What’s considered "new" has often been lived before, but sometimes it’s not pretty. Presumably that’s what Clarence Darrow meant when he said, “History repeats itself, and that's one of the things that's wrong with history.”
It is becoming increasingly clear that developed-world countries will attempt to go down a path followed before by governments facing similar debt loads — and it’s not pretty. In this case it’s not a wartime debt rollover, but a combination of lofty promises made to provide a safety net to a burgeoning population demographic. And this follows years of fiscal sloppiness both here and abroad, derived from an attitude best expressed in the infamous and thoughtless words of Dick Cheney: “Debt doesn’t matter.” Well, Dick, it does.
With the debt-to-GDP ratios of the U.S. and many other sovereigns reaching or exceeding 100 percent, governments are in a mad scramble to line up financial resources to stay afloat.
Europe (Greece in particular) continues to be the poster child for the illusion that a government can keep itself going by leaning on its citizens and others to create bailout funds, or by changing the accounting, regulatory or legal rules, or by engaging in other funny-money schemes. Europe has just concluded its 16th summit in less than two years to solve the debt problem — and all they do is create more debt.
Some of these efforts have brought a temporary reprieve from financial meltdown, but they do not provide a meaningful adjustment process to regain prosperity or debt sustainability. There is now so much debt and so many additional scheduled debt commitments that austerity on the rest of the budget will not contain the debt problem.
Given the lack of will by the government to stop the entitlement game made by previous irresponsible governments, it appears that we will soon be learning the ultimate cost of attempting to keep the entitlement promise.