411 Renaissance

Dickens Redux – Ghost of the Grinch

May 25th, 2010

Dickens Redux – Ghost of the Grinch

Britain is Our Future Unless….
To say that the American public is disenchanted with its political leadership is the understatement of the decade.   If you doubt this, check in at the Rasmussen polling organization (http://www.rasmussenreports.com) where reliable numbers have been consistently telling us that.  

For example, today our president’s disapproval rating is 56% and has not been below 50% since 11-16-09.  The Congress fares even worse.  What is the percentage of Americans who do not think the congress knows what it’s doing with respect to the economy?  72%.  What is the percentage of Americans who now favor repeal of the president’s health care plan?  63%. 

The popular outrage and distrust is not the result of some irresponsible demagoguery.  Quite to the contrary:  Uniquely armed with actual information, these Americans have bypassed the demagogues, gotten to the raw data and have noticed something that the emperors have tried to hide, camouflage and explain away.  Here’s the dirty little non-secret — We cannot afford to fund the ambitious agendas of modern liberal government.   The game is up.

A back of the envelope snapshot of the state of 2010 federal spending compared to actual revenue quickly reveals that 20 of every 100 dollars spent by the deferral government is borrowed.  Further, the total national debt (remember – it grows with each annual deficit) expressed as a percentage of our nation’s total domestic product is almost 60% and trending rapidly to 100%. 

The current national debt is about 12.9 trillion (http://www.federalbudget.com/), while the 2010 current federal budget, including the part relying on borrowed money, is only about 3.6 trillion. 

This means that the US federal government already owes more that 3.58 times as much as it spends in one year.  And that is almost 60% of what all of us, individually and corporately make in a year (which, crudely speaking, is what is meant by the GNP).

This isn’t just our situation.  Greece, Portugal, Spain, Ireland, Britain, France and the USA are lined up in a failure chain.   The iron laws of economics are presenting to each of these sovereign states only two choices: 

Total economic collapse or

A deeply unpopular total retreat from their toxic borrowing addiction.  

The illusion that we – or anyone else – can continue to borrow, while continuing to suck capital out of the private sector and just “grow our way” out of this mess, has now graduated to the status of full-on delusion.

Our British friends are like the ghost of a bleak Christmas future in the Dickens novel.  That is our future…unless….

The American people now host a plurality of citizens, a nominal majority that I will call the Tea Party Plus group.  These are the informed citizens who have figured out our essential situation ahead of the politicians.  Our government’s thirty year borrowing binge is now exposed as a Madoff Ponzi scheme writ large, one that will lead inexorably to a brutal correction. 

For the grim details, you might start your research with these links.

http://www.heritage.org/budgetchartbook/federal-spending

http://www.heritage.org/budgetchartbook/federal-revenue

http://www.heritage.org/budgetchartbook/contents

THIS IS WHY NO SINGLE LEADER HAS EMERGED FROM THE TEA PARTY MOVEMENT. 

 

“You need someone to say, ‘I will do the right thing and everyone will hate me.’ ”

New York Times

Business Page

In Europe, Britain May Face Largest Debt Hurdle

By Landon Thomas Jr. 

Published: May 24, 2010

“Prime Minister David Cameron has talked boldly of closing a British budget deficit now equal to 11 percent of its gross domestic product. But he also has said that he will allow health spending to outpace inflation, continuing a trend started by the Labour government that has doubled the cost of the government’s elephantine National Health Service since 2000. [My emphasis added.]

“’You need a martyr to cut this type of deficit,’ said Andrew Lilico, chief economist at Policy Exchange, a right-leaning London research group, who has argued that quick and immediate spending cuts would actually hasten economic recovery rather than derail it.

‘You need someone to say, I will do the right thing and everyone will hate me. ‘”

“In a recent report, the International Monetary Fund warned that the countries that would have to make the biggest sacrifices in spending cuts and tax increases to return to pre-crisis levels of indebtedness — Britain, France, Ireland, Spain and the United States — also face the biggest increase in spending demands. These are driven by the rising number of the elderly, thus making the cuts all the harder to impose.”

Copyright 2010, the New York Times

Link to the full piece: http://www.nytimes.com/2010/05/25/business/global/25debt.html?ref=todayspaper

Are we Americans different than the Europeans?  We are not.  Moreover, we cannot be bailed out.

http://www.usgovernmentspending.com/

THE STRUCTURAL PROBLEMS

 

It all boils down to this.  Any viable working social order requires that the great majority of able adults need to be economically productive. 

 

When well-meaning social programs multiply, they get to a certain critical mass; programs become parasitical in effect and ultimately toxic in outcome. 

A minority of highly productive individuals cannot and ultimately will not support all the rest. 

Here are some of the key elements: Labor union contracts, bureaucratic employment rules, generous benefits for able bodied non-productive persons, defined benefit, underfunded pensions, political feedback loops between benefited groups and vote-buying politicians; all these forces and more have conspired to create a rigid politically tangled economic system.  

 

Perversely, one could not have set out to design a system more resistant to rational corrective change.  As a result, a catastrophic crash followed by social unrest becomes increasingly likely.  Greek riots in LA?

 

This is not to say that our hallowed social benefit systems were not  inspired by well meaning policy objectives.  It’s just that there are real world limits.  How far can any set of politicians take us into the brave new world of the cost-free entitlement society?  We now have our answer.  We’ve already gone a bridge too far.

The BP uncapped oil spill is a metaphor for the current administration’s paralysis during a dire period of fiscal hemorrhage.   We were already deep in trouble before the new well was drilled.  Capping that gusher will be as difficult and as necessary as reversing this administration’s fiscally irresponsible programs-in-place.  

It is also a metaphor for our economic recovery.  To the extent that America is able to emerge whole from our under-water indebtedness, it will be due to the buoyancy of our private sector business communities.  At the moment, they are underfunded, and deeply anchored to a government that still thinks it can operate at great depths.  

I am reminded of a recent conversation between a highly placed Chinese official and an American entrepreneur.  Reportedly, this was a Chinese official  (who will remained  unnamed here-  he is known for his aggressive role in unleashing the business community).  He asked the American (in light of the Obama administration’s recent policies) , “So how do you like life under communism?”

You can’t make this stuff up.

Jay B Gaskill

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