Facing the Facts of Financial Doom

Our politicians’ appetite to spend money they don’t have will never be satisfied.  There’s always a boondoggle or meritless program in need of pork.  Likewise, there’s always a politician or representative in need of votes.

Spending other people’s money brings a senator flattery from their constituents.  The voters reward congressmen that deliver federal funds with another term in office.  For the voter believes that, through the ballot box, they can get something for nothing.

Take this whole fiscal cliff debate.  From what we can tell the debate is limited to how much taxes will increase and who will pay them.  We’ve yet to hear much in the way of real spending cuts…the type that would take federal spending from 25 percent of GDP, where it is today, back to 18 percent of GDP, where it was in the 1990s.

But even that seems too high.  Why not cut government down to just 5 percent of GDP?  No doubt, there’d be a lot less paperwork to contend with.

The point is government spending is the real problem.  That’s why raising taxes is not the solution.  There are simply not enough people to squeeze $1.1 trillion out of to cover the deficit.

Distant Jungle Stompers

When it comes down to it, the politicians have promised too much stuff to just about everyone.  They’ve temporarily delivered on their promises by borrowing money from foreigners and borrowing freshly created digital monetary credits from the Federal Reserve.  This has constructed an enormous problem…and just about everyone’s in on it in some shape or form.

Unfortunately, massive amounts of people have come to expect massive amounts of public spending…even though it’s not sustainable.  Nearly half of American households receive government assistance.  They’re dependent upon a never ending flow of money from the federal government just to subsist.

Others, who may or may not be dependent on direct government assistance, are dependent on continued government spending.  This includes government contractors, agency staff, attorneys, and accountants, who need government spending programs and costly regulations and tax laws in order to have a job to show up to every morning.  They are fully invested in perpetuating a failing system.

Then there are the bleeding hearts who want compulsory philanthropy from government.  They want government to spend other people’s money on causes they are passionate about.  The mere possibility that the government will cut off their special programs obliges them to go mad.

Earlier this week, for instance, the prospect that there could be budget cuts to AIDS programs compelled several people to enter the office of House Speaker John Boehner and take their clothes off.  What point were they trying to make?  Maybe government spending on AIDS programs reduces the AIDS burden on society as a whole.  Quite frankly, we don’t know.

But it doesn’t seem it ever occurred to these individuals to consider if the government should really be in the AIDS program business to begin with.  If it had, they could’ve made a persuasive case for continuing the funding rather than baring their derrières like distant jungle stompers.

Facing the Facts of Financial Doom

But that’s the problem these days.  Peoples brains have gone soft or mad – or both.  They believe the darnedest things.  Despite four years of trillion dollar deficits, and all the evidence to the contrary, they believe lasting prosperity can be attained by greater public spending…even if the economy can’t afford it.

Congress pretends everything’s fine.  That this is merely a matter of politics and that with just the right policy tweaks things will be back on track.  The economy will grow its way out of the debt problem and unfunded liabilities of Social Security, Medicare, and Medicaid will become operationally solvent.

The problem with this logic is that it’s a fantasy.  It’s mathematically impossible.  The fact of the matter is, government finances are doomed…and everyone dependent upon the current system remaining in place has an epic disappointment coming their way.

Right now we are living in a world where the government borrows over a trillion dollars each year to run the country and stimulate the economy.  This money is largely borrowed from the Federal Reserve.  The Federal Reserve gets the money by creating it from nothing…and loaning it to the government.  The debt gets larger while economic growth stagnates.  Do you see the fundamental flaw in what’s going on?

Hundreds of millions of people are depending on this flawed system holding together.  Most of them have no comprehension of the wickedness they face.  Congress doesn’t appreciate it either.

Soon they will.

Sincerely,

MN Gordon
for Economic Prism

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