The government found a way to spend as much as it wanted, by guaranteeing the debts of the off-budget government agencies (GSEs) Fannie Mae and Freddie Mac. The GSE’s provided highly paid, prestigious positions for a stream of government elite.

The beauty of a guarantee is that it seems to involve no money, and need not be budgeted by the government. Eventually, there is a sudden need to pay out billions when you find that the guaranteed parties have borrowed at low interest rates and can’t pay anything back. The unexpected disaster was that building too many houses wrecked the market value of housing, to the surprise of left-leaning economists and politicians.

The current bailouts and huge budgets continue to serve the self-interest of politicians and government aligned groups. The government continues to leverage its ability to use guarantees, to borrow what it wants by guaranteeing repayment. It couldn’t possibly do this if it had to raise the money immediately through taxes. It won’t be able to raise the full amounts through taxes, even in the future. The result will be high taxes AND inflation.

We Guarantee It
The government is guaranteeing us into poverty.