Oh, the Debts We Will See!
Going broke without style...
$3.6 trillion budget. $1.7 trillion annual deficit. $800 billion plus borrowing stimulus. $600 billion plus in outlays for new nationalized health care, and then another $600 billion again for cap-and-trade.
These numbers are so fantastic, so absolutely crazed, that the thought of ever paying them off boggles the mathematical senses. (I have surreal nightmares that as we haggle with the Chinese for another $500 billion dollar note to fund cap-and-trade, or another DMV-like national health care center, the USS Carl Vinson radios that it is broke and has no credit to buy supplies off Dubai, or its F-18s sit in rows on its deck, gathering brine for want of parts to take off).
"They" will pay
How many of those diabolical rich making $250,000 and above are there left to gouge to pay for this all? It simply doesn’t compute. One is left with the only possibility that we slash defense, or we will inflate our way out, since no foreign debtor will want to supply those staggering sums of cash.
Athens in the fourth century B.C. chose to mint “redheads”, silver coins with bronze cores that were quickly exposed once the patina around the coins’ imprinted busts wore off. Rome did the same thing, and by the fourth century AD simply flooded its provinces with money of little real value. Germany paid off its war debts to France in the 1920s, with deliberately inflated German marks. I lived in Greece during the oil-embargo hyperinflation of 1973, and remember buying individual eggs with three or four inked-in price figures crossed out, as the store-keeper kept upping the price each day. (And I remember farming in the early 1980s when full-strength Roundup herbicide seemed to go from $60 to $70 to $100 a gallon in a single year).
What, me worried?
I don’t think any one knows what is quite going on. I recently gave a lecture, and a Wall Street grandee afterwards approached the dais, asking me for advice (me, who could not even turn a profit growing raisins, and was a lousy peddler of family fruit for years at Farmers’ Markets), saying in effect something like the following: “Mr. Hanson—Consider: Real estate bad—not going to put money there when I’m not sure where the bottom is. Stocks worse—had I got out at New Year’s, I’d have thousands more than I do now. Cash pathetic—the interest doesn’t even cover what’s lost to inflation. So what's left—the dole?”
I had no advice, of course, other than some vague warning that we are in a war against capital, sort of similar to what Sallust and Cicero claim that Catiline and his band of dissolute and broke aristocrats were planning, with his calls for cancellation of debts and redistribution of property.
Here are the possible exegeses.
(a) Clueless. Obama, the community organizer from Chicago with a mere two years plus in the Senate, is clueless. He has never run a business, never served as an executive, never done anything in matters of commerce other than speak and write and authorize spending bills as part of his government job. The result is that he listens to the last person he speaks with—and with dozens of advisors with dozens more agendas, we are seeing a herky-jerky, now this, now that, everything but the kitchen sink, sort of governance. This version of the President is a nice guy who wants to please everyone and will please no one.
(b) Not so clueless. Or Obama has a pretty certain, calculated European objective of high taxes, big-spending programs, utopian foreign policy initiatives, and a therapeutic sense of ensuring we are all going to be equal by result. In that sense, the recession was a godsend, since he has a brief window of about six months of fright and uncertainty to ram through programs that will last a lifetime, and whose expense will ensure a vast redistribution of income. His closest advisors are life-long government technocrats who are inured to spending others’ money and can use tax-free public appurtenances (salaries, perks, benefits, travel, etc.) to emulate the grand lifestyles of those they detest in corporations and on Wall Street. So we will get a new technocrati overseer class to replace the now disgraced masters of the universe on Wall Street. This manifestation of Obama is a hustler of the first order, and almost everything he says from FISA and earmarks to raising the ethical bar on appointments and limits on spending is, well, made up as he goes along, with the assurance that the media is still ga-ga.
(c) A Mean streak. Or there is not so much chaos or European utopianism at work as a sort of primeval dislike of capitalists and those who have access to money—an angry President Obama whose furor now and again peeks through (remember the clingers’ speech, the accidental middle finger scratches, and the Robespierre rhetoric). Never mind the hypocrisy involved, or the mega-fortunes at play in the rise of Obama’s candidacy. Instead concentrate on the effects, both direct and insidious, of his initiatives on capital of the near-do-well. This is a quadruple whammy:
1) Aggregate tax rates are going to approach 70% in some states, effectively destroying the idea that anyone from the lower classes can ever achieve wealth in a single lifetime, and pass some of it on to his children (increases in estate taxes will be next).
2) The pulverizing of the Dow (cf. Obama’s flippant talk of gyrations and advice to invest now at rock bottom prices, as if those who were wiped out have disposable cash to buy more stocks) means that the aggregate wealth in 401(k)s and stocks for millions—along with equity in homes— of the upper middle classes has effectively vanished. In some cases, the lawyer or contractor who a year ago had $400K put away in retirement funds and $300K in home equity has effectively lost half, if not more, of his hard-won wealth. And when one computes the additional taxes on future income he will pay, it will be almost impossible in his remaining lifetime to make it back.
3) The promises of free health and free education for everyone most surely will come with salary considerations and mean-testing (we are seeing that already with ideas floating about charitable contributions). In other words, the more you of the upper middle class will pay for new expansive entitlements, the more likely you will not be eligible to use the full extent of them.
4) The power of anti-“rich” rhetoric is already beginning to demonize the wealthy as those who have somehow done something wrong in paying the full ticket for their children’s’ educations, or their own health care, or their full mortgage payments. Of all the things that worry me about Obama, the most troublesome is his conflation of the super wealthy—who are so rich that even Obama cannot touch them and who often are his most fervent supporters—with the entrepreneurs, the scramblers of the small business class who make between, say, $250,000 and $600,000.