by a ranking Senator in his party, which mentions the term "bankrupt" to refer to what could become of the American government.
Gregg may not be correct and his point of view may make him an outlier. But there is no denying the fact that there has been almost no time spent in the Congressional conversation about what could happen to the budget if either the revenue or expense assumptions at the core of the Administration or CBO analyses are wrong by a substantial margin. The projections of GDP growth only have to be a percent or two too low for deficits to go up by hundreds of billions if not trillions of dollars over the next decade. Not a single page in the Administration or CBO documents describes how that might happen or what the financial results will be. Perhaps the reason is that no one wants to put in writing the possibility that the recession, compounded by inappropriate actions to correct it, could lead to financial mayhem.
One of the reasons, and probably the critical reason, that large banks have nearly failed is that the executives who ran them apparently never looked at their rapidly rising earnings and asked "what happens if the investments we are making now start to trade in the wrong direction?" "What happens if the assumptions that led us to make ludicrous amounts of money this year turn out to be wrong next year?" It turns out that there was no "Worst Case Scenario Handbook" for running big banks. It might have saved investors and the government a trillion dollars or more. (See pictures of the Top 10 scared traders.)
The odds that the American Treasury will not be able to sell debt are still relatively low. But, no one, except perhaps Senator Gregg, sitting in high office in the federal government has asked if there are any parachutes in the plane on the off chance that all four engines go out at the same time. That kind of question is the work of unstable or anarchistic minds.
Douglas A. McIntyre
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