“Unless New York City representatives are forced to re-evaluate the political risk of allowing transit service to deteriorate, today’s cuts probably won’t be the last.”

They almost certainly won’t be the last.

What the MTA is doing today is eliminating some overly costly services, and making the kind of cuts that might be required given shared sacrifice in a deep recession. While inconvenient to some, the consequences will not be catastrophic.

What will probably become catastrophic is the ability to provide service as more and more money is diverted to the retired, at the MTA and elsewhere, and the ability to maintain or improve the transit system due to pay funding of ongoing normal replacement — and current funding of generally acknowledged operationg costs — through massive debt.

The MTA capital plan dies in six months, and most of it consists not of improvements we’d like to have — the are a one-time cost — but maintenance to preserve what we’ve got. It could probably be funded with cash, if all the cash weren’t going to past debts with some of it siphoned off for other agencies.

As for a federal bailout, it appears the federal government is going to cut off the long term unemployed from benefits — even though employers have been paying what is allegedly a “dedicated tax” for federal unemployment benefits for decades. That’s because the federal government is broke, as are states and localities. So what are the odds of a big boost for transit?

The biggest problem is that the sold out future is here. They’re still selling, but no longer so special interest can get more, but merely to forestall the extent to which everyone is going to get less. And they aren’t selling to benefit transportation, not roads or transit.

No they are broke. The bondholders assume that theirs is a contractual obligation, whereas Social Security and Medicare are not, and these can simply be taken away from younger generations plunging them into poverty and ill health in old age, and yet those younger generations can be forced to pay taxes. We’ll see.

Yes I’ve read Krugman Sure they can borrow now, but Krugman is assuming younger generations will be much richer later when they have to pay it back. That isn’t true. Japan borrowed massively and has still faced a lost 20 years, and is poorer. It’s backed in with this much debt.

http://www.economagic.com/em-cgi/daychart.exe/form

That is the only chart that matters.

A more cogent Krugman article admitted that perhaps we need massive inflation as a back door default on fixed debts. He mentioned 4 percent per year. I think 10 percent plus for a while is more like it.

I think you’re missing Krugman’s point, which is that the younger generations will be much richer if the government stimulates the economy now. He argues that Japan’s lost decade was due precisely to the fact that they didn’t have enough stimulus.

And in response to your chart, Krugman has this one.

And what do you mean when interest rates are low? The Federal Reserve is keeping rates low by buying up U.S. Treasuries. Should it just do so indefinately, and in increasingly large amounts?

A soaring share of the debt is short term. Which means it rolls over every 13 weeks. Should we keep borrowing more and more while interest rates are low, not matter how high the debts go, and then actually pay that money back when interest rates on the EXISTING debt soars, even if the cost is 50 percent of the federal budget or more?

One thing that has changed is not only the amount of debt but what it was used for. The money was just blown, with no future benefits to offset the future debt burden.

Firms and people used to borrow for assets that would earn money (plant and equipment, land and resources, a college degree priced at a cost that could be earned back with higher productivity) or save money (buying a home so you don’t have to pay rent, buying a washing machine so you don’t have to go to the coin laundry).

More recently, firms have borrowed for executive bonuses (stock buybacks to cover over the dilution of stock options), and people have borrowed for huge or overpriced houses in excess of their rent savings, big SUVs in excess of their transportation needs, vacations, etc. Some have borrowed for ordinary spending, to paper over an increasingly unequal distribution of income.

When this collapsed on the private side, the public sector stepped in and borrowed to keep the consumption going, at least to an extent. Now that appears unsustainable, and as for the reaction, just look at the stock market today. I’m not sure I see a way out.

I’ve tried to do what might work — spending money in a way that will save money later by installing solar panels, replacing consumer durables with more energy efficient models — and will be shipping off years of savings to colleges. Since everyone knows people can’t and won’t pay what they borrowed, I’m not sure that works for those who would need to to invest, even if investing is what they would do with it, which I doubt.

Austerity when it shouldn’t happen, because you are tapped out and insolvent, is the flip side of going deeper and deeper into debt when the economy is strong, because they losers won’t complain about what the insiders are doing as long as they don’t have to pay for it (yet). That’s the problem — the position we were in going into this recession.