I will be the first to admit that I have not followed all that closely the Tea Party, given that my superficial impression from newspaper reports has been that they are mostly a gang of ultra-right fundamentalists who are against anything that has to do with the government.  They constantly portray President Obama as leading a “galloping socialist agenda” while continuing to claim that he is not really a U. S. citizen.  They have allegedly spewed racial epithets, spit at Congressmen, screamed homophobic comments, and generally come across as a group who might welcome those of Timothy McVeigh’s ilk.

Fringe elements?  From the dark side?  I’m sure there is an element of both found within their ranks, but when you take the time to contemplate their rant of less government, there certainly is to be found an element of truth when considered from a strictly economic viewpoint.

If you want to believe what most academic economists are telling us, crunch time is just around the corner for the United States, as well as many other nations.   Our national debt has ballooned to the point where it is about to burst, and if investors lose confidence that we can pay our bills, the money-lenders who have supported our prolific spending will stop buying all of those Treasury bonds.   Interest rates will begin to soar, unemployment will go even higher, and the prospects for another recession will loom over our heads.

It remains a fact that you can overspend only up to a certain point, and then the house comes crashing down: the party is over.  The options at that time become painful for all, and none of the choices for getting out of the mess are very pretty:  the government can drastically cut back on services and programs, or raise taxes, or a combination of both; the currency can be devalued; or the debt can be diminished by allowing inflation to run rampant.

Witness what is happening in Greece, another nation with a government that spends money like it grows on trees.  The retirement age is a super-generous 61, government employees have jobs for life, and tax evasion runs rampant.  But the over-leveraged chicken has come home to roost, and with little choice available at this time, draconian austerity measures have been imposed.  Many people are going to be hurting for a very long time as a result.

It appears that our day of reckoning may be just around the corner as well.  Government debt is now about 90% of our gross national product, household debt is still through the roof, and as consumers we are once again starting to spend more and save less. Others will be willing to finance our debt only as long as there is credence that we can pay back the loans, and when that confidence disappears, they will call in their chips.  Interest rates will take off, and there goes our economic recovery.

This is by no means an endorsement that the government was wrong to step in at the time of our recent financial meltdown.  This was a crisis of epic proportions, and the Tea-Party is flat-out wrong that the government should have let our financial system go into a freefall.  It is a rare economist who does not agree that the amount of suffering would have been immeasurably more drastic if the government had not intervened, especially with the much-maligned TARP program.  The recession hit with full force in essentially every other country as well, and their governments did the same as ours:  stimulus spending to prop up their economies while waiting for private investment and markets to recover.  This occurred in most countries in Europe and Asia, and as a result, there was a softening of the recession. To have governments sit idly by while the world’s finances crash around them would have created a potential nightmare-scenario of social disruption.

Members of Congress have been harping for years about reigning in this unending upward spiral of debt but have never had the gumption and political will to actually do anything about it.  The biggest problems are in our so-called entitlement programs like Social Security and Medicare, and there can be no fix until our populace comes to the realization that there must be cut-backs.  Another disaster-in-waiting which is seldom mentioned, but lurks for hundreds of thousands of workers, is the fact that many pensions are significantly underfunded.  We have caught just a glimpse of this in our own neck of the woods as the Maryland state government indicated a desire to pass on the responsibility of funding state teachers’ retirement funds to the local county governments, and that is going to be quite a hefty burden to bear.

With human nature as it is, changes will not likely be made until an irreversible crisis develops.  Just like the attitude of “not in my backyard,” people will resist till the bitter end any cuts in their benefits or government-funded programs that are to their advantage. In fact, I would bet that this holds true just the same for the Tea Party folk who claim to be so adamantly against everything and anything government.

Consider a couple of small, but illustrative examples of the difficulty in enacting change.  The U.S. Postal Service, where red ink flows all over the envelopes, runs a deficit of billions of dollars every year and yet faces strong opposition to ending Saturday deliveries and closing small, inefficient rural offices.  These are considered sacrosanct entitlements in the eyes of many, and the powers that be have consistently resisted any changes that make economic sense.  Ditto for our anitquated system of farm subsidies and price supports that go almost exclusively to those who are already quite well-off.   I'm sure it will be a cold day in hell before any congressmen in farm states vote against these perks that have been around so long that they are also considered entitlements.

The future doesn’t look so rosy for our nation of spenders whose consumption of goods seems to be a bottomless pit.  Government services and benefits will have to be decreased, and yes, read my lips, taxes will have to be raised.  This can be done in an orderly, focused fashion, or we can wait for circumstances beyond our control to take over.

Tighten our belts, or prepare for the dire consequences:  the hammer of austerity is lying in wait and ready to smack us in the head.   And don’t blame it on Carpenters In The Forehead:  you have been forewarned.