We were not being critical of debt arbitrage at all. We were simply pointing out that there are other consequences of prolonged and unrealistic low interest rates and, for many, they are very serious, life-changing, consequences.

Thanks Clint. I have, indeed, looked into Lovellian economics and find the concept intriguing. Actually, a Republican congress did hold Clinton's feet to the fire on PayGo and that did result in a temporarily balanced budget and even a temporary surplus. And, yes, your theory that politicians will, sooner or later, corrupt the system proved true. But the people are beginning to "get it" and, at least for a while, I believe an enforced PayGo system would curtail, if not stop, the bleeding. And as we wrote in our March 1st essay, so-called "untouchable" federal programs will have to be touched.

A fascinating concept, but obviously not doable for the foreseeable future. Perhaps a far easier (relatively speaking) solution would be to pass a constitutional amendment requiring "PayGO" with no exceptions except by a super majority of 75% or by an act of war or its equivalent. That would be a passable proposition.

Rainmaker is, of course, correct, but our essay this week only related to the Obama stimulus plans and not to the greater problem of irresponsible government spending. We have, however, touched upon this broader issue in several prior essays. We call Rainmaker's attention to our March 1st essay, " Feeding the Deficit...The Ultimate Obesity," in which we conclude, "It would take a courageous and masterful leader and a magical moment to say to the American people, “the government has made entitlement promises to you that we can’t keep…that we can’t afford, and that we can’t place on the shoulders of our children. We’re going to have to establish a “means test” for Social Security and Medicare and even the age at which our people will be eligible to begin receiving benefits. We’re also going to have to eliminate hundreds, maybe thousands, of programs that are wasteful or redundant or that we can do without. Henceforth, there can be no programs that are ‘untouchable.It seems we will have to wait for such a leader and such a magical moment. We can only hope he or she arrives in time."
Hal Gershowitz and Stephen Porter