On one hand, it's nice that there are even some Democrats saying not to panic. It's a refreshing change. On the other, there's so much stone-cold stupid packed into that statement, I'm moderately surprised Mayor Bloomberg ever figured out how to breathe.
“We are spending money we don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.”
Okay, let's unpack that, first.
"We are spending money we don't have." Yes, Mr. Bloomberg, that's the problem. Spending money you don't have is bad.
“It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money.
No, Mr. Bloomberg, the reason living on credit alone is bad is not that people will stop lending you money. The reason is that eventually you're going to have to pay it back. Once the bill comes due, there's not much you can do. Oh, as long as you can keep your head above water (or buy a long enough snorkel), you can keep borrowing today to pay previous debts. But that's just a "turtles all the way down" argument. Eventually something will happen. You'll miss a payment. Checks will clear in an unexpected order causing your bank account to overdraw. When that happens, it won't matter how much you owe- the people you borrowed from are going to come looking for their money back, and they won't accept "sorry, I don't have it, come back Tuesday."
That is every bit as true for the Government as it is for families. The Federal Government might be able to borrow money indefinitely in theory, but Reality will not be denied and something will give. When that happens, the whole house of cards will come down. It'll make the Great Depression look like boom years. If you think the lenders won't stop lending us money just because we owe them a lot, you don't understand how this whole "lending/borrowing" thing works. Eventually one or more of three things will happen.
1) We'll miss a payment. Do not underestimate how bad for the entire world economy "The USA Missed A Payment" could be. Much of the world financial crisis in the Great Depression was because Germany "missed a payment." If 1920s Germany could do that, imagine what 2013 America could do.
2) A lender simply will not be able to lend us more money. This is a major problem with fiat currency: it gets too far divorced from money. People look at a dollar bill and think of it as money. They don't understand that it is only currency- the "money" is the labor which that dollar represents. Money is finite. At some point there will not be enough left to lend us more.
3) A lender will cease "throwing good money after bad." At some point, a lending country (say, China) will decide to cut their losses. Yes, us not paying them would be bad. If, however, they believe we'll never repay them anyway, why make the situation worse by lending us yet more money? What good would that do them?
If any of those things happens, the whole house of cards falls down. And we're way too close to that edge for comfort. By the way: a major US Figure (as the Mayor of NYC is) saying "Oh, they have to lend us the money, and we don't have to worry about paying it back?" Yeah, that's a good way to get other countries looking seriously at option #3.
“Listen, I’ve worked now in government for 11 years,” he said. “One of the problems is the definition of ‘waste.’ You think the programs that I want are waste. And I think the problems that you want are waste..."
No, Mr. Bloomberg. No one is talking (seriously) about ending whole programs. We should be, but we aren't. Therefore the definition of waste is pretty narrow- money which is supposed to be used for a specific purpose which is not being used for that purpose. Money that pays high-ranking NEA or SEIU members to go on vacation (on the public dime) is "waste." Dollars spent deciding if a watched pot really ever does boil are "waste." It's actually fairly simple.
Though, if you want to talk about whole departments or programs, I'd be willing to compare notes with you.
Finally, he says this:
"Everything we have was put in by Congress, signed by the president. There was a reason for it, or a constituency for it. Most of the tax breaks are designed to encourage or discourage economic activity. There’s a reason for it.”
And there's your problem. Virtually every part of our tax-code is now designed to encourage or discourage some kind of economic activity. It is policy via taxation. What the tax code should be doing, of course, is seeing to it that our government has enough money to operate. To what extent it should operate is a separate- but highly important- question. Regardless of the answer to that tangential question, it should be obvious that when we implement policy via taxation that's bad. It leads to the kind of bloated, incomprehensible tax system that we have today.