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Debt & Dumb

August 7, 2011

January 2013

This year marks an auspicious anniversary  of several events that I feel marked the beginning of the decline of America as we know it – 1)  the 17th Amendment to the Constitution was enacted, making the US Senate elected by the people, instead of the legislators of the various states.  This took away the “check and balance” against the house, and made the Senators subject to the popular whims of the electorate instead of putting their interests to what was best for the states.  2)  The Federal Reserve system was created to direct the monetary policy in the US, allowing “central planners” to tinker with the economy and print endless supplies of money 3)  the 26th Amendment to the Constitution was enacted, giving Congress the power to direct taxes on individual incomes, giving them the power of the purse over individual Americans.

1913 also was the year Woodrow Wilson became President, and kick-started the “progressive” movement that would lay the groundwork for BIG government.  Wilson felt that the Founders ideas and the Constitution were flawed because they focused so much on individual liberty instead of giving government control of every aspect of our lives.  Wilson gave birth to the Federal Reserve.  Ideas about government borrowing, which had previously been for emergency or large spending (Louisiana territory) started to change when Keynes introduced the idea that “Government could legitimately borrow not only for production, but also for consumption” according to an article called “The Real Cliff” by Christopher DeMuth in a Weekly Standard.  DeMuth goes on to say

The Keynesian nostrums were conceived in an era when the balanced budget was the universally accepted norm:  They assumed that debts incurred during the depressions and downturns would be balanced by surpluses during booms and upturns.  And the prospect of balance over the course of business cycles seemed unproblematic during the Depression, when the economy had been roaring in  the  recent past, and during the three postwar decades (through 1974) of bracing growth marred by only moderate recessions.

What was not forseen was the effect of the Keynesian proposition in the context of practical politics.  For it taught that government officials, in weighing current revenues and expenditures, should weigh the needs of the known present against the resources of an imagined future.  But the present is always cluttered with problems and difficulties, while the future is an abstraction.  the future is also, in the progressive American mind, a  more prosperous and untroubled place – especially if we can just got ourselves through today’s pressing exigencies. This manner of thinking tended to dissolve the distinction between investing for the future and borrowing from the future.

Up through the FDR years and his “New Deal” big government programs, including Social Security, the “Great Society” trumpeted by Lyndon Johnson that gave us Medicare and Medicaid,  and culminating with the latest big spending abomination called ObamaCare, “progressives” have supported Keynesian borrowing that spends more than can be raised through taxes.  Republicans were not exempt with Ronald Reagan and George Bush adding to the debt load, while taxpayers seems to be developing an increased tolerance for high debt and deficits.  According to DeMuth “Generational accounting suggests that future generations will be paying nearly all of their lifetime incomes in taxes, which obviously cannot happen.  Calculations such as these point to the real harm of financing current consumption with ever-increasing public debt.”

Special interests in DC have taken over the reins of power in government.  People becoming less engaged in government and more and more willing to abrogate their power to a Congress and executive while the real fiscal cliff  is looming.

Dr. Shanon Brooks of Monticello College claims that the day of reckoning is near, and in his recent article that The Fat Lady Begins to Sing .  In it he tells you to avoid the “death spiral states” (NY is one) and to begin to get ready for the worst which is yet to come.  In the article he states

Ideas have consequences, and the consequences of the ideas that are shaping our fast approaching fiscal reality could not be any more obvious. Sure, go ahead, hope and pray that a miracle will occur or that government will come to its senses and stop all new spending and cut deeply into current spending (yes, that means real budget cuts such as reducing or stopping all non-vital services, no new construction projects, and pay raises).

And while you are waiting for that miracle or change of heart, you might consider entertaining the same steps that we have been suggesting for at least two years:

1. Read at least one of the depression books listed below within the next 30 days (no really, just do it). [read full article]

2. Re-evaluate your current economic and family situation and make hard choices to re-position with a better strategy (down-size, more family time, grow a family or community garden, food storage instead of family vacation).

3. Get as liquid as possible and out of debt as soon as possible.  Fire sale opportunities will be on the rise over the next 5-10 years.

4. Start a mini-factory (develop multiple streams of income – home-based business, a cottage industry, enhanced education to shift to more flexible income, parallel incomes, CSA, Network marketing business, etc.) and be as creative and optimistic as possible.  These sentiments will soon be in short supply.

5. Create a culture and community of service

6. Create a family legacy. This means lay the groundwork for a multi-generational organization that unifies and protects your family — come what may (true happiness can only be found in family).

It’s time for “we the people” to face reality – government is the problem, not the solution as Reagan famously said, and we can’t wait for elected or unelected bureaucrats to come to our rescue.  The fiscal cliff is looming large, and it’s a question of not if, but when.  If you don’t believe me, then I’ll point to the blog post I wrote almost a year and a half ago the last time the government was going to hit the debt ceiling.  All of the money was borrowed and squandered without any real commitment to spending less, and now Congress is looking for $2-3 Trillion more.  Leviathan is here and need to be battled.

August, 2011

Any breathing person with a shred of common sense knows that “debt” is when you spend more money than you take in, that it piles up quickly, and that it’s not any easy thing to get out of.  Common sense knowledge is that debt=bad.  So, you’d think that such a simple concept would be obvious to seemingly sophisticated financial wizards like Tax Cheat Tim Gueitner and Ben Bernanke, as well as the President of the United States and 85% of congress.

However, you would be wrong to assume that, as the left leaners in the government think that the cure to the US debt problem is to borrow more money by raising the debt ceiling.  And that the fix for the economy is for the country to borrow and spend it’s way to more and more debt.  They are hoping that they won’t be around for the day of reckoning.

Finally, the parent, in the form of Standard & Poors, just declared the day of reckoning was Friday.  Finally, the parent has read the riot act to the offending teenager and said they need to turn in the credit card “or else”.  Finally, the line has been drawn in the sand for the US Government and the teenager president.

The tea party caucus of the House, led by Michelle Bachmann along with Paul Ryan, Rand and others, has been right along along about the drastic spending cut measures that need to be taken right away by the government.  They are now being backed up by S&P.  I wonder if VP Biden and the democrats will also now begin declaring that S&P are terrorists and radicals like the tea party members?  I can imagine that the Whiner in Chief is livid this weekend in Camp David, and how long before the attacks on S&P will begin?

It’s time for the so-called leadership in this country started using the common sense that even a child should know, which is that continuous, growing debt is not a positive, and that it is unsustainable in any form.  It’s time for the government to stop being in “debt & dumb”.

One Comment leave one →
  1. January 20, 2013 12:38 pm

    Reblogged this on GardinersRight.

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