The primary axiom of economics is "There is no such thing as a free lunch." In other words, you can't generate something from nothing, and everything has costs, either in money, time, or lost opportunity to pursue other options. This is like the law of gravity -- dependable, reproducible, and utterly immutable.
How then, can those advocating "universal health care" declare that a government-run health care plan in the United States will be a panacea fixing all ills of our system while having no downsides? Let's look at it in detail. The current health care reform proposals which include a government "universal care" option are said by the proponents to:
1) Cover 46 million additional Americans (by the advocates' count);
2) Increase the standard of care;
3) Reduce costs.
Let's take these in order. First, 46 million newly covered persons. Given the current US population of approximately 320 million, if we do the math we find that the newly covered adds about 17% to the total number of people with health care coverage. This is where the trouble starts.
Most analysts agree that there is a shortage in health care professionals in the United States. Lab techs, nurses, physicians' assistants, and particularly doctors are in somewhat short supply, particularly in rural areas. So we can assume that increasing the patient rolls by 17% will aggravate this problem by approximately that same amount.
So now we're at (2). How exactly do we increase the standard of care by increasing the patient-to-doctor ratio? That seems counter-intuitive at best, and wholly dishonest at worst. You can't get the same standard of care, much less better, with a smaller relative force of healthcare workers.
The partial answer to "universal health" advocates, is (3)...cost reductions. unfortunately, the current bills "recover costs" by raiding $500 billion from Medicare, and raising taxes another $500 billion or more on those making over $200,000 per year. So, we're saving money by spending more and taking money away from...health care?!? In what universe does this make any sense?
To make matters worse, the Congressional Budget Office, the arbiter of what things actually cost in congressional bills, has little good to say about any of this. They anticipate $1.6 trillion in costs over the next ten years. The savings in "preventive care" envisioned in the bill are actually determined by the CBO to cost more. This is because, for example, if you screen a thousand people using a $3 test to catch a problem that costs $10,000 to fix, and two of them have the problem, you've spent $10,000 more than if you just spent the $20,000 to fix the two people that actually have the problem. Preventive care only works if it specifically targets people actually at risk...which is what doctors do now.
Additionally, there is a lot of data suggesting that the 46 million number of uncovered people is misleading. Up to 16 million of them are young people that choose to not buy insurance because they simply don't think they will have health problems and don't want to incur the expense. Another 16 million or so are people who could afford insurance yet choose not to buy it, either because they don't want the expense, or choose to be self insured through savings or medical savings accounts. That leaves about 14 million people, or about 4.5% of the population. So we're going to go into crippling debt and risk the quality of health care in the US in order to cover less than 5% of the population? That's fiscal insanity.
What proponents of "universal health care" actually advocate is universally poor health care. Rather than have a general population with an excellent standard of care, but with some issues, they'd trade for a substantially lower standard of care for all. The fact is, we already have universal health care in the USA. By law, no person in the US is denied life-saving medical care, regardless of their ability to pay. Not every person has health insurance, but all have access to health care.
It's obvious this debate is not really about health care, but rather is about control. Who will control your access to health care? Will it be you, based on your interest in your own health and your willingness to pay for it? Or will it be a bunch of government officials deciding what is best for you, with or without your consent? It's clear which direction leads to the most freedom, for patients, doctors, hospitals, and all the health-related businesses that create jobs and value to the patient. Choose wisely.
Wednesday, August 19, 2009
Friday, July 17, 2009
Tyranny of the Majority
The Founding Fathers of the United States detested democracy. The prevailing thought among them was that direct democracy was essentially mob rule, where one interest, merely by having a slight majority, could despotically impose their will on rest of the people. The term often used to describe this situation, coined by Alexis de Tocqueville in his Democracy in America is "Tyranny of the Majority."
Over the years, the American Republic has been morphed from a representative form of government into a more direct, democratic one. For example, in the original Constitution, the House of Representatives was meant to represent the people of each state, and the Senate was designed to represent the state legislatures. The Senators were chosen by the state legislatures, not by direct vote of the residents of the states. This relates directly to the founders' concept of Federalism, and that the states were essentially sovereign nations that needed representation in the federal government. This was changed by the 17th Amendment to the Constitution in 1913.
This change, along with several others generally and the rise of two party politics specifically, has reduced the insulation between government decisions and the people as engineered in the original Constitution. This sets up a situation where the majority in Congress can realize its tyranny on the minority.
Our country is undeniably polarized. Look at any Presidential election in the last 20 years...the winner is never separated from the loser by more than five percent, and often half that. Popular vote totals are often even closer than electoral vote counts. That should set up a situation where the middle ground is straddled closely, and little radical change in either direction occurs.
However, the exact opposite is true. When asked if people want federal bailouts, cap and trade legislation, or federalized healthcare, the results are usually close. Yet the current Congress, because there are a majority of one party, have been ramming through the most radical expressions of all of these ideas that they can conceive. Why? Because they have learned how to tyrannize the minority. This is not representation, it is an outright hijack of government to serve one group's agenda.
I don't have any illusions that things would be any less fair under Republicans (though I will say that things seem to be more civil when they are in charge), and that's the problem. The overall system is broken, and nearly half of the people in this country feel completely unrepresented and without a voice. This can only end badly. Like revolution badly, if people feel pushed hard enough.
I believe the answer is a return to original Constitutional principles, including scaling back federal power in line with the concepts of Federalism as designed in out system. Without that no citizen has any real protection from federal power. Even if you like what the government is doing right now, it is only a matter of time before that beast turns against you.
Over the years, the American Republic has been morphed from a representative form of government into a more direct, democratic one. For example, in the original Constitution, the House of Representatives was meant to represent the people of each state, and the Senate was designed to represent the state legislatures. The Senators were chosen by the state legislatures, not by direct vote of the residents of the states. This relates directly to the founders' concept of Federalism, and that the states were essentially sovereign nations that needed representation in the federal government. This was changed by the 17th Amendment to the Constitution in 1913.
This change, along with several others generally and the rise of two party politics specifically, has reduced the insulation between government decisions and the people as engineered in the original Constitution. This sets up a situation where the majority in Congress can realize its tyranny on the minority.
Our country is undeniably polarized. Look at any Presidential election in the last 20 years...the winner is never separated from the loser by more than five percent, and often half that. Popular vote totals are often even closer than electoral vote counts. That should set up a situation where the middle ground is straddled closely, and little radical change in either direction occurs.
However, the exact opposite is true. When asked if people want federal bailouts, cap and trade legislation, or federalized healthcare, the results are usually close. Yet the current Congress, because there are a majority of one party, have been ramming through the most radical expressions of all of these ideas that they can conceive. Why? Because they have learned how to tyrannize the minority. This is not representation, it is an outright hijack of government to serve one group's agenda.
I don't have any illusions that things would be any less fair under Republicans (though I will say that things seem to be more civil when they are in charge), and that's the problem. The overall system is broken, and nearly half of the people in this country feel completely unrepresented and without a voice. This can only end badly. Like revolution badly, if people feel pushed hard enough.
I believe the answer is a return to original Constitutional principles, including scaling back federal power in line with the concepts of Federalism as designed in out system. Without that no citizen has any real protection from federal power. Even if you like what the government is doing right now, it is only a matter of time before that beast turns against you.
Monday, July 6, 2009
The Massive Inflation of Our Money
I am not an economist, and I really don't want to be. It's dreadfully dull stuff, and my eyes start to defocus after about ten minutes of reading on the subject. Unfortunately it's something we all need to pay attention to, especially in the current depression. And yes, it is a depression.
Here is a link to a much more lucid explanation of the inflation of our money supply than I could ever write:
"How Much Money Inflation" by Howard S. Katz
The key in the above article is the fact that the money supply is larger than the Fed reports, due to the fact that banks (with the consent of the Fed) routinely "reclassify" deposits in order to remove them from the money supply. From Katz' article:
I have heard that the Fed plans to pull that money back out of the economy in order to "cool off" the economy before the huge inflation hits. However, that requires perfect timing, and nobody seems to be able to explain how contracting the money supply in an economy where the major problem is a lack of money for lending is going to "help" things. It seems that the Fed has locked itself into a Morton's Fork of either having huge inflation or a powerfully contracting economy, and neither is a good solution.
The real tragedy is that this dilemma was entirely preventable. By taking an interventionist attitude to the problems in the markets, the federal government seems determined to drive the economy off a cliff. An early determination to let the free market work and punish companies (including public companies like Fannie Mae and Freddie Mac) that were engaged in foolish speculation could have allowed the markets to recover quickly, albeit with some pain to investors. But the Fed's unwillingness to allow any pain in the economy has doomed us all to far more than we would have otherwise had to endure.
As a pilot, I like to make aviation analogies, and this is a perfect opportunity for one. When an airplane gets too slow the wings stall. This means the wings lose lift and cause the airplane to sink quickly and the nose of the plane will drop toward the ground. For a non-pilot, the natural reaction is to pull back on the stick to pull the nose up and stop the dive. However, this merely slows the plane more and deepens the stall, until it falls right into the ground. However, if back pressure on the stick is relaxed, the plane stays nose down for a bit and gains enough speed to start flying again. The pilot can then smoothly pull the plane out of the dive gracefully, losing minimal altitude.
The government is pulling back on that stick for all it's worth. As this economic stall becomes worse with each day, those in government act puzzled and mumble about how maybe just a little more back pressure will solve it. The complete lack of faith the government is showing toward market economics and the lessons of history is unfortunately causing those of us along for the ride to look out the window and remark, "gee, those trees down there sure are getting big fast..."
Here is a link to a much more lucid explanation of the inflation of our money supply than I could ever write:
"How Much Money Inflation" by Howard S. Katz
The key in the above article is the fact that the money supply is larger than the Fed reports, due to the fact that banks (with the consent of the Fed) routinely "reclassify" deposits in order to remove them from the money supply. From Katz' article:
So even though these deposits are payable as money, they are not counted in the money supply. When they are counted as they should be, Katz reveals that:This process of reclassifying bank demand deposits as time deposits is the fraudulent part of the new procedure. Despite the fact that both are called deposits, time deposits are fundamentally different from demand deposits as follows:
A demand deposit is money given to a (banking) institution that does not earn interest and can be withdrawn by the person who gives it (the depositor) whenever he wants (on demand).
A time deposit is money given to a (banking) institution that earns interest but cannot be withdrawn except after giving notice for a defined period of time (usually 90 days). A time deposit at a bank should be thought of as similar to a certificate of deposit. You can't get your money out for a certain period of time, but while it is there, it earns you interest.
Because of these differences, economists, for many centuries, have classified demand deposits as money but have said that time deposits are not money. A simple example will illustrate the point. Money is that economic good which can be used to buy things. Suppose you go to the store and see an item that you want. If you pull out your checkbook, which is a demand deposit, it will be accepted as money. But if you pull out your passbook to the savings account, then you will politely be told to take the passbook to the bank and get money for it. The passbook is not money (because of the time restriction on it), and you cannot buy things with it.
Calculating from the end of May 2008 to the end of May 2009, the US money supply has grown from $1.37 trillion to $2.34 trillion. This is an increase of 70%.So the money supply been inflated by 70% in one year. That reduces the purchasing power of a single dollar by 70%, as that many more dollars chase the same number of goods and services. Our prices have not reflected that yet because there is a lag as that extra money filters throughout the economy. Once that happens though, severe price inflation is inevitable.
I have heard that the Fed plans to pull that money back out of the economy in order to "cool off" the economy before the huge inflation hits. However, that requires perfect timing, and nobody seems to be able to explain how contracting the money supply in an economy where the major problem is a lack of money for lending is going to "help" things. It seems that the Fed has locked itself into a Morton's Fork of either having huge inflation or a powerfully contracting economy, and neither is a good solution.
The real tragedy is that this dilemma was entirely preventable. By taking an interventionist attitude to the problems in the markets, the federal government seems determined to drive the economy off a cliff. An early determination to let the free market work and punish companies (including public companies like Fannie Mae and Freddie Mac) that were engaged in foolish speculation could have allowed the markets to recover quickly, albeit with some pain to investors. But the Fed's unwillingness to allow any pain in the economy has doomed us all to far more than we would have otherwise had to endure.
As a pilot, I like to make aviation analogies, and this is a perfect opportunity for one. When an airplane gets too slow the wings stall. This means the wings lose lift and cause the airplane to sink quickly and the nose of the plane will drop toward the ground. For a non-pilot, the natural reaction is to pull back on the stick to pull the nose up and stop the dive. However, this merely slows the plane more and deepens the stall, until it falls right into the ground. However, if back pressure on the stick is relaxed, the plane stays nose down for a bit and gains enough speed to start flying again. The pilot can then smoothly pull the plane out of the dive gracefully, losing minimal altitude.
The government is pulling back on that stick for all it's worth. As this economic stall becomes worse with each day, those in government act puzzled and mumble about how maybe just a little more back pressure will solve it. The complete lack of faith the government is showing toward market economics and the lessons of history is unfortunately causing those of us along for the ride to look out the window and remark, "gee, those trees down there sure are getting big fast..."
Thursday, July 2, 2009
Why Animals Don't Have Rights
Ever since I heard of the concept of "animal rights," I knew that it was flawed and false. The problem was, I could never really say why I felt that way. Recently this came up with a friend of mine (he argued for, I against), and I was forced to try to articulate why animals don't have rights. I did a good job, and in fact by the end of the discussion my friend said "okay, that makes sense." I'm not sure he agreed with me, but he at least could not refute my logic, which is good enough for me. I'll attempt to reproduce and expand a bit on my reasoning here for you to use in your discussions.
First off, we have to define what we mean by "animal rights." Most proponents don't really have a firm grasp on this beyond a vague notion that animals should be respected as people are. While there are some that think that chimps should have voting rights (in spite of their inability to read a ballot) and all sorts of other insane notions, most animal rights activists stick to an idea that animals should be free to do as they please. In this view the animals should be as free as people to roam about and do their animal things unmolested and restrained by humans. After all, animals are organic creatures just like people and should therefore enjoy the same rights...
The problem here is that rights are not based on biology. If they were, we'd have to apply the equal protection clause of the Constitution to every petri dish full of virus cultures. After all, they are based on DNA just as we are, so they must have the same right to go about their viral business. This is on its face rather ridiculous; a virus is nothing but a protein coat surrounding a DNA core. It can't even reproduce without forcefully taking over the machinery of a host cell.
I have coined a term to describe what rights truly are based on, which is "reciprocal responsibility." What does that mean? Reciprocal responsibility means that you, as a holder of a particular right, are held responsible for respecting the similar and equal rights of others. You have a right to free speech, but you must respect both another's right to free speech, and must not misuse your right of free speech against another (in slander, for example). You have a right to keep and bear arms, but you must not infringe on another's right to bear arms, nor shall you use your arms in unjustified force against another. This is reciprocal responsibility. A violation of reciprocal responsibility opens you to criminal and civil liability. No right exists without this attending responsibility.
The problem with animal rights is that animals are incapable of recognizing and respecting reciprocal responsibility. If left completely free, animals would habitually engage in acts that would be criminal if performed by human beings. Bears and cougars would attack (assault) people. Dogs would defecate on (vandalize) people's lawns. A million other "criminal acts" would be perpetrated by animals, in violation of others' rights. This leads to one of two outcomes:
1) Humans and animals would necessarily have to have different standards of behavior. Acts against persons or property that would be criminal for humans, would be allowed for animals. In other words, animals would have superior rights to humans. We'd be constantly cleaning up after the criminality of animals, and would effectively be enslaved to creatures that didn't have a second thought to us and our rights (which undoubtably do exist). This is backward, to put it mildly.
2) To protect us from the criminal acts of animals, we'd have to imprison animals that "break the law." Since animals don't have the reasoning ability to make rational choices, most animals would eventually end up imprisoned for breaking the law. So we'd be locking up all these "freed" animals...how exactly does that respect their "rights?"
The concept of "animal rights" is an enviro-fantasy based on a misguided and ill-considered desire for animals to be happy. We have a responsibility to animals, not to mistreat them or cause them undue pain or suffering. There are, and should be, laws against animal cruelty. But to ascribe "rights" to animals goes against the concept of reciprocal responsibility which is inherent in the very definition of rights. Those who cannot respect rights cannot hold them...ergo, no rights for animals. Sorry PETA.
First off, we have to define what we mean by "animal rights." Most proponents don't really have a firm grasp on this beyond a vague notion that animals should be respected as people are. While there are some that think that chimps should have voting rights (in spite of their inability to read a ballot) and all sorts of other insane notions, most animal rights activists stick to an idea that animals should be free to do as they please. In this view the animals should be as free as people to roam about and do their animal things unmolested and restrained by humans. After all, animals are organic creatures just like people and should therefore enjoy the same rights...
The problem here is that rights are not based on biology. If they were, we'd have to apply the equal protection clause of the Constitution to every petri dish full of virus cultures. After all, they are based on DNA just as we are, so they must have the same right to go about their viral business. This is on its face rather ridiculous; a virus is nothing but a protein coat surrounding a DNA core. It can't even reproduce without forcefully taking over the machinery of a host cell.
I have coined a term to describe what rights truly are based on, which is "reciprocal responsibility." What does that mean? Reciprocal responsibility means that you, as a holder of a particular right, are held responsible for respecting the similar and equal rights of others. You have a right to free speech, but you must respect both another's right to free speech, and must not misuse your right of free speech against another (in slander, for example). You have a right to keep and bear arms, but you must not infringe on another's right to bear arms, nor shall you use your arms in unjustified force against another. This is reciprocal responsibility. A violation of reciprocal responsibility opens you to criminal and civil liability. No right exists without this attending responsibility.
A mountain lion asserted its "rights" to this man:
The problem with animal rights is that animals are incapable of recognizing and respecting reciprocal responsibility. If left completely free, animals would habitually engage in acts that would be criminal if performed by human beings. Bears and cougars would attack (assault) people. Dogs would defecate on (vandalize) people's lawns. A million other "criminal acts" would be perpetrated by animals, in violation of others' rights. This leads to one of two outcomes:
1) Humans and animals would necessarily have to have different standards of behavior. Acts against persons or property that would be criminal for humans, would be allowed for animals. In other words, animals would have superior rights to humans. We'd be constantly cleaning up after the criminality of animals, and would effectively be enslaved to creatures that didn't have a second thought to us and our rights (which undoubtably do exist). This is backward, to put it mildly.
2) To protect us from the criminal acts of animals, we'd have to imprison animals that "break the law." Since animals don't have the reasoning ability to make rational choices, most animals would eventually end up imprisoned for breaking the law. So we'd be locking up all these "freed" animals...how exactly does that respect their "rights?"
The concept of "animal rights" is an enviro-fantasy based on a misguided and ill-considered desire for animals to be happy. We have a responsibility to animals, not to mistreat them or cause them undue pain or suffering. There are, and should be, laws against animal cruelty. But to ascribe "rights" to animals goes against the concept of reciprocal responsibility which is inherent in the very definition of rights. Those who cannot respect rights cannot hold them...ergo, no rights for animals. Sorry PETA.
Friday, June 26, 2009
Living the Celebrity Lifestyle
Like many folks, I'm always amazed when I hear about big name celebrities who should have all the money in the world and yet go bankrupt. You kind of expect it from sports icons like Mike Tyson, but then there are real class acts like Ed McMahon (RIP) who have extremely lucrative careers spanning decades whose finances collapse as well. How does this happen?
I suspect that the answer lies in inertia. People get used to whatever situation they are in, and any change to that is unfamiliar and breeds resistance. In the case of celebrities and money, they get used to the "celebrity lifestyle," spending exorbitant sums on limousines, fine food and clothing, and expensive homes, vehicles, and toys. If their income does not continue to support these activities, then a larger and larger percentage of their income becomes consumed with merely maintaining the appearance of the celebrity lifestyle.
Mike Tyson's Former House:
Sadly, this problem is mirrored in our federal government. The political elite has become so used to the endless spending of their own celebrity lifestyle, that they simply can't imagine anything else. Let's look at it through a personal finance analogy...
A person has two types of income: "total income" and a "disposable income." In the case of the United States, the total income is essentially the GDP (Gross Domestic Product) -- the value of all the goods and services produced by the US economy in a single year. This number is currently estimated for 2008 at $14.33 trillion, a large number to be sure. Our "disposable income" can be thought of as tax revenue; this is the money not in use for the essential purposes of operating businesses, producing goods, keeping people fed, etc. Current federal tax revenue for the US is in the neighborhood of $2.66 trillion, or about 18.5% of GDP. This is probably a similar disposable to total income ratio to most households in the United States.
So with $2.66 trillion not needed to just keep the lights and heat on, our spending limits should be quite clear. Ideally we'd spend less than that so we could put some money aside for a rainy day, but of course that is not the case. The current federal budget is in the neighborhood of $2.9 trillion. Hmm. As you can see, we're already adding about 9% of our disposable income to our deficits each year. Like any household budget, there are three ways to deal with this: lower your spending, increase your income, or go into debt. Like any good celebrity we have chosen the last, in the form of treasury bond issues through the Federal Reserve.
But it's worse than that. The above just relates to the annual operational debt we are incurring, and does not include "unfunded liabilities." These are expenses analogous to mortgage and car notes for a family, ongoing longer term expenses that can't be dodged and for which we simply don't have the revenue. The two big offenders here are the Medicare and Social Security programs. How big are these liabilities? The numbers are a little vague because they depend on what period of time you look at and how rosy or grim your revenue projections are. But virtually nobody believes they are less than $50 trillion.
Let me repeat that. $50 trillion. 50,000,000,000,000 dollars. That is the equivalent of every dollar made in the United States economy for 3.5 years. And that is the minimum projection, some analysts see that number as closer to $100 trillion. It is obvious that the only way to financially survive this crushing debt is to go on a crash program of economic development and radical spending cuts. We need to cut up the credit cards and stop eating at the Four Seasons.
But Congress is addicted to the celebrity lifestyle, and the inertia of extravagant spending. So rather than grow the economy, Congress proposes "Cap and Trade" legislation, which amounts to a tax on economic development which trickles down to every person in the nation as higher energy prices and increased cost of all goods, since all goods require energy to produce. This is like quitting your high paying job and taking a lower paying job when you are snowed under in credit card bills.
Congress also wants to pass a new Universal Healthcare bill. The cost? Anywhere from one to two trillion dollars over ten years. In other words, increase annual spending, just on this one program, by up to ten percent. That's like taking out a loan for a new luxury home when you have an empty bank account and negative income.
Kingsmill Resort & Spa, Site of Congressional Retreat:
This cannot continue. I don't mean that in the moral sense, I mean it in the economic sense. As much as they would like to, Congress cannot repeal the laws of economics. We cannot keep printing money (the money supply has been doubled by the Fed/Treasury since Obama took office) and not devalue the currency. This angers our creditors, because the value of the bonds they hold is lessened. More importantly, it reduces the value of every dollar held by every American. Expect increased inflation soon, and some are predicting "hyperinflation" with rates of inflation going as high as 10% per month. This is not your father's economy (though it may be your grandfather's, if he lived through the Great Depression).
What to do? Well, currently cash is king. First get out of as much personal debt as possible, yesterday. Interest rates will continue rising, and personal debt will become an expensive anchor dragging you down. Second, keep as much cash reserve as you can. The markets are very volatile right now, so be conservative if you choose to stay in them. If the inflation rate really starts climbing, you might want to get out of the cash as well, and move into gold or silver. Once inflation gets high enough, cash value will erode fast enough that hanging on to dollars simply degrades your assets faster than having something of real value.
I wish I had better news, but since we are acting like celebrities we have to take up the celebrity mantra: "You have to pay if you want to play."
I suspect that the answer lies in inertia. People get used to whatever situation they are in, and any change to that is unfamiliar and breeds resistance. In the case of celebrities and money, they get used to the "celebrity lifestyle," spending exorbitant sums on limousines, fine food and clothing, and expensive homes, vehicles, and toys. If their income does not continue to support these activities, then a larger and larger percentage of their income becomes consumed with merely maintaining the appearance of the celebrity lifestyle.
Mike Tyson's Former House:
Sadly, this problem is mirrored in our federal government. The political elite has become so used to the endless spending of their own celebrity lifestyle, that they simply can't imagine anything else. Let's look at it through a personal finance analogy...
A person has two types of income: "total income" and a "disposable income." In the case of the United States, the total income is essentially the GDP (Gross Domestic Product) -- the value of all the goods and services produced by the US economy in a single year. This number is currently estimated for 2008 at $14.33 trillion, a large number to be sure. Our "disposable income" can be thought of as tax revenue; this is the money not in use for the essential purposes of operating businesses, producing goods, keeping people fed, etc. Current federal tax revenue for the US is in the neighborhood of $2.66 trillion, or about 18.5% of GDP. This is probably a similar disposable to total income ratio to most households in the United States.
So with $2.66 trillion not needed to just keep the lights and heat on, our spending limits should be quite clear. Ideally we'd spend less than that so we could put some money aside for a rainy day, but of course that is not the case. The current federal budget is in the neighborhood of $2.9 trillion. Hmm. As you can see, we're already adding about 9% of our disposable income to our deficits each year. Like any household budget, there are three ways to deal with this: lower your spending, increase your income, or go into debt. Like any good celebrity we have chosen the last, in the form of treasury bond issues through the Federal Reserve.
But it's worse than that. The above just relates to the annual operational debt we are incurring, and does not include "unfunded liabilities." These are expenses analogous to mortgage and car notes for a family, ongoing longer term expenses that can't be dodged and for which we simply don't have the revenue. The two big offenders here are the Medicare and Social Security programs. How big are these liabilities? The numbers are a little vague because they depend on what period of time you look at and how rosy or grim your revenue projections are. But virtually nobody believes they are less than $50 trillion.
Let me repeat that. $50 trillion. 50,000,000,000,000 dollars. That is the equivalent of every dollar made in the United States economy for 3.5 years. And that is the minimum projection, some analysts see that number as closer to $100 trillion. It is obvious that the only way to financially survive this crushing debt is to go on a crash program of economic development and radical spending cuts. We need to cut up the credit cards and stop eating at the Four Seasons.
But Congress is addicted to the celebrity lifestyle, and the inertia of extravagant spending. So rather than grow the economy, Congress proposes "Cap and Trade" legislation, which amounts to a tax on economic development which trickles down to every person in the nation as higher energy prices and increased cost of all goods, since all goods require energy to produce. This is like quitting your high paying job and taking a lower paying job when you are snowed under in credit card bills.
Congress also wants to pass a new Universal Healthcare bill. The cost? Anywhere from one to two trillion dollars over ten years. In other words, increase annual spending, just on this one program, by up to ten percent. That's like taking out a loan for a new luxury home when you have an empty bank account and negative income.
Kingsmill Resort & Spa, Site of Congressional Retreat:
This cannot continue. I don't mean that in the moral sense, I mean it in the economic sense. As much as they would like to, Congress cannot repeal the laws of economics. We cannot keep printing money (the money supply has been doubled by the Fed/Treasury since Obama took office) and not devalue the currency. This angers our creditors, because the value of the bonds they hold is lessened. More importantly, it reduces the value of every dollar held by every American. Expect increased inflation soon, and some are predicting "hyperinflation" with rates of inflation going as high as 10% per month. This is not your father's economy (though it may be your grandfather's, if he lived through the Great Depression).
What to do? Well, currently cash is king. First get out of as much personal debt as possible, yesterday. Interest rates will continue rising, and personal debt will become an expensive anchor dragging you down. Second, keep as much cash reserve as you can. The markets are very volatile right now, so be conservative if you choose to stay in them. If the inflation rate really starts climbing, you might want to get out of the cash as well, and move into gold or silver. Once inflation gets high enough, cash value will erode fast enough that hanging on to dollars simply degrades your assets faster than having something of real value.
I wish I had better news, but since we are acting like celebrities we have to take up the celebrity mantra: "You have to pay if you want to play."
Thursday, April 16, 2009
Tea Party Politics
It's been a long time since I posted anything here. I've been pretty burned out and depressed about politics the last several months, or at least too burned out to actually write about it. But that just seems to make me seething mad a lot...and that's not healthy!
I spent yesterday evening at the Atlanta Tea Party, and it was quite inspiring. The hoped-for crowd was about 10,000 people; the actual number attending is estimated at 15,000+ people. From what I saw, I definitely believe it, as there were people packed so tightly they could barely move as far as the eye could see. With very few exceptions the crowd was upbeat and friendly. I met many people there, and they all shared a love of liberty. Police report no arrests were made...that in itself is amazing; usually if you get that many people in one place, there will be one drunk idiot, or a fistfight, or something. We're peaceful, law-abiding common folk.
The amazing part of this gathering was it was not some political group organized by a large political group or party. This was a grass-roots movement all the way. In fact, it was even hard to find anything out about the Tea Parties unless you were paying attention and did your own research. The media did not cover it at all in the days and weeks leading up to the events, and only mentioned them briefly the day of the events. These are people that wanted to be there, not some ACORN-esque rent-a-mob.
Tea Parties are great, and serve to pull people together. The problem going forward, which is always the problem with independent-minded people, is how to sustain momentum. People are inherently lazy, and tend to take the path of least resistance. For example, I could not get ONE person to go to the Tea Party with me. My wife had a legitimate work commitment or she would have been there. My other liberty-minded friends all had mysteriously vague "other things to get done." I'm not faulting them, I'm just pointing out that it's always easier to do nothing than to do something. And that's how we got to this terrible point in our Republic's history.
As time passes, and the demands of getting things done becomes greater, more people fall by the wayside. They don't make time to attend more rallies, or write their representatives, or donate to the organizations that promote liberty, or talk to their friends and relatives about these issues. In the end the 5% that always carry the standard are left; the few that are really committed to this cause above all others keep things going, smoldering in the background. I'm guilty of this too. There is inertia to all of our lives, and it's hard to overcome it. But if things are going to really change, we'll have to find a way to overcome that resistance and move forward.
I don't know the exact answer here, but recognizing the problem is a good first step.
I spent yesterday evening at the Atlanta Tea Party, and it was quite inspiring. The hoped-for crowd was about 10,000 people; the actual number attending is estimated at 15,000+ people. From what I saw, I definitely believe it, as there were people packed so tightly they could barely move as far as the eye could see. With very few exceptions the crowd was upbeat and friendly. I met many people there, and they all shared a love of liberty. Police report no arrests were made...that in itself is amazing; usually if you get that many people in one place, there will be one drunk idiot, or a fistfight, or something. We're peaceful, law-abiding common folk.
The amazing part of this gathering was it was not some political group organized by a large political group or party. This was a grass-roots movement all the way. In fact, it was even hard to find anything out about the Tea Parties unless you were paying attention and did your own research. The media did not cover it at all in the days and weeks leading up to the events, and only mentioned them briefly the day of the events. These are people that wanted to be there, not some ACORN-esque rent-a-mob.
Tea Parties are great, and serve to pull people together. The problem going forward, which is always the problem with independent-minded people, is how to sustain momentum. People are inherently lazy, and tend to take the path of least resistance. For example, I could not get ONE person to go to the Tea Party with me. My wife had a legitimate work commitment or she would have been there. My other liberty-minded friends all had mysteriously vague "other things to get done." I'm not faulting them, I'm just pointing out that it's always easier to do nothing than to do something. And that's how we got to this terrible point in our Republic's history.
As time passes, and the demands of getting things done becomes greater, more people fall by the wayside. They don't make time to attend more rallies, or write their representatives, or donate to the organizations that promote liberty, or talk to their friends and relatives about these issues. In the end the 5% that always carry the standard are left; the few that are really committed to this cause above all others keep things going, smoldering in the background. I'm guilty of this too. There is inertia to all of our lives, and it's hard to overcome it. But if things are going to really change, we'll have to find a way to overcome that resistance and move forward.
I don't know the exact answer here, but recognizing the problem is a good first step.
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