It’s Delightful, It’s Delicious, It’s Default
The most serious budget-cutter we have, Congressman Paul Ryan, is not nearly serious enough about the disaster we face. Or if he is serious, he doesn’t have enough of his party backing him up. And even if he had that, Ryan still would face a public too uninformed to understand or tolerate what must be done.
Option One, in other words, is off the table. Ain’t. Gonna. Happen.
So how about Option Two, Hyperinflation?
Inflation only as high as eight or ten percent is harmful to a nation’s economy, its savings, and even its social fabric. Hyperinflation destroys all of those things. It’s no remedy; it’s a cure worse than the disease.
That leaves us with Option Three: Default. Simply put, the government of the United States simply refuses to honor its debt obligations. It’s called “sovereign default” because you can’t take the government to its own courts to make it pay up.
Default would be terrible. The dollar would cease to act as the world’s reserve currency and that inflation we’ve spent the last forty years exporting to the rest of the world, would come flooding back to our shores all at once. Can you imagine how expensive a barrel of oil would be, if we had to scrounge up enough euro or yuan from our meager reserves, to pay for one?
And what about our budget? It would still be seriously out-of-whack — but Washington would lose the ability to borrow from overseas to cover the shortfall. Washington would either have to balance the budget — and right then, buster! — or start rolling the printing presses again. Call it “The Mother of All Quantitative Easings.”
Or just call it Option Two. We’re back to hyperinflation.
The way I see it right now, default still might be our least-bad option. Because default doesn’t necessarily lead to hyperinflation. Not if three things happen. We’ll call it the VodkaPundit Plan for Putting Washington Through Chapter 11. It goes like this:
1. Immediate cuts to spending.
2. A long-term plan to keep spending in line is enacted. (A glide-down path, along with maybe a balanced budget amendment.)
3. Hike interest rates. (To protect the dollar and give the middle class a reason again to save and investors a reason to invest. And also because “free” money makes people stupid.)
The first item is going to happen no matter what; we’re simply out of money. The second item is a necessary step to reassuring jilted creditors that maybe someday they can trust us again. And we are so deep in the hole that the third item might be possible only after we’ve defaulted. Lindsey never made that point in his piece, but it seems perfectly clear: Since we can’t even afford to pay what we already owe, default is looking like our least-bad option.
Not that I’m advocating default. I still think it would probably lead to hyperinflation. A government too paralyzed by cowardice to step out of the way of a moving train, probably doesn’t have the balls to make the hard choices my plan would entail.
If anyone can think of another way out, I’m all ears.
Today I saw an article that quoted 8.5% interest rates at major Russian banks. Hmmm, interesting! Better than American banks. Then I checked the rest of the article and discovered that projected Russian inflation is above 9%.
At some point the Fed won’t be able to force down interest rates and flood our economy with fiat money. Maybe that will happen when we hit the “debt ceiling” or Congress acts on the debt this year. Either way, chances are that economists will no longer have to study The Great Depression from afar. The New Great Depression will be totally up close and personal.
If anyone can think of another way out, I’m all ears…
I can’t think of another way out other than plenty of vodka to numb the pain, which isn’t really a serious answer to your question, but is more serious than any answer I’ve heard from the Democrats.
Herr Wilson,
Here’s my attempt:
1. Immediately eliminate about 2.5 Million Gov’ Jobs. Continue cutting for the next 10 years until the only Gov’t workers left are mostly Military, Police and other essential services. True, it would temporarily increase the unemployment rate. but no one would miss the productivity loss… because there wouldn’t be any. The newly unemployed would be forced to find productive work. Along with it we would be deporting Millions of Illegal Aliens to make room for American Citizens in the labor force.. the productive labor force.
2. Phase out Food Stamps over a year’s time. Hunger is a great motivator. This could open up lots of jobs for riot police (Temporary Gov’t Positions). Shorten time limits on the receipt of Unemployment Benefits and Welfare at the same time. We are a better Nation when our citizens are self sufficient.
3. Reduce taxes on the rich… the job creators. And increase taxes on the poor… the roughly 50% who pay no taxes at all. Afford voting rights to only those who pay taxes and those who receive no Gov’t assistance (including Gov’t subsidies of any kind).
4. Phase out Social Security and Medicare entirely over the next ten years leaving the 55 and older crowd alone (much like the Ryan Plan). Everyone would eventually be on their own. Families would have to stick together. Those families who won’t would have their elderly die as paupers. No big deal. Same goes for Health Care. Keep the Gov’t out of it.
The above plan should free up enough cash to easily pay off our 14 Trillion in debt in about 10 years and still fund a very strong military. Term limits would be a big help as well. America would be a strong proud Nation once again.
all these are appropriate steps, therefore, we can deduce they will never be considered until the public’s outrage is felt by those we elect to legislate the changes
as far as the default armageddon is concerned- the only voices hectoring the ginned up fear are those most likely to be affected by budget cuts- in other words, it is the corrupt and embezzling politicians and connected cronies living fat off of pilfered monies who decry the end of the world nature of the debt ceiling
call their bluff and force them to show their crap hands
if only it could happen this way.
They’re playing chicken with this default talk. Defaulting will have the effect of passing a balanced budget amendment, since it’ll be a generation or two before anybody (including union pension plans) will buy that junk again. The plan is to get as much tax increase as they can, and then inflate their way out of this.
You can take that to the bank. If it’s worth anything by the time you get there, anyway. Now what happened after Weimar?
Notice I didn’t say default is the most likely choice. Pretty sure Option Two is the way we’ll go.
We’re already effectively defaulting by devaluing the dollar. The Chinese have called our government out directly on this. The question isn’t whether we default, but how.
As you mentioned, the only way out is to cut government spending like crazy. Whomever’s elected (it won’t be Obama – I think he’s toast on the economy because it’s only going to get much worse – the Republicans can run just about anybody and win) is only going to get a fraction of the cuts they promise through the Congress. And that leaves us with two candidates who stand a prayer of accomplishing enough to forestall or avoid Very Bad Things – the angry constipated chicken guy (AKA Dr. No) and the unknown guy from New Mexico (AKA Governor Veto). Hopefully people will get it through their heads that at this point we’re talking economic survival, not Presidential American Idol.
I’ll keep beating this point into the ground: we need a President who will do to the Federal Government what Jason does to teenage campers in those Friday the 13th movies.
Yep, the only way out that preserves a modicum of dignity is deep, across the board spending cuts. But no one in DC is going to go along with that, it would be political suicide. So.. We are so screwed. The fallout from this is going to make the Great Depression look like a weekend at Disneyland.
Interesting times we live in and they’re about to get a whole lot more interesting. I’m stocking up on beans and bullets….
No matter which way we go, it’s gonna be painful.
Note to self, buy more food, reload more ammo.
Amen to that brother! Food, water and ammo; all the things that you will need when it all comes tumbling down!
We’re screwed…..
Option 4: REVOLUTION
A violent revolution that leaves all of current ruling class dead or out of work. A rewrite of the Constitution that forbids progressive taxes, all welfare and “entitlement” programs will be forbidden, term limits for all elected officials, an expiration date for all laws and regulations, and a House of Repeal that can overturn any spending program or law with a simple majority – no filibusters allowed.
Of course the Free States of America will not honor any prior debts (or treaties).
See, I fixed it. Who’s with me?
It may come to Option 4 whether we like it or not. When the money runs out the looters (welfare recipients, etc) will take to the streets. The producers will then have to defend their lives and property.
When you have a dog with a few fleas, you can live with them. When the dog is infested with worms that are threatening its life, you take action. We’re getting darn close to that stage. I really don’t want to have to engage in eliminationist rhetoric, but it may be time to purge the parasites, and start the patient on long-term medication to keep the problem from coming back. So yeah, I’m with you.
The V. pundit definitely overlooked this wrinkle in his article. From an economic point of view revolution followed by default is still default (duh!), but after a revolution — as opposed to just another election — the new government can advertise itself as more trustworthy, etc., than the old, tempting some to lend money sooner than they would otherwise do. It’s also the traditional maneuver of third world countries who, since WWII, have found themselves in similar straits.
That is the downside of revolution. It has become apparent that no elected government can be trusted with the authority to borrow money. Purely internal lending might be an exception, but preventing bonds from being sold to noncitizens is probably not as easy as it might seem on the surface. The long term destruction of the sovereign credit rating is a feature, not a bug.
Our Founding Fathers have foreseen our situation in the Declaration of Independence and tell us that it is our duty to overthrow a tyrannous government. In one stroke, all the rot in Washington could be expunged. The obvious danger is similar to what the freedom-loving kids in the Middle East are about to find out the hard way…that the new boss is going to be worse than the old boss. Perhaps American Exceptionalism will prevail here.
The Founding Fathers would approve, since they already accounted a renewed and renewing revolution against tyranny an inevitability. =’[.]‘=
What makes folks think a revolution would produce a better government? it might probably be dominated by the worst kind of strong-arm, nativist, anti-trade anti-business populism.
SO you are saying it might be a wash?
And there’s yet another option for those of us living in states that have been fiscally responsible and aren’t wallowing in debt — my Cowboy State and my second home in the Great State of Texas come to mind. I’ve a feeling that before we join you circling the drain we’ll wave a fond farewell and secede. No hard feelings, but what would you do in our circumstances, join in the suicide pact?
Defaulting would tip the credit rating down and increase the interest rate on the debt. Greece who is leading the western league in low ratings is CCC at 30%. They can never repay the vigor much less the principle. Greece is only talking billions, not trillions. Uncertainty and interest on debt is what is bleeding the US the most on confidence in the economy.
Cutting redundant federal departments, Obamacare, and having a real attorney general against fraud and waste is a start to reduce the debt load. Then a 10 to 20% across the board for all federal budgets, is a strong start in the balanced direction which will never find the courage to happen. Will the US go Greek?
JED –
The higher interest rate would apply only to new debt — assuming we could find any lenders. Sovereign default is, by definition, when you refuse to pay the old debt.
Or maybe they decide to pay Peter and hose Paul. That would be consistent with the Obama MO. See GM cramdown. So if you’re Peter, you keep buying bonds, and if you’re Paul, you’re ****ed.
Don’t forget our ever-growing amount of inflation adjusted bonds. Any serious US inflation effort is going to immediately make servicing our outstanding TIPS bonds more expensive.
Yes and no.
Yes, it will make payments on the TIPS more expensive… but Congress can direct the Treasury to modify how inflation is calculated. And they will.
So in the long run, everyone holding US debt is going to take it in the shorts, but some will get it harder than others.
Not only will, they did about a decade ago. That’s why the official inflation numbers are so low right now, when we’re actually running significant inflation, as anybody who does purchasing at home or for a business can attest to.
“It’s called “sovereign default” because you can’t take the government to its own courts to make it pay up.”
I’m not sure that’s actually true, when you’ve got the highest law of the land flatly prohibiting default. I’m not at all confident the Supreme court would ignore that clear language.
I’m assuming we’re going to hyperinflate. Part of the reason I assume this is because once hyperinflation sets in, it’s hard to stop, and you can’t really predict with any certainty when it will start. And with a good deal of the left absolutely convinced that deficit spending can’t even theoretically have bad consequences, we’re not going to stop short of that uncertain line. Assuming it’s not somewhere behind us, and the fuse just hasn’t burned all the way down yet.
Put your assets abroad, where they won’t be destroyed by hyperinflation in the US. Most 401-K plans have ways of doing this.
If you move the goal posts, you’re right. Inflation = higher TIPS payments. Inflation + less truth in government statistics = less higher TIPS payments + unknown economic consequences (likely bad ones). But that’s not what our illustrious philia aqua vitae Slavica laid out above and it was his message that I was addressing.
Don’t forget that our government debt is overwhelmingly in short term instruments. This has been incredible short sighted but it certainly is in keeping with the rest of the government’s behavior.
It is a sure bet the critters in DC will not do the right thing: tell the people the truth about the sh***y creek and the lack of paddles. The second sure bet: at least 51% of the voters don’t want to think about the sh***y creek and the lack of paddles. It will be default after hyperinflation. Its only a matter of time. BTW, the Ryan and the Simpson-Bowles plans are a few trillions short and 10 years too late.
I really wish people would drop the cutesy little “critters” euphemism when referring to Congress. It lends a playful tone that’s way out of place for the gravity of the situation.
It’s not just me; I’ve seen others express this sentiment, usually regarding the full nomenclature “congresscritters.”
Well, I’m definitely not going to refer to them as actual members of my species, so I will continue to use the term critters. And I ain’t being cute, if you could see my old face you would not think cute.
Where I come from “critters” are cows. Big, dumb, hairy-eared and vacant-eyed herd animals, but dangerous when they stampede. In that context “congresscritters” is actually pretty accurate.
How are you gonna inflate the money, exactly?
The vast majority of the money supply comes from loans with real estate as collateral. And last time I checked real estate prizes were falling.
And for all the people ready at the keyboard to assault me with the usual talking points they picked up at mises.org – Shut up when grown ups are talking.
“Shut up,” he explained.
If Old Soldier named option 4 here’s my stab at option 5. Most of the people and all of the government and supporting elites will just keep their heads in the sand until unexpected catastrophic collapse.
After the collapse, they will pull their heads up and suggest they should be entrusted to “fix” the problems.
“The vast majority of the money supply comes from loans with real estate as collateral”
This is unbelievably ridiculous, and you tell us to shut up? The money supply, not the government fiat money, but the real wealth is generated by business. That money is lent to folks to BUY property. It does not come FROM property. It comes from people producing goods and services which other people need. Business is the goose which lays the golden egg.
All primitive societies start with barter. Eventually, they move to precious metals and such, then, currency. It begins with commerce and ends in property, not the other way around.
They print it. They shovel it out- 700 billion stimuluus funds; 790 billion medicare/medicaid; 690 billion Defense; 660 billion Discretionary, etc. They buy AIG, General Motors, pay for medical care for an additional 50 million people; thats how.
Raising tazes to give the communist-in-charge more money to spend recklessly will not make the debt go away. Only living within our means can do that.
We must mak Government much, much smaller than it is- by reducing the amount of money it has to spend.
No doubt you can point to substantiation of your claim…
Actually, inflating (depreciating) the currency is just a monetary default. You’re taking a haircut on the dollar along with the bond holders. While not in worse economic shape, the Euro zone is in worse political shape; the euro is going down, because none of those nation states will concede their rights to separate fiscal, security, and foreign policy arrangements. The cold war is over, NATO is kaput, the economic, security, and foreign policy interests of the various European nations are diverging because of different histories, geography, and ethnicities. In short, they’re the multicultural nirvana, pre-U.S. Articles Of Confederation in a sense, and they are not going to make it to the American’s “Constitutional Convention” stage. Of course, the last time the cold war equivalent ended in the 19th century (the Napoleonic Wars) and peace pertained in North America (after the Barbary Wars with the Muslims and the war with Mexico) we proceeded to have a civil war over some cultural/regional disagreements regarding economic growth and who pays for it. Interesting times, wonder what happens when the boys come home and the war is “over” over there. Already US states are passing immigration enforcement laws in contradistinction to Federal desires and Federal foreign policy, and we’ve had a unitary federal state for 200 hundred years.
Stephen, I largely concur. The arithmetic is clear. However, I strongly favor modest changes for those over 50 to 55 for both Social Security and Medicare (20% reduction in ‘benefits’, no COLA and Medicare folk premiums doubled and the program something like the Medicare Part D) with all younger free therefrom! Likewise, I am persuaded that all claimed pensions by government entities be limited to 401k style programs. You get the drift.
By the way, I am 74.
Of course the SS stuff is not fair. They have paid in for the last 40 years and ought to have solid accounts. Too bad. But, politicians cannot be trusted with such matters. David Holmes
Nobody in Social Security has a solid account. Here’s how to find out just how much your income from SS has been paid for:
Everybody gets an annual statement from the Social Security Administration. It contains a summary of the wages you have received that are subject to the social security tax. It also contains an estimate of the monthly benefit that you will receive. Follow these 3 simple steps to find out how insolvent Social Security is.
In the middle of page 3 of your statement is a summary of the taxes paid by you and your employer.
1. Add the Social Security taxes together.
2. Select your approximate monthly benefit from page 2 at the top.
3. Divide the total paid into Social Security (step 1) by the monthly benefit (step 2). This number is the number of months that you have paid for your social security benefit. If you receive Social Security for more months than this, someone else is paying for it and you are on welfare.
Social Security started out as being voluntary, under FDR. Then, it was made compulsory for all workers. Initially, the “contributions” went into an independent trust fund. Then, under the LBJ administration, the monies were moved to the general fund. If the monies had stayed in the independent fund, collecting interest, the monthly benefit results would be considerably different, assuming an average 5% annual interest compounded monthly. After 40 years it would make a nice little nest egg. Or the money can be invested in a compulsory 401K plan, to achieve the same results. The Democrats are hurting the country by opposing SS reform. What’s worse, they are blaming the Republicans for trying to eliminate SS, and scaring little old ladies on pension.
You forget option 4, tax people at rates much higher than Clinton did. Have fun with that.
Seriously though, what’s going to happen is that when economic growth and decent employment rates come back, you’ll go back to Bush-sized deficits, with maybe some tax bumps and spending cuts. Nobody in the US actually wants a balanced budget, so that’s the best you’ll probably wind up doing. Again, have fun with that.
Ah yes, the Return to Normal. Only 5% unemployment, 4% growth and 3% rates are not normal, just what we are used to from recent years. As the piece mentions, all the “plans” out there presume a rapid and abrupt return to the mean…. only it is the mean of some cherry-picked timeframe, basically the Reagan era. That ain’t happening. Ryan is as foolishly optimistic as Obama on that score.
Let me be frank, (and you can be merry), real estate prizes are falling, and they will continue to fall when the game show they are attached to is “hide the decline”.
Of course, that is the leftist mantra for everything from globalwarmingclimatechangeiceage to drunken deficit spending.
And I don’t know what would make Paul Ryan …Blanche…but surely it couldn’t be the unexpected consequences of loading up the Keynesian streetcar named expire. And don’t call me Shirley.
It’s Stella long way until November, 2012. And we never listen when you are being morbid.
Dude, that was the only thing in this whole article or the comments that made me smile – thanks! The rest is just too damn depressing and/or enraging.
Grow the economy now.
Cut the corporate taxes to the lowest of first-world countries, institute an immediate energy plan to drill, build nuc’s, Frac, new refineries,etc. Shut down Federal agencies wholesale, EPA, Education, Energy, TSA, some military, Etc.(require the states to handle those issues if they want them). When we start down the pro-growth path, good jobs and enterprise returns followed by and increase in tax revenues.
Of course the budget must be balanced. Stop spending.Pay down the debt. Dump Obama care.
Shut down the civilian desk jobs but keep the boys in uniform and take any who want to join. Give ‘em a place to sleep and feed them. Once the future hits the bottom the guys from the ‘Stan lands are gonna rise up from the sands and start their infiltration. They’re already broke, they’ll fit right in. Someone is gonna have to keep order and it’s not going to be local law enforcement.
And drill baby drill.
Someone on PJM who tackles this problem with his feet on the ground and his head screwed on…Good for you Mr. Green!
Above and beyond any polticians rhetoric comes the time when the rubber must meet the road….the actual will of the people by a majority and the legislative processes.
Every [plan] ‘at-best’ is dependent upon [sustained] economic growth levels as projected to succeed and inflation….period!
The real underlying problem of the nation is a simple one! We no longer have the economies to support the nations needs and population. We’re now part of a global competitive economy long supported blindly by the U.S.
“The real underlying problem of the nation is a simple one! We no longer have the economies to support the nations needs and population. We’re now part of a global competitive economy long supported blindly by the U.S.”
Overspending has a little to do with our debt. And that “global competitive economy” you are so concerned about only means that certain parts of the world have finally caught up to our production capabilities. Protectionism is not the way to go. Competition is the way to go, with support from our government. Unfortunately, our present government only supports the unions, and continues with one of the highest corporate tax rates in the world, while trying to implement other roadblocks to our manufacturing base by imposing restrictive and unnecessary EPA “carbon” regulations.
["Competition is the way to go, with support from our government."]
Well lets see now! We have the predominate European, North American and Japanese models and then we have the China, Russian, Indian and Vietnamese models. Where and how exactly are you demanding the federal government redirect us in their regulating foreign commerce authorities?
The EPA came into play only because folks became more and more irresponsible stewards of the planet they occupy! ALL intervention by laws comes only through the hands of individual and collective irresponsibility resulting in damages to sombody or some thing. Likewise, labor unions came about for essentially the same premise if irresponsibility by the employer towards their employees. Have either become overreaching? Of course they have but….neither are going away and that the reality! That said, the latter, in the instances of public sector unions; it may well be that they can be regulated to less and less power as is being witnessed in several states today and should be done also at the federal level.
I personally, am anti labor unions having any authorities but for negotiating pay and workplace safety. I am anti national organized labor unions and believe only states organized unions should be authorized. I am anti employer paid benefits other than ‘options’ of shared retirement benefits through stock share purchasing… maybe up to 50/50. I am anti public sector unions and such employees should follow pay in parity to their states median income with the additional ‘benefit’ of mandatory shared retirement. I am anti EPA being granted any other authority than ‘enforcement’ and certainly NO means to set legislation or policy. Legislation and policy should be left to the scientific communities and the Congress to fight out. In fact, I’m for NO department agency or corporation of the federal government having any legislative or policy authorities not specifically granted them by the constitution. Of course that would entail a congress with the brass to stand up and make the federal government constitution once more..and that ain’t gonna happen!
We can stick it to the world and it’s because we saved their a** over the years funding a huge military, fighting wars, massive foreign aid, IMF, UN etc
Then dissolve USA and call it Republic States of America, re-adopt our Constitution (just as it is tku), keep the flag and proceed debt free (more or less)with precepts that prevent FEDS from doin’ us again.
Bankruptcy does not have the negative connotation it once did, just look around. But be strategic about it. Everybody and his brother will still want to do business here……
1) I like
2) I like. I’m not sure about the glide-down path thing though. I think the band aid should come off quickly Calvin Coolidge style.
3) Sharp interest hikes manipulated by the FED + Mark to market accounting rule = Bank insolvencies. Slow hikes would be OK. Somewhere around 0.25-0.5% a year.
My improvement to your plan would be the one that has worked time and time again: Big tax cuts plus even bigger spending cuts. I know it’s boringly simple. But we know it works. And right now we need something foolproof. We’ve had enough experiments recently to last for a lifetime.
Track the tax ‘rates’ Post WWII through the time of America reaching its highest or at least, far less unencumbered pinnacle. See if they actually support the populist premise of reduce taxes to achieve marginal, good or great economic productivity. Check the historical tax rates in comparison to the Bush and present tax rates and then explain why the U.S. isn’t doing so well….but for a couple of past government created, unsustainable bubble economies. Then try remembering that the same government folks claim have encumbered business with high tax rates is the same government that provides business with a million intended tax loopholes.
There is a natural tax rate cap, that people are willing to pay. Increase the rates and people and corporations will spend money, resources and time sheltering their money and assets from those higher taxes or simply relocate.
Higher rates also incentivizes increased spending of lobbying to politicians to put loopholes, exceptions or subsidies into the tax code so they can avoid the higher tax.
Lowering, simplifying and removing ALL exceptions would provide the incentive for people to pay all required taxes, by making it less economical to spend money to avoid the tax in the first place.
The US is not doing well, not because of Bush tax cuts, but because of Crony Capitalism, unprecedented SPENDING and unsustainable entitlements, promised from politicians for political gain.
Well, perhaps you should check them.
It s hard to see how this agrees with your “thesis”. You might get a graph of inflation against that too.
That lower tax rates mean greater wealth s hard to dispute. I d not see much proof coming out of you. Is there anything to your argument but rhetoric?
["That lower tax rates mean greater wealth.."]
I didn’t see you providing any data to support that claim! Data…not rhetoric! The tax rates of today are among the lowest in tax history and yet I believe there are problems amomg the highest levels recorded.
In our businesses, market supply and demand along with cost controls are the major factors of wealth accumulation. In well managed companies, taxes are ‘naturally’ offset by increased markets/supply or in bad years…losses of income. In a hundred and twenty years of operation we have continued to maintain and or increase wealth, decade after decade, in spite of any tax rates.
Tax rates aren’t the core problem! Poor and in most cases, irresponsible management of business and ones individual finances are the core problems. In my opinion, arbitrary inflation (a subject unto itself) and individual debt is the problems. Remember also, on the individual side, nearly 50% of folks pay no taxes and many more pay very little taxes.
Now, do I personally like taxes? Of course not! I’m of the literal small government school. Few taxes should be going to a federal government and if we’re to have taxes, more should be at the States level as determined by their people.
Several observations on Mr. Green’s fine piece.
1. Given the enormous excess that is our national government, it is remarkable that our leaders cannot find multiple programs to cut, shrink, sunset, etc. The low hanging fruit of waste and duplication is so abundant that making reductions in the size and scope of government should, at least initially, be child’s play. It seems not to be.
2. Our inability to find such savings and economies stems from two primary causes. First, our federal government no longer serves the people nearly as much as it serves itself. The government has become little more than another interest group. As such, our government leaders are dedicated to their own reelection, the perpetuation of an obese bureaucracy, and the prosperity of those who directly serve the beast above all else. The country? Well. . . .
3. At the same time, it could be argued that our government is not precisely dysfunctional, as many suggest. In one sense, it works beautifully: the beloved people demand more and more; but they also insist that they not be taxed for those programs and services to which they are ‘entitled.’ Enter our representatives who have for years been ready to accommodate this nonsense by simply borrowing the difference. Borrow for entitlements; borrow for wars; just borrow. But hey, what’s not to like? We get what we want without paying for it; they get re-elected. Happiness all around. Until now.
4. Finally, one modest reform for all our governments, federal, state and municipal. Henceforth, let us resolve that pensions will be pensions, and that no public employee will receive his pension, in whole or in part, until he or she reaches the age of 65. No exceptions. None. Would save us a ton.
‘He who says A must be willing to say B.’
_IF_ the coming economic explosion is an existential threat to the US
then everything which can be done must be done, in a sequence of ever
more unthinkable options, as the worsening situation justifies them.
_IF_ the US survives the regression, it will stabilize at a point in
its socioeconomic past corresponding to 1950, with a new emphasis on
self-sufficient isolationism, and an overriding goal of using Hi-Tech
to produce new wealth.
If not, try to get to the New Republic of Texas before the border closes.
I feel like we are discussing the arrangement of deck chairs on the Titanic. Will all of the USA have to look like a decrepit tired old poor town before anyone realizes it is too late?
We have the world’s biggest military and nowadays the Dept. of Defense seems to be the only branch of government that works at all the way it’s supposed to. So, we become the world’s policemen and tax all the other countries for the law and order we provide them. It’s very close to the original vision of our founding fathers, but what the hey!
Sorry, the last sentence should have been “It’s NOT very close …”
You left out an option. In 1935, France had a very high debt load. The Germans solved it for them. Perhaps the Chinese government will solve our problem.
I agree with the fundamentals here.
However, there are other solutions. This article assumes the only way government can get revenue is by taxing U.S. citizens. There are other ways to get revenue. Here are some options:
Tax foreigners: A little difficult to implement directly, but we could send out bills for the cost of WWII, the Cold War, Korea, and such things to our opponents during such wars and confiscate assets when they refuse to pay. We could similarly send about 50 years of invoices for the defense of western Europe, and again, confiscate assets if they refuse to pay.
Penalties for failure to comply with U.S. regulations overseas, such as stealing intellectual property. Cancel China’s bonds. Cancel anyone’s bonds who does business with China.
Extortion: We have a Navy and lots of anti-missile systems, all sorts of cool submarines. That’s a nice merchant fleet you’ve got there, Han, shame anything were to happen to it. That’s a nice ferrin airline you’ve got there; shame anything were to happen to it.
Provide “protection” services: Bad deal with your neighbor there, amigo, but maybe we can talk sense to him. Sure, we’ll escort your shipping through pirate-infested waters.
Take control of scarce and necessary resources: The ME oil fields, for example. Just take ‘em and sell the oil to the world. We’re already accused of it. Why not do it?
In the end, we only need to pay our domestic debt down. That’s about half.
Or we could pay it all down by taking it from the beneficiaries of American largesse over the past 60 years. The world economy is like $74 trillion; we could surely simply take a few trillion here and there from everywhere else.
Is there no one else on this board who sees the utter absurdity about complaining about foreign debt when you’ve got the scariest set of guns the world has ever seen? Isn’t anyone else, you know, evil?
Sure, we’ll try the Weimar stuff mentioned above. And then the next logical step is conquest, extortion, protection and confiscation. Be careful out there.
Robert A. Heinlein predicted this
Okay, he who has ears to hear, let him hear:
The interest on the debt is 197 billion. We pay that first. No default.
We look at defense, 689 billion, and cut 100 billion. From Discretionary, 66 billion, we cut 97 billion. Problem solved. We bring all our troops home from wherever and secure our borders. We pass a balanced budget amendment and prohibit the Government from borrowing, period. WE repeal Oscambo care and end all the Social Security-Welfare-Handout programs. Medicare and medicaid total 793 billion at present. It is not the business of government to provide medical care. With the gigantic surpluses we pay off the balance of the debt within a decade.We require Iran and North Korea to disassemble their nuclear facilities- or we will. We airdrop all members of the World Bank, Fed, IMF, CFR, etc. into Tasmania, sans parachutes.Then we elect Rick Perry and on the inside wall of the Oval Office we post a large photo of the Tasmanian airdrop.
Why Rick Perry? Aside from the Iran and North Korea part, you just pretty much listed Ron Paul’s agenda – except that he would also allow private currencies back into the US so the Fed can play all of the games it wants, and people will have the option to use hard currency. This is pretty straightforward – we all do most of our purchasing with credit / debit / charge cards anyway, and they’re already set up to handle multiple currencies…
The options this administration will exercise are:
1.Nationalize 401K funds.
2.Sell Alaska to China.
3.Nationalize Oil and Gas reserves.
4.Nationalize the Electric Grid.
When you control the means of power you control life. 1 & 2 pay the debt.3 & 4 prevent objections from anyone not wishing to freeze in the dark. Simple solution if you are totally ruthless!
Sorry, but they won’t get beyond 1.) Once they cross that line all but the Obama zombies will finally see the emperor has no clothes. Obama zombies comprise no more than 25% of the population and 50% of the remaining 75% have guns. It will be no daily bag limit should your scenario come to pass. Remember, head shots only.
You forgot another option. War.
War allows governments to enact many policies which would not otherwise accepted, and it completely screws up the relative value of currencies…the biggest, baddest country during a World War has the safest currency.
In part, this may explain China’s drive to become a military power on par or exceeding the US, as well as Russia’s military resurgence.
Who would we pick to start a world war with…that’s something to discuss.
I find it hard to believe that hyperinflation isn’t down the road. It’s the easiest answer for politicians, as horrifying as it would be. It’s the one that could actually happen, unlike actually cutting govt back to 1910 levels, which would cause an army of lobbyists and special interest groups to rise up.
I watch prices in the local super markets very closely. I shop in the poor Hispanic and Black neighborhoods and in the middle class and Walmarts on a daily basis as part of my business. Prices have been bubbling for several months almost a year actually, BUT in the last three months they have really started to take off. Coffee at retail is twice what it was three months ago, mayonaise and anything with sugar or oil has gone up significantly in a very short time frame. I have not seen these types of broadbased moves in retail prices since the inflation of the 1970s. IT is time to get out of all domestic bonds of more than a 2-3 year maturity and to move to tangibles of one kind or another. All of the above discussion will be even less pleasant if you are doing it with debased dollars.
With the political class we’ve got now? It’s going to be stagdisinflation… you know, the option that makes hyperinflation look good?
How can you possibly claim that Ryan is the most serious budget-cutter we have? Have you even read Rand Paul’s budget proposal?
-jcr
I have indeed. But Paul is in the Senate, where spending bill cannot originate. He’s also in the minority party on that side of the Capitol Building.
So until a whole lotta shakin’ goes on, Paul doesn’t count for much — unfortunately. Leaving Ryan the best thing we have right now.
You nailed it – the Ryan budget that has everybody’s panties in a twist is nothing but a Trojan horse to cement the current big government structures into place while disguising it as “budget cutting.” But what do you expect from somebody who voted for Medicare Part D and TARP?
I believe that with the Oval Office and Senate in Republican (spelled Tea Party) hands, we will end up with something between Ryan and Paul’s proposals, and that that will be sufficient to avert the worst–and likely the most–of what Mr. Green describes.
SS retirement age will end up around 70, Medicaid will be transferred to the states (who will largely get rid of it) and we’ll see a sharp distinction in the expected lifetime of the wealthier vs. the poorer citizens. SS will be entirely privatized a la Chile.
The tax rate will be either entirely flat have a single rate with a simple exemption.
This has all happened before.
When we went off Bretton Woods, the dollar crashed in value. From 1973 until 1980, the value of the dollar dropped by nearly half.
A decade of that type of inflation will be sufficient to bring things into balance and it will also make real (as opposed to nominal) cuts in programs much easier to conduct.
From 1973-1980 we weren’t sitting on existing debt equal to GDP, nor was the Baby Boom generation set to go on SS and Medicare. We cannot get out of this situation with a comparatively mild Nixon-Carter inflation.
Further, during the 70s very little was tied to inflation. These days things like Medicare and SS are inflation indexed, which makes hyperinflation actually less able to solve the problems we’re facing with our deficit. To make hyperinflation “fix” our problems you’d have to break the lock of entitlement programs to the inflation rate via a redefinition of inflation (which has happened many times) or by legilation (unlikely since it requires courage and that’s something politicians tend to lack).
So in sum, even hyperinflation can’t “fix things” without complicit, sly and ruthless government action. Or in other words, we’re SO SCREWED…
i think you are ‘too precise’ in the matter of our economic future.
i’d like to elect a realist, but anyone with a firm grasp of the numbers sees that we are too far gone, and would be seen as the herald of our apocalypse for stating the actual truth.
completely unfixable problem. there is neither the path, yet, nor the will, ever, to see this thru.
There is a path. It’s been done before in recent memory. I’m still astonished that nobody is championing reworking the BRAC process to fit today’s needs. It was our last successful exercise (1990s) in cutting money out of the federal budget. Go do *that* again but for the whole budget this time.
Create a bill that operates under a special rule of no amendments and everybody has an up or down vote to accept packages of spending cuts from all the departments. Cut off the bottom and explain that both doing nothing and cutting any other set of programs would hurt even worse and you have a politically viable path for politicians to take back to fiscal sanity.
Keep on cutting off the bottom every Congress and the bond markets will see a path to reality that permits them to get their money back without massive inflation. They’ll know to head to the doors the first time one of these bills fails. And that credible market threat of immediately cratering the federal government with crippling interest rate hikes is going to provide the discipline to keep those bills passing.
the brac closures were a product of the cold war drawdown…
by 2000, we had 1/3 the active duty forces than when we liberated kuwait.
our current deficit is 1.7 trillion. if we ended all payments on defense, the deficit goes to 1.1 trillion.
while the nominal spending on defense, 494 billion(2009) seems to be larger than ever, we were spending 426 billion in 1986.
as a % of gdp 494 billion is 3.3% of gdp, while the the 86 number was 9.6% of gdp.
we’ve cut the defense department, horribly. there isn’t much left in the well.
i appreciate the idea, but even christine romer(for what her crediblity is worth) admitted that defense spending is a dollar for dollar trade.
it’s one of the few things that does approach a multiplier of one.
Please pay attention to the phrase I used in my original post “but for the whole budget this time”. That means you adopt the successful process (BRAC) to a new scope (the whole $4+ trillion we spend).
Yes, DoD would not be exempt but we’ve gone well past the point where we can afford to have *any* sacred cows that don’t get a hard look and deep cuts. Since Social Security is now going to be a net drain on the Treasury going forward, we actually have to run a surplus not to worsen our debt situation.
It’s not like defense cuts aren’t a mainstream conservative position. I look in on the YouCut initiatives every once in awhile. Congressman and former Col. Allen West successfully proposed a 10% cut in the DoD printing budget as one of the YouCut selections. And then there are the stupid fights like the one where there were multiple vendors reselling MI-17 helicopters that we were looking to buy for Afghanistan and the Navy wanted to go the least expensive route and the army wanted the most expensive one. It’s better to go the Navy way and spend 40% less while giving the Afghan govt a capability that might let us responsibly withdraw earlier.
We’re in too deep to go off reflexively into talking points. The DoD came up with the only functioning spending cut process that we’ve had for the past few decades. That’s something to be proud of, and something that the rest of the government should use to cut their own fat.
Please pay attention to the phrase I used in my original post “but for the whole budget this time”.
******
i did. brac didn’t spring out of the blue…
it was the end result of lowering the number of active duty forces. first fewer soldiers, then fewer bases.
this was one of several economic surges that the govt needed, freeing up cash, without having to raise taxes.
other examples…
40-50′s manufacturing was almost a monopoly as eurapoer tried to rebuild.
60-70′s, where women increased our labor force, substantially.
and the above mentioned 90′s, where we could repurpose federal revenue to doemstic spending.
now, we are demographically doomed. the labor force will shrink as the largest demographic group, baby boomers, head for the exits. they take with them the highest salaries, after occupying the largest tax brackets. if you want conditions similar to brac, you’d have to wipe out large demographic groups which are destined to be a massive drain on available funds.
the ponzi scheme is simply ending, as it always was going to…
It’s going to be bloody.
It’s going to be on purpose.
This is not an administration, it is a coup.
The Revolution is always executed by the heroes.
Lenin spent 1917-1920 pondering how much representation the peasants might have. He sent Stalin out to “solve problems” by filling ditches with dead bodies.
Our campus commies gone establishment would be laughable were our nation and our liberty not the punchlines…
Not in any particular order:
1) Get Obama out of office. Get the Dems out of control of the Senate. And get rid of Mitch McConnell. In fact, if some Senator is over 70, do not re-elect him.
2) Cut back spending. Not to the bone, mind you. Just cut out all the truly useless stuff. Vast sections of the FedGov is useless. During the last election, the GAO had identified literally hundreds of programs that could be cut, saving 100′s of billions, most of it annually. None of it has been cut, of course, and Obama has added far more. There is almost a half trillion which could be cut annually in this fashion. Ban pork from the budget.
2) Cut back the regulations which are stopping businessmen from doing anything. Business is paralyzed. They cannot make the numbers work.
3) Issue the drilling permits. Waive the environmental nonsense. Same for refineries and nuclear plants. Permit no lawsuits for environmental reasons. When you have no wealth, you have to tap resources to get started again. These things will boost wealth and provide good jobs. See Texas and North Dakota, if you are confused about this.
4) Stop printing money except to replace what we have. People need to know we will not be inflating away our debt. This will help keep inflation from getting out of hand.
5) Increase the prime rate. The money should not be coming from the government, but from savers and investors. Easy money makes banks stupid.
6) Restore the portions of the Glass-Steagall Act cut by Sen. Graham and Pres. Clinton in ’99. Bankers need to be protected from their own avarice. Roll back some of the newer regulations which do nothing to make things any better. They were just put in so the government could have more control of the banks. We have to have a good banking system.
7) The next Presidents first act is to undo Presidential order #10988, ordered by Kennedy, which allowed public employee unions. It was done by executive order and can be reversed by executive order.
8 ) Pay out all public employee benefits from the funds at once. Do it on a pro rata basis. Whatever portion of the total you paid in is how much percentage of the existing total you get. Buy them out. If they do not get much, well that is just too damned bad. Constitutional Amendment to forbid these unions in the future, and forbid any pension plans which do not go to individual accounts and which do not get paid to them at payday, matching funds withstanding. No paying Tuesday for a hamburger today.
9) Constitutional Amendment to get rid of the income tax. Forbid it, because it is a tool for government power and for class warfare. Also get rid of property taxes, corporate taxes, VAT taxes, Capital gains taxes, Estate taxes. All these taxes interfere with saving, investment, and capital formation. Institute a national consumption tax at strictly the retail level. Heavy penalties for those caught abusing their business status to buy personal stuff and evade the tax.
10) Targeted tariffs. Other nations subsidize their production. We must identify the amounts, and levy a tariff on those specific goods coming here. They must not be allowed to have an unfair advantage in our markets. Do not shy away from a trade war, because we will always win such.
11) Tort reform. We have 5% of the world’s population and 70% of the world’s lawyers. Lawyers do not create wealth. They skim it. Most are parasites, and they suck out too much blood.
12) Redefine “cruel and unusual punishment”. Our prisoners just have it too good and it costs too much. Fraud should mean hard time. So should ID theft.
13) Break the monopoly of the AMA. We pay monopoly prices. Healthcare costs will come down.
14) Repeal the 17th Amendment. Make Senators appointed by the States again, preferably nominated by the Governor. Many States in the past could not appoint Senators because the legislatures were locked in combat. That’s how we got the 17th Amendment. Give the Governors more power over the federal government.
15) Balanced Budget Amendment, with exception for DECLARED war expenses. While we are at it, require all laws to have solid sunset dates. New bills must be introduced, not just continuation motions. Make the laws get debated every time. How about term limits for Congresscritters, too?
16) There needs to be some national recall ability to get guys like Holder out of office and make them accountable. There needs to be a way of forcing the SCOTUS to review laws for constitutionality without the lengthy process. There needs to be some penalty to Congresses which pass egregiously unconstitutional laws like ObamaCare. We should not have to wait years to fix such problems. Pelosi’s “Are you serious?” response was beyond the pale. Maybe give the 50 Governors the ability to impeach?
17) Voting requirements. Lots of them. ID’s. Civics knowledge. Property? Parasites should not vote. Voting should be done at precincts. Yes, it costs more, but mail in is very vulnerable to fraud. Absentee ballots should be very hard to get.
18) Break the media monopolies. Only one thing, be it a newspaper, a radio or TV station. Whatever.
19) Sell federal land, especially to small farmers. While you are at it, no agriculture subsidies. They hurt the small farmers.
20) Repeal Sarbanes-Oxley. It was put in to make it harder for little guys to go public. It was meant to protect companies like Microsoft from competition.
21) Stronger copyright protection from foreign countries.
22) Define the Interstate commerce clause in an Amendment. It is only to prevent the States from interfering with the free flow of trade. States should not be telling insurance companies what they have to include in their policies.
23) End government-funded college scholarships, subsidies, and grants. They just transfer wealth from the taxpayers to the colleges without making anything more affordable.
24) Privatize all the public schools. They cost too much and produce inferior students. Money allocated for students should go with the students. Special needs should go to special schools with different rates of remuneration.
25) Privatize many other government services, if they are necessary. Do you honestly think the private sector could not run the DMV better?
I could go on, but this is already an insanely long post. Growth rate during the Coolidge years exceeded 10% per year. No reason we could not do the same or better. Government was far smaller then, and bureaucracy far less. Tax rates were higher, but there are a host of other things dragging on the economy now, because of government.
You’re far too rational for the Twilight Zone we live in. Better buy beans, rice, and bullets.
gold, silver too…
heck, melt value of pre-1982 pennies is worth 2.7 cents, today.
might as well start saving for the next generation.
i would point out that when they stopped silver coins, the melt value of a quarter was 23.5 cents.
considering how many copper pennies are out there, one should easily accumulate 20-30 pounds(147 pennies to a pound) a year.
Your list is entirely a rationale approach, I love it.
Marc Malone for President!
Woot!
World War has always worked in the past. Gets people to accept privation and burns down the competition.
Calm down people. All will be well until the economy collapses UNEXPECTEDLY.
You are probably more right than even you realize.
Personally, I think we’re going to end up with a VAT…
There are basically 3 things government can tax. They can tax consumption – sales taxes, VATs, tolls, usage fees etc. They can tax income. They can tax wealth. That later has rarely been tried in the US except in the form of inheritance taxes. Either of the first two would depress economic activity and make ultimately increase the deficit. The third however – sock it to the idle rich as it will be called is what I think we will see in a second Obama administration.
I believe he will go after the 401K plans of the middle class and maybe make a show of impoverishing fourth and fifth generation Kennedy’s of whom there are way too many already. Harvard and Yale could take a hit too at least symbolically. There is no good reason why they needs tens of billions sitting around in endowments when they are charging $55,000 a year for a really rather crappy education.
Raid the 401ks to prop up medicare and Social Security. Put the geezers down a couple of years early and without that hip replacement and you can lick this can down the road and do Green Energy and all the other imbecilic stuff you have been doing for another decade. Grant citizenship to the illegals and you have the new electorate you have always wanted instead of the one you have been lying to for years. Then rename the main drag in every Mexican ghetto in the country Barry Obomber Ave and vote yourself a holiday.
It is really not hard if you just take care of today and tomorrow and stop worrying about10 years down the road.
OMG Joe Hill are you on the payroll at the Whitehouse? You seem to have the Obama program down perfectly. The will come a time when we lynch him. His death panels and hyper inflation may take all that we have. Civil Rights will however go first.
Just default on the debt to the Federal Reserve, but not that owed to other Treasury security holders. The Federal Reserve Bank holds the majority of our national debt now.
What a great thread. 50+ comments, and even the opinions I disagree with are at least thoughtful.
People don’t realize what real trouble that we are in. Default may be thebest of our choices. They have written the “entitlements” so deeply into our law and the budgets that to cut the unrealistic commitments will be as bad as a default. The hyperinflation would be the only thing worse. One has onlyy to observe the Germans post hyperinflation to see how bad it got. They struck out at the Jews. We would probably strike out at the gay mafia because they are the ones who benifited the most.
But it is up to us to be intolerant and hell no to every MBA who suggests Mutualy benifitial agreements or one day the parents of the United States are going to look up and realize that their children’s very best prospeects is for the daughter to be sold into prostitution in China. When we get down to nothing we will follow anyone leading the way out just as the Germens did.
It’ll be inflation, maybe hyper, maybe just very bad. The choices are to rein in spending and just have bad inflation, maybe 10-20% per year for a decade, or keep spending up and go the Weimar route.
QE2 was a dry run–the Fed simply creates money to buy USG debt. The money goes all over the world and fuels bubbles, while the dollar skids.
The future will just be more of that—as USG debt needs to be rolled, for want of other buyers the Fed will buy it in and create assets on its books, and the dollars it uses will flood the world and the value of each individual dollar will fall.
Increasing taxes won’t help much, that’ll just destroy the productive parts of the economy and revenues won’t rise nearly apace with rates. It’s too late to get out without a lot of pain. We won’t outright default, because we have the inflation option with the supposedly “apolitical” Fed’s help.
We need a national bankruptcy. That doesn’t necessarily mean a default, it does mean big changes. Probably, ‘Social Unrest’ will be one consequence. So be it.
Inflation will be the preferred way out….take 10 percent over 4 years and your fixed liabilities (T-notes/bonds) are devalued by 35 percent. However, the bad news is that SS has yearly cola. So that will have to be addressed either thru rigging the CPI (that’s worked so far) or means-test the cola.
Inflation will do wonders for the state liabilities too. Often state pensions are fixed colas, or capped….or if you are lucky, no cola. The Corporate space will be in great shape because they don’t have colas.
Healthcare will be pretty much fixed by means-testing and rationing via price controls or just plain rationing for old/feeble people.
China won’t be happy of course.
About time someone on this website initiates an objective view of the economic situation…, most others are debating what a proper martini consists of while watching an Iceberg loom ahead. ( Reyka or Grey Goose is proper martini. Asking for fennel apple or other Fluffy Foo nonsense should result in requester being escorted from establishment, or tossed overboard).
What happened to corporate america in 2008-2009, is now occurring to entire nations; the financials do not add up and the day of reckoning is Dawning upon them.
Viewing the International Banking system from above, money is created by central banking systems as a ledger entry, which is Debt, then loaning this debt to governments at interest. The government loans this debt to the public as currency, and the taxpayers of that nation are collateral for the original loan. Great system, as long as slightly more debt is created each year. If debt is ever paid off, the fractional reserve system will collapse.
The trick is to keep the ratio of debt only Slightly larger than the scheduled repayments.
This has been going on since President Nixon removed the USD from Gold Backed system, and replaced the tried and true system with the Petro-dollar, which is a Fiat Currency. This Petro-Dollar allows unlimited ledger entry debt, as there is no control against issuing dollars as long as interest is paid.
As corporate America experienced in 2008-2009, so now are nations experiencing the same. However, a default of the US debt will have results we cannot forecast. The Feds requested ( or forced, depending on who we ask ) Lehman Brothers to file bankruptcy on Sept 14, 2008 The result was overseas offices and transactions frozen in place, with billions unable to move or complete their intended business, which apparently nobody at Lehman or Feds had foreseen occurring. As the dominoes spread throughout securities and banking systems, panic increased eventually reaching into every corporate board on Wall street.
The corporations were were bailed out by Governments, mainly USA government, which borrowed the money from a central banking system, which created the money as a ledger entry on a napkin in an exclusive British Pub in the corporation of London in October of 2008.
We really don’t know what will happen if the USA Defaults on its debt. At a minimum it will sow panic in central banking systems…at its worst may result in panic selling of US dollar and plunge USA into a depression far worse than the 1930′s, and take half of Europe with it into the abyss.
Martini sounds good…no wonder there is so much drunk blogging going on.
To add to the other problems, consider this:
Under QE1 and QE2, the fed has pumped enough liquidity into the economy that, if the velocity of money was constant, would have resulted in inflation of around 10%. But that didn’t happen because the money just wound up sitting in the vaults of banks like so much dead fish, and didn’t really goose the money supply (quantity of money X velocity). In fact, the ‘Quantitative Easing’ may have simply caused velocity to fall in compensation because the real economy doesn’t play games.
So what happens if the economy starts to pick up and that money starts moving? You get inflation. And the Fed’s traditional tool against inflation is to hike interest rates, which kills off economic growth. So you wind up with – stagflation (yay! – waves tiny flag).
But it gets worse – in 1980, Reagan and Volcker got inflation under control with large interest rate hikes, which triggered a recession. Today, the U.S. is already in recession again or damned near it. But what’s worse is that there’s 14 trillion dollars in debt floating out there, held mostly in short-term securities that must be rolled over at current interest rates. A single point of interest rate increase results in a $140 billion increase in debt-servicing costs. Raise the interest rate into the double-digits as Reagan did, and you would immediately crater the U.S. government budget.
In aviation, we call this a ‘coffin corner’. No matter which direction you move in, you’re screwed. This is the result of the brainless policies of the U.S. government doing flips and twists to avoid as much temporary pain as possible by constantly backing into that corner until there’s no place to go. That time is just about now.
So how do you get out of it? You do what Canada did. In the early 1990′s we had a deficit almost as big as the U.S’s in terms of GDP, and a debt that was 70% of GDP. Debt servicing costs were consuming 21% of the budget. We embarked on a program of mostly government cuts but some revenue increases (7:1 ratio of cuts to tax increases). We then held the size of growth of government to a percent or two below below GDP growth for a decade, until our government shrank from 53% of GDP to about 35% of GDP (as of 2009, smaller than the U.S’s government as a percentage of GDP, and the gap is growing with each year Obama is in office). Along the way, our deficit turned into a surplus, and we used that to pay down the debt. As the debt came down and our debt servicing costs declined, we gave that money back to the public in tax cuts.
On the competitive side, we began a long series of cuts to corporate taxes, capital gains taxes, and dividend taxes. We also promoted STABILITY. Our governments have not proposed major new regulatory programs or large new social programs for many years. So Canadian business understands the rules, knows how to play the game, and can make proper business plans. The result is that Canada now has the strongest economy in the G8, and we’re on track to be running surpluses again by 2014-2015.
It won’t be so easy for the U.S., though. Canada had the foresight to do this in an era of world economic growth, and while there was still a lot of time before the baby boomers shuffled off into retirement. The U.S. will have to do it in a world where growth is low or stagnant and medical and retirement costs are skyrocketing. It will be much harder.
Personally, I’d start with regulatory reform. Regulations cost the U.S. about 1.2 trillion dollars per year. That’s one area where you can lower the burden on the economy without losing government revenue or cutting social programs. Free businesses from red tape, expedite regulatory approvals, turn the FDA into an advisory-only agency or at least get rid of the efficacy requirement. Put a moratorium on major new regulatory programs to give business a stable environment to operate in.
Start government cuts immediately, but institute a Value Added Tax eventually, and only under the condition that every dollar in tax increase will require three dollars in spending cuts. One dirty secret of American tax policy is that there is a big ‘donut hole’ in tax revenue for the middle class, due to all the social-engineering tax credits for families, mortgages, etc. These distort the economy and force tax hikes on businesses. The middle class in America pays less in taxes than they do anywhere else in the world, while America maintains the highest corporate tax rates of any country except one small country in Europe somewhere. Canada’s tax rates are less progressive and more competitive because we raise 21% of our revenue through a VAT and excise taxes on tobacco and alcohol. Most countries do the same, which puts America at a competitive disadvantage.
Above all, avoid the old game of agreeing to tax hikes now, with a promise of spending cuts in the future. We all know what happens then – the tax hikes take some of the pressure off the government, and the spending cuts never happen. I think the major objection to combined tax increases/spending cuts is that Republicans have been burned by this type of deal too many times in the past. I think there would be more Republican support for revenue increases if they absolutely knew that each dollar in revenue would be matched two-for-one or three-for-one with real spending cuts, and so long as those tax hikes don’t come in the form of insane taxes on an ever-dwindling slice of the top end of the American economy where all the job creators live.
Dan, very workable plan. That’s why Canada has one of the freest market systems in the world, much freer than in the US, because of our regulatory excesses.
We’re light-years from righting things, and we simply don’t have that long. The gov’s out of control spending is a consequence of the zombie culture; the masses need to ditch a lot of baggage (altruism -> welfare for one), and adopt new ideas long before the technicalities in the gov get ironed out. And I just don’t see it happening.
There’s an entrenched reality evasion, and it keeps getting reenforced by policies.
I understand why the left repeats the totally discredited notion that increased taxes automatically leads to increase revenues, they are morons, at best. But why you? Tax something and you get less of it.
Our side tends to lose because we repeat their bullsh!t, adopting it as our own. Liberalism is a disease. Don’t infect your analysis with it.
Sorry, Stephen, late to the party. But I have a request…
Can someone please write a detailed post of what default will look like to a regular person? Someone with lots of debt (mortgage, student loans, credit cards), and then maybe also someone not in that position–paid off debts, etc. I don’t think the general public understands exactly what default means to each one of us. I’m not sure I do for myself, and I’m pretty widely-read in economics.
Maybe this would be better as a PJTV topic–a couple of economists discussing with one of you guys (you? Glenn? Alan?) exactly what would happen. Does transportation get disrupted so that food cannot be delivered? Do pharmaceutical companies quit providing medicine to hospitals, a la Greece? I can speculate all day long but I would love to see this addressed. Thanks!
ditto
Default means the government can no longer borrow money, as no one would dream of buying the notes.
That means the government suddenly has to balance the budget, with the benefit of not having to pay the interest on the debt ($197B/an).
That means all the social payments, all the pork, all the political payoffs get junked. Government is cut to the bone.
It means massive economic dislocation… for those suckling at the government teat.
What’s not to like?
Well, other than the government might use the crisis as a means to nationalize more things and seize 401k’s and other retirement plans. Then of course, the Citizens with guns rise up and haul these bastiches out of their offices and literally hang them from lamp posts.
Again, what’s not to like?
No disrespect, Marc, but what I want is a description on a very personal level of what this means to specific people. For example, for a guy at the top of the “food chain,” does this mean anything at all? For someone in the middle, is it job loss, or a slightly emptier fridge? Or is there rationing of some items, like gas? What about medical care, already dependent in some ways on Medicare and Medicaid? What about retirees? I’m looking for specifics.
Again, this is probably a great discussion for PJTV…so, Stephen, you hunk of hot conservative drinking-ness (does sweet-talking help?) I’m asking you to do this! If you do, a bottle of Grey Goose is on its way…Hey, you can’t blame a girl for trying!
It always plays out badly for the middle class, because the same government remains in charge, or some strongman who is just as bad or worse takes over, or the country is conquered by someone else.
See the Weimar Republic of Germany for an example. See the collapse of the Soviet Union for another. See Argentina for another. The middle class gets wiped out completely.
Great Britain dismantled her empire to cut costs, and it worked for a time, but they seem to only have bought some time. The behavior never changed.
We will be different. Why? Because we Americans have a natural aversion to dictators… and we have guns. As long as we have guns, they cannot wipe out the middle class. As long as we have guns, we can have elections, and the middle class will have a say. When they come after our personal monies, it will becom every personal, and we will kill them.
They have to get the guns first. And they know it. If they get the guns, we will not be different. We will be ruled by tyrants or thieves or oligarchies. We will be ruled.
Either the middle class gets wiped out, or the government does. Our Founding Fathers had guns. The middle class was getting wiped out. The King of England, the mightiest nation on Earth at the time, lost. The situation is very similar today. We are the mightiest nation on Earth. Our government will lose to the people. Because we have guns. None of those other countries had guns when the government won.
Keep your powder dry.
…..really the battle boils down to who can build enough plausible deniability in order for History to blame the other party……
Problem for the Left, essentially this is FDR’s world started coming crashing down around our necks….it was accelerated greatly by LBJ’s New Society and topped off by Fannie Mae’s purpose and offshoot effects.
Problem for the GOP—–State Run Media and how to combat the message they will push. The Left has, in strategy put the GOP between a rock and a hardspot. Any new spending has to come thru the GOP held house—-blame.
Any significant cuts that may slow down the economy short term are already being lamblasted by the left.
Plausible deniability—–the Left started working on it at the same time FDR proposed his socialism…..
GOP is just entering that game….way behind.
1. This will lead to the break up of the USA. The productive areas will refuse to continue subsidizing the non-productive. Surprisingly, the non productive areas are often the more conservative ones. For example, by any reasonable measure, the rural conservative areas are less productive and get constant subsidies.
Perhaps we will see a new Hanseatic league.
2. This will also lead to private money. Yes indeed you’ll be paying for your stuff with valuta issued by American Express or MasterCard. Now really, there’s lots of precedent, fuggers and all that, and who do you trust more, MasterCard or Tim Geithner? No choice at all really, is it?
“For example, by any reasonable measure, the rural conservative areas are less productive and get constant subsidies.”
The rural conservative areas is where they grow the food. Try to do without it.
This is a false narrative about productivity generated by the Left.
To expand on this further and show why it’s a bad metric: the federal subsidies measures will always cause the dollars in vs. dollars out metrics to skew AGAINST the most critical productive states because they measure the activities important enough to subsidize, instead of accounting for how those subsidies lower prices in the consumer states.
Marc M gaves us his huge list and wrote “I could go on, but this is already an insanely long post. Growth rate during the Coolidge years exceeded 10% per year. No reason we could not do the same or better.”
Hmm, do you suppose that those growth rates had anything to do with what followed? That kind of growth leads to a few excesses, wouldn’t you say?
How long did it take you to prepare that list?
A lurking 8000 lb gorilla: If you had an elected set of folks with the will to do all of the above, don’t you reckon that the feeling of having the power to make all those changes would carry over into them getting a short way into it and realizing, ‘my God, we are putting ourselves out of business here (and after all the time and energy we have devoted to this, we deserve better.” For everything you take away, people have to feel as if there is some future benefit.
Workers of one sort or another, have to believe that there is some benefit for them and since those folks may tend (hate to stereotype here, but…) to think
in shorter term benefits, you have a BIG problem moving toward the magic bullet now of, “if you take much less now, you’ll get more later.”
A lot of these lists, including much of yours have a “if someone made me God…here are all the things I would MAKE happen,” quality. They are only slightly more helpful than the people who are settling for stocking up on ammunition and precious metals. Should we talk about what is possible?
No, those growth rates had nothing to do with what followed. Hoover had everything to do with what followed. Coolidge used to complain that Hoover, his Sec of Commerce “used to give him advice all the time, all of it bad.” The crash of ’29 was really far more mild than the 38% destruction of wealth in 1920. It was far less bad than black Monday during the Reagan years. It was Hoover’s over-reaction which led to the Great Depression. Then it was stupider FDR who truly made us unique in the world, by continuing it for years and years more.
How long did it take me to make that list? I put it down as fast as I could type, only pausing to edit typos. That’s why it was “in no particular order”.
The list does not “require godlike powers” to make happen. The hard parts are the Constitutional Amendments. 2/3 of the Senate is really, really hard, right? Well, not when you are trying to eliminate the income tax. I would love to see the Dems defend the income tax!
Much of the regulations were put in by agency fiat, and can be reversed by the President. Same goes for executive orders. Banning public unions requires only the stroke of a pen.
The president has enormous influence over the Federal Reserve, as Obama has demonstrated. Technically, he is not supposed to, but practically he does.
Reducing the government is the same. You do not have to eliminate the departments to get rid of them. Simply eliminate the positions in the department. You cannot fire anyone who has been in civil service for more than 3 years… unless you eliminate the position. Just eliminate all the useless positions, and roll anything left into another department. Anything worth keeping in Energy could be rolled over to Commerce, for example. The department would exist only on paper. There would be no people. Then you get Congress to eliminate it officially.
It actually is easier to reduce the government than you think.
Dwight, you always have something empty and disparaging to say. You rarely offer anything worthwhile yourself. Kind of like the Democrats in Congress. They do not pass a budget, so that they can attack anything the Republicans offer. If they offer nothing, they cannot be attacked, is how their thinking goes. They are critics, not doers.
If you have nothing to add to the discussion, Dwight, then spare us your snide, broadly-dismissive commentary. You never seem to have anything nice to say.
Occasionally, you say something constructive, and I have engaged you. I have even complimented you. You have never once reciprocated. Not once.
Go read the previous paragraph Steve!! The discussion in the one you quoted has nothing to do with the interest rate. The current growth rate is 2.5% (see the previous paragraph in Lindsey)and many expect that rate to continue. The president’s budget assumes the 4.5%, 4.0% and 4.2% growth estimates so what Lindsey is saying is that there is a $4 trillion error just from overestimating the growth rate.
Hyperinflating debts is simply a more accepted way of defaulting – it says “we’ll pay you X pennies on the dollar”, with X shrinking for long-term bondholders.
Obama, by his own words intends to continue using regulation to bypass the legislative branch on everything he proposes, with which Congress disagrees. And this is the same guy that Boehner invites to “discuss” the debt ceiling???
For goodness sake – impeach this guy now. He’s gone way beyond anything remotely constitutional. WTF?!!!!! Don’t we have ANY real men left??? Excuse me while i go visit Ralph O’Rourke!!!!
I hate to start with a quibble, but I must. The quoted section addresses what happens if the rosy economic growth predictions get reduced to the historical average. That isn’t to say, however, that isn’t an entirely-incorrect premise – the first part of the piece addresses the “normalization” of interest rates. Specifically, if they go to the 2-decade average of 5.7% from the current 2-year average of 2.5%, the interest increase would be $4.9 trillion.
Put me down for “I’ll take a wrecked government for a fixed economy”.
The Ryan plan, especially the predecessor Roadmaps which were bolder than the succeeding budget, depend on the goodwill of the Treasury bondholders as they’re a decades-long restructuring. The problem is, rather than moving toward imlementation or even a mere continuing of $200B-$500B annual deficits, Obama, Pelosi and Reid jumped it to $1,200B-$1,500B annual deficits, and they chose to demagogue to the point that even the watered-down House budget is nothing more than a white paper.
The ultimate problem is that the pain that is going to be required to break the death spiral is going to have to be felt by a whole lot more than half the population as a whole lot more than half the population has their lips firmly planted on the government teat.
If anybody is still reading’ this was all dome 80 years ago. Check out Hjarma Schacht, Albert Speer etc. Confiscate property of “undesirables (Demcrats) loot other countries,just avoid a land war in Asia and all will be well. One State One voice one leader.
Mr. Green: Reading your piece and skimming the comments has left me strangely optimistic. Maybe I need a drink! It seems what we are facing is a financial crisis, not an existential crisis. As some of the posts above demonstrate, there are many things we can and should do to address the financial crisis. I particularly liked Mark Malone’s list and Dan H’s recounting of Canada’s experience. Remember, also, that individual states are facing similar financial crises and some appear to be taking action to dig themselves out of the hole. Unfortunately, the reality that we are not going to bail them out hasn’t yet hit California and Illinois.
In general terms, my own solution would be (1) a series of immediate spending cuts which, ideally, continue until spending is eliminated for everything except the essential purposes of the Federal Government. I’d settle for an interim goal of, say 1980 federal spending levels. (2) Selective Default, by which I mean a cutback on the open-ended entitlements of Social Security, SSI, SSDI, Medicare, Medicaid, public employee pensions and healthcare by means and to levels at which those kinds of things can be transitioned to the self-funded private property of individuals. And (3) The replacement of the entire existing federal tax code with a Transaction Tax with no exceptions and no exemptions. Even the Little Sisters of The Poor would pay. We would be taxing the velocity of money instead of income or “wealth.” Businesses and Banks can collect it and remit to the Treasury daily. I believe these three approaches would satisfactorily address the current financial crisis.
Then we can move on to more serious underlying problems: The moral, intellectual and political bankruptcy of our ruling class; the corruption of our politics, and the rule of judges.
Yep. Good summary.
What everybody on here is refusing to accept and address is the new global competitive economy. China is now what America was to the worlds economy at the beginnings of its great rise to its highest industrial and economical pinnacles. However, there are a couple of stark differences! First…American economies have and continue to systematically relocate much of its economies to other more competitive foreign shores at the SAME TIME continuing to invest and move major portions of the economy to China. Second…with the above exception, much of the worlds economies have gained parity such as Europe, South America, North America and parts of Asia, namely South Korea and Japan.
If the economy is central to America floating or sinking, folks had better wake up to the realities that America no longer has the competitive economic resources it once enjoyed. Next! The U.S. has far to much population for the current structure of the economy to support sustained low levels of unemployment. Since the 90′s America has only been able to achieve relatively low unemployment through unsustainable ‘bubble’ economies. Both eventually burst and here we are today!
America’s arbitrary circular continuum of inflated values for goods and services is sinking America as in Europe!
I know you are not a Leftist, TT, but sometimes…. This sounded like, “We just have too many people”.
Either an economic system works or it does not. It does not matter how many people you add or subtract. Even the rate of increase does not matter much.
The problem is that Capitalism has been sabotaged by government. Take the government monkey wrench out of the system, and everything will move back into place.
No Marc…I’m the complete opposite of a liberal and I always appreciate your understanding that. However, I’m very much a realist! I’m still smart enough to understand that those who produce less have less means than those who produce more. As we all know, the U.S. was at the top pinnacle of global production and virtually every able bodied American gained the economic means to propser at a level of sustainment all the way up the ladder to excesses. In the most recent decades, America’s once sustainable economic production has systemically declined at the same time its population has increased.
Now folks can debate the causes and the potential means by which to recapture its once economic dominance but, it cannot ignore the simple fact that the nation, today, no longer has the traditional and accustomed economies to support its population in any sustainable fashion in todays global market and economic conditions. If it wasn’t so, we wouldn’t be where we are today. With 16-18% real sustained unemployment and a national spending and debt crisis in a sustained global recession, how can one make the claim our economy is supporting our populations needs?
On the other hand consider only 4-5% unemployment added to the segements of the populations that are at or below the poverty line plus the aged and handicapped. That again indicates an economy that is incapable of providing adequately for one heck of a large population. Again, if it weren’t so we would not have progressed to the economic hole we’re in. The private and public sectors have simply shown that they can no longer sustain the economic needs and promises to its population. Just check the number of private sector retirement funds that have had to be taken over by the government since the 80′s and 90′s. Count the numbers of economies that have relocated signficant operations to foreign shores with those jobs filled not by american’s.
If we put more cows per acre of pasture than nature and fodder will allow for, I starve my entire herd…but I have the benefit of adjusting my herd population to accomodate the dictates of the pasture. We don’t have that luxury on the human side. We’re left only to increase the economy by at least the rate of population increase, which we’ve not accomplished over the past few decades!
This is Malthusian, leftist thinking. Humans are not cattle. They cannot be compared, even as an analogy.
Cattle have only one way to exist. Humans are endlessly adaptive. Humans have the ability to create wealth in different ways. Even if you entertain what you think to be limits on food production, technology finds a way around it. Dwarf wheat in India is an example.
Now, we have GPS adaptation in tractors/seeders, which track productivity from season to season, and spread the seeds extremely precisely, which is making it possible to get far higher yields yet. Could the same be used for pasturage? Yes. Your same acreage could thus support more cattle. Your analogy falls apart.
An efficient system produces great results. Greater efficiency produces even greater results. Government is inefficient by nature, because there are no metrics. When one introduces some standards, some metrics, even government improves. There just has been no real effort to make government efficient. So, government is a drag on the rest of the economy by decreasing efficiency.
Marc…I wanted to address this comment separately.
["The problem is that Capitalism has been sabotaged by government."]
I understand the gist of your comment and as you probably remember, I’ve long been an advocate of a commerce clause amendment. That said, there are few industries more regulated than that of the agriculture chain from raw production through processing of foodstuffs, byproducts, storage, logistics and retail. For 120 years our operations have not only survived all the regulation but we’ve signifcantly increased our operations in land holdings, production capacities and overall wealth. Today, agriculture remain one of, if not, the remaining predominate economic backbone of the U.S. In fact the labor demands in much of agriculture seemingly surpasses supply…at least thats how I look at it, given that most agri jobs have to be outsourced to migrant labor.
A few years ago we dabbled in hogs and poultry. The minimum wage was somewhere over $3 per hour. Of the 68 jobs being offered we received 16 applications over the 60 day hiring process in three states. We had a static start date and was forced to use the ‘network’ system to start. We battled the conventional labor problem for three years even offering upward of $10 per hour and finally made the decision to eliminate the business plan from our operations.
Bottom line! Yes, the governments regulatroy intervention can be a pain in the butt, but with a good business plan and management, that intervention is no excuse for marginal success or failure. If you have a good commodity to offer and there is a market and…. you’re competitive you can succeed and grow. I don’t fully buy into the idea that regulatory intervention or even tax rates are the predominate factors of business decline or collapse. Poor management decisions are far ahead of regulation and taxes.
“I don’t fully buy into the idea that regulatory intervention or even tax rates are the predominate factors of business decline or collapse.”
Delta smelt. They cut off the water to the most productive farmland in the world. (Well, they turned the water back on in the districts of Democratic Congressmen.) Tell me how good management can overcome them turning off your water?
Amazon. CA said they have to collect the sales taxes, just like IL did. Amazon gave them the finger and pulled out of CA, just as they did previously with IL.
Banks. Obama and Co. are making banks adhere to all kinds of ridiculous requirements, even the ones which are technically not subject to their dictates. If the government tells you what your lending standards MUST be, well, you can fight them in court. It’ll take a long time and cost a lot of money. If you are a small bank, you cannot fight at all. Meanwhile, you cannot lend even your own money. Tell me how management can overcome that?
Government is a drag on business (but some government is necessary). The bigger the government, the greater the drag. This has been proven time and again. At some point, the drag is too great, and business cannot succeed, unless they go under the radar (the black market economy). In the USSR, the black market economy was greater than the official economy. So, the USSR collapsed. But it took a long time, and millions of murders, to get to that point.
We raised hogs when I was a teen. Under the radar. Best pork ever. We sold at $1/lb for the whole or half hog. Cost was $.45/lb. Completely safe. Supermarket price was $2/lb for water-injected pork. Could not have done it following the rules. Could not have. Just as you couldn’t make yours work.
You sound like a good businessman, yet you couldn’t make it work. You are the living proof of the falsity of your own position. I like you TT, but some of your positions seem to accept a certain amount of acceptance of big government, despite not liking big government. There is an inconsistency in you.
Regards
There is a fourth option, which digs us out of the hole the old fashioned way — robust growth. Unfortunately, the clowns in charge haven’t a prayer of getting us there.
I think it is pretty clear that relaxing environmental and local “planning” (aka rent enforcement) laws is far less damaging than hyperinflation and default.
Build and grow, now. It doesn’t have to be sustained, just a bit more than that 4% for a few years, along with Ryan’s cuts, and it ain’t so bad.
I am sick of this defeatist attitude. The USA is not Greece we have many things to sell we have been gifted with a plentiful land and would throw it away for a few leftist loud mouths bullying the good people who have been suckered.
We have coal, oil, farmland, fishing, gold, sliver, copper, great minds,
The problem is we are paying people not to work.
The other is we are letting a bunch of leftist wieners control our country this has to stop grow a set.
If the press is lying do what they do protest in front of their business don’t give in to their fear mongering stop giving money to leftist vote them out of office this is what power you have. This is called term limits.
Stop the EPA and all the other goons if you loose you money at a gambling house don’t ask others to pay your bills and if these people say you should shame them and theirs.
obama is not a king we fought a war to not have a king. Fight the leftist democrat bullies they have caused this crap REMEMBER this country is a Rich country with a rich history to be proud of and worth fighting for.
Catherine
So I guess what I am saying is fight back don’t let the damn leftist win don’t let people like shumer or soros cause a run on our banks help those who stand up and fight against these leftist they are counting on you folding and getting out of the game don’t fold you have the winning hand.
Don’t think if you have to get into the pig pen you aint going to get a little dirty but remember people love bacon and pay for bacon and dirt washes off
Sarah? Is that you?
I think Obama could help the economy more by selling Ipods with his speeches already loaded on them. Apple could call it the “I have a dream edition”. And it can have a custom app that updates Obama’s golf handicap score in real time and plays a Black Eyed Peas beat to notify you when he is giving a speech.
Why are you using Obama’s 2011 budget for anything? He didn’t present one because he was afraid that it would effect the 2010 election adversely. That is why we are fighting over the current continuing resolution.
He did present a 2012 budget at the SOTU address that was so bad it was not scorable by the CBO. It was voted down by a record margin, 97-0?
Actually of Obama had presented a budget that was real, or followed up with one that was real, we could discuss that, so what we are ‘fighting’ over now is a continuing resolution which will expire as a matter of law by the end of September. Then we can begin fighting over a 2012 federal budget which noone has presented. Then we can do this all over again because the inmates are in charge.
Regarding default, we have now and will continue to have the revenues to pay the interest on our debts. If we pay that interest, and its not at all certain that Geithner understands the point, we will not be in default, even if we do not pay all of our bills. Since all of our bills are not due simultaneously, it is entirely possible that noone will have to go without.
As long as the same group of leaders remains in charge, any victories will be small and short. Expecting something new from the same old dinosaurs is just not realistic.
Marc….We didn’t decide to drop our hog and poultry plans because of any specific government interventions or profit problems. We dropped our plan because of labor problems for which we didn’t need the headaches of.
We have had no choices but accept larger and larger government over the past 120 years of operations. When you chose to live your lives and run your business with some high degree of responsibility to a moral certainty, few new laws will have much impact on you. Farmers have the charge of not only feeding the human populations, but more importantly, being the best possible stewards of the land and all other lesser species of life.
To make a long story short, NO laws are ever enacted but for the irresponsible acts of others that can or do affect the majority of the population and the planet. Therin and therefore, I have become a realist and try hard to adjust accordingly to the effects of the increasing irresponsible for which I have no direct controls over. When folks become irresponsible for the planet, the government steps in. When folks become irresponsible for others of their communities, the government steps in. When folks become irresponsible to the common laws of mankind, the government steps in…..and on down the list.
With freedoms granted to the people, comes much responsibility of the people. The people have and continue to fail collectively, their individual responsibilities to each other, the nation and the constitution granting them their freedoms. Freedoms and capitalism are only lost through the people…not any government! The government is people…people sent to represent the folks who elected them from the many districts of the nation. Whatever ‘flaws’ have arisen, the flaws are with the electors and not the elected.
The wisdom pf the founders is astounding! They gave to the electors a system of checks and balances through a voting process every 2 – 6 – 4 years along with a removal process under certain circumstances along with a congressional (the peoples representatives) process of repealing laws. The founders also gave not only to the congress but, to the people through their States a process of amending even the constitution.
Seems to me the founding system of checks and balances along with majority rule of the people and the congress continues to work as constitutionally mandated. I for one have come to believe the system has become flawed with the heavey concentrations of populations in particular areas and regions giving them more lower house representation and in some election instances absolute representation. I’m for some kind of an amendment that changes representation equally among the states in congress in lieu of population representation….six districts for the House and four districts for the senate.
As for capitalism! The people and their special interest groups have completely corrupted the system beyond description and resolve at this point.
Have a great American birthday celebration!