It is not the on-balance sheet public debt of close to 100 percent of gross domestic product that makes governments insolvent but "the off-balance sheet liabilities of an additional 300-400 percent of GDP that are total impossible to fund," according to Edwards.
"Governments will have to default in some shape or form and part of that process will be inflation. But you cannot inflate away some of these liabilities. The US cannot inflate its way out of these ludicrously expensive, unfunded health care liabilities. It can only default. But how?" Edwards wrote.
In the same vein, more here.
Cicilline explainst that he "balanced" the budget every year through a variety of devices, which amount to gimmicks such as increased borrowing, depleting reserves, etc.. The problem is that those were bandaids on a gaping fiscal wound, and now there are no bandaids left. None of this explains how Cicilline during the campaing insisted that Providence was in good fiscal shape when it was not.
In fairness to Cicilline, the underlying problems were not of his creation. The problem arose because of outrageous union contracts with unsustainable retirement benefits. So I don't fault Cicilline for the underlying problem, but I do fault him for not dealing with it for 8 years and for minimizing it during the campaign.
Had Cicilline taken serious steps to deal with the looming crisis, rather than year-to-year budget gimmicks, it would have ruined his relationship with the unions and his liberal base.
One last whack across the legislators' and journalists' foreheads, here.
the power of the public sector unions will be broken, because there is no alternative. The ability to buy politicians who then "negotiate" pay and pension increases with their union friends delayed the inevitable for a while, but unions have priced themselves out of the market in the public sector, just as they did in the private sector. They are, I think, doomed.
Fiscal austerity may sometimes sound like a dogmatic religion, but fixed principles often help us do the right thing, especially when temptation beckons. Professor Buchanan argued that the real choice was between a religion of budget balance and a rule of illusion. Seeking an optimal technocratic path is not on the menu...In any case, the rigor of the numbers will soon sweep away the fiscal illusion. The only question is whether we will end the charade on our own terms or continue to play the fool.