The bailout is just the beginning - what do we do when it all starts to unravel?

There’s a lot of ire over the bailout, and if it’s the appropriate response (and if a response is really needed in the first place). I’ve seen good arguments on multiple sides as to the issues, problems, and potential solutions (with various “smart important people” weighing in). But this crisis is in part dealing with panic – the market is not acting rationally (either due to the crisis or due to the promise of government involvement). And so our government acts not-entirely-rationally, in the hopes of countering the market issues and enabling forward progress.

What I worry about far more are the looming disasters with our mandatory entitlement spending. Our “entitlements” are pitching over – individual Medicare “trust funds” are starting to be depleted, and the remaining Medicare and Social Security positive balances are starting to narrow. That is, even those funds that still see a surplus are seeing a shrinking surplus in the very near future. As a result, the “extra” cash the government has been using for their pet projects will soon fall off.

And what do our candidates think of this? One wants to cut spending, but will have no power to usefully reform these programs given the makeup of Congress. The other wants close to a trillion in new spending (plus the pork fat to grease the skids in a friendly congress), and thinks we can “tweak” the tax code to find it. He wants to mandate oil independence and create 5 million “green jobs”, which would add $6000 in energy costs per household. It’s a fair cop that earmarks are a relative drop in the bucket here, but to say that earmarks are small potatoes, so let’s go spend another trillion? Get real!

Making matters worse, we have an incompetent Congress and a party that’s going to claim “we just need to tax the rich a little more – we owe it to the OSADI recipients, as they’re just getting back what they paid in”. No Congress, you took their money and created a bunch of little programs to keep them happy and stupid with it, and dropped an IOU into the “trust fund”. Now the bill is coming due, and “taxing the rich” will just ensure that they restructure their payout to minimize the new tax liability, or relocate overseas.

If government programs were instead corporate programs, those involved would be thrown in jail for running a ponzi scheme, those paying in would lose their investment, and the whole mess would be liquidated. But of course we couldn’t do that for Social Security recipients, as they had no choice, since Congress refused to give them one. We have presidential candidates that are ignoring the issue, a Congress that couldn’t even take the hard look at the problem when Bush was pressing for it, preferring the “pay no attention to the man behind the curtain” approach. Are we going to look back on this rescue attempt and say “ah, if only we could fix today’s troubles with a mere trillion dollars?”