Intro

It's time for a reality check ...

Maybe we’ve reached the point of diminishing astonishment.

But I suspect that much of what we’re hammered with every day really doesn’t make much of an impact on most of us anymore. We’ve heard the same stories too often. We’ve been exposed to the same issues for so long without any meaningful resolution. We recognize that reality is rapidly becoming malleable, primarily in the hands of whoever has the biggest microphone. How else can we explain a society where myth asserts itself as reality, based entirely how many hits it gets online?

We know that many of the “issues” as defined are pure crapola, hyped by politicians on both sides pandering to “the will of the people,” which is still more crapola. Inevitably, it’s not the will of all the people they reflect, but the will of relatively small groups of people with disproportionate political influence.

Nobody wants to face up to the realities of the issues. Nobody wants to say what’s right or wrong – even when it’s obvious and there are numbers to back it up. Most of us are afraid to bring up the realities for fear of being accused of being insensitive or downright mean.

So we say nothing. Until now.

It’s time for a reality check on the fundamentals – much of which is common knowledge to many of us, already. But it might be comforting to know you are not alone …

Monday, April 28, 2014

Monopoly money

A million bucks is still a lot of money to most of us; not so much to others it seems. 

If you think anything under a fifty million bucks is not a lot of money, you’re probably in government or trying to get money from the government. If you routinely talk in terms of billions and trillions, you’re definitely in government.

The bigger the numbers get, and the more we hear them, the more desensitized to their magnitude we become.  It’s hard to comprehend a billion dollars – think of it as 1,000 stacks of $1 million each.  Yet we spent more than $800 billion – 800,000 of those stacks, or about $2500 for every man, woman and child in this country – in a “stimulus” program that accomplished very little. 

Almost nobody blinked.  $800 billion just appeared.  And was gone.  Just like that. 

Now, I don’t remember anybody passing the hat and telling every person to put in $2500.   I don’t remember a special assessment, or a telethon to cover the cost. 

So where did that money come from? Did our government pull it out of some secret stash it’s just sitting on for times like that? If so, how big is that stash?  Who refills it? 

Is there a secret government gold and diamond mine or hush-hush alchemy project in Area 51 that produces a never-ending stream of riches?

You might think so, given our politicians’ cavalier attitude about spending.  The public seems to believe there’s an endless supply of money, too, given their constant clamor for more government spending on everything from bike paths to beach restoration to bail outs on bad mortgages. 

Government money is increasingly seen as “free” money for the taking; it’s from the government, after all, so who is counting?  What’s a billion here or there?  It’s not even a rounding error in a trillion-dollar budget.  Consequently, spending or wasting only millions is much less important. 

When Obama and his entourage went to Africa it was estimated that trip cost taxpayers $100 million; the family vacation in Hawaii was a relative bargain at about $16 million. The “date night” to New York in his first term was a paltry $12 million.

For reference, each hour flying on Air Force One costs more than $288,000, so round trip air fare for one plane to Hawaii was more than $8 million, alone. When Michelle took the girls and their friends on that little jaunt to Spain for shopping and then dining at a great five-star restaurant, figure travel time at about 12 hours each way, so round trip cost us about $7 million just for air fare.

Now Obama supporters and Democrats in general are quick to point out that these aren’t out of line with costs during the Bush administration. Or what Bush trips and family vacations cost when W was in office. They are correct.

However, that somewhat proves my point:  the amount of money being spent by politicians and government is no longer “real,” and hasn’t been for years.  That’s communicated to the general public every day.  It’s hard to convince voters we’re in dire financial straits – which we most certainly are – when politicians waste hundreds of millions on themselves and other stupid stuff all the time.   

When the media breathlessly reports on the globe-trotting Obama family, and the nightly news covers every fundraising stop using Air Force One, you almost never hear what those trips cost taxpayers. That’s because the perception is that those trips are essentially “free” since they are paid for with government money and use government staff and aircraft. 

As one former Secretary of State would say:  “What difference does it make?”    

It’s easy to see how the government is perceived as an ATM with no limits.  Instead of popping out 20s, it pops out millions, billions even, and it never seems to be out of money or out of service. 

It’s also not surprising that there are always beggars hanging out by the government ATM.  They’re not in tattered rags but often in expensive suits. There’s a fair mix of blue jeans, Birkenstocks, dashikis, Dickies workwear, and orthopedic shoes, too. Everybody has their hand out.  Everybody wants to show they are more needy – or deserving – than the next beggar in line.  

Homeowners with bad mortgages.  Students with big loans. Failing businesses and banks.  Public school systems.  Poorly managed cities and states.  Bankrupt pension funds.  Advocates for the homeless, the hungry, the disabled, the elderly, and the “working poor.” 

Everybody wants – no, demands – their “fair share” of government money.  They see government spending millions and billions on all kinds of other stuff, why shouldn’t they get some, too? 

Everybody feels entitled.  Our government has a hand in this.  It keeps growing the number of those eligible for subsidies and credits. It’s also paying out more and more to those deemed “victims” of one thing or another, whether or not it’s actually at fault.      

I know this is going to seem cold and cruel, but it didn’t make any sense to have the government give millions to victims of the 911 attacks.  The government didn’t have anything to do with their deaths.  As compassionate as it seemed at the time, it set a terrible and stupid precedent.

Then, to add insult to ingratitude, a lot of the survivors’ families claimed the government didn’t give them enough. They demanded more. 

Every time there’s a tragedy now, people expect government to start handing out cash to the “victims.”  It makes no difference whether it was an act of terror or simply the result of a stupid personal decision, people expect the government to step in.

That sends the wrong signal and reinforces the belief that there’s infinite money on the table.  Give us a good story and you can have some.  Break our hearts and we’ll give you more.  Show us pictures of your kids and the sky’s the limit. There’s always more government money available. 

And government aggressively promotes that by encouraging people to sign up for free this or reduced cost that, all courtesy of your rich Uncle Sam.  It’s small wonder that many Americans don’t – or won’t – accept the fact that we’re in deep financial trouble as a country. 

All anyone can see is that there’s always more money. 

The public doesn't seem to notice the gradual, yet very real, loss of purchasing power of their dollars.  Sure, they see prices go up on a lot of things, but politicians tell them that’s somebody else’s fault.  Or not to worry because they'll get a subsidy to help pay those higher costs. 

Nobody in government – regardless of party – wants to deal with the real issue.  They’re afraid it’s too complicated, and too unnerving, for the general public.  In truth, it’s also because there’s no easy way out now, no magic formula, no “politically viable” way to explain it without admitting complicity.  Better to pretend that things will somehow work out. 

Meanwhile, the public is oblivious to the fact that easy money pumped out by the government by the billions for every pork project, crackpot social engineering scheme, subsidy and tax break, and to pay interest on our ever-expanding debt, is diluting the value of every dollar. Between exempting people from paying taxes and/or giving them money to offset the cost of something they should be paying for themselves, it’s all less money coming in and more going out. 

When you’re spending too much and taking in too little, you can’t simply borrow and print your way out of the mess you’re in.  No country has ever been successful doing that.  Sooner or later you run out of other peoples’ money and nobody wants to hold your currency. 

You also can’t tax your way out.  At some level, higher taxes suppress economic growth and reduce overall tax revenue.  Plus, really rich people can just leave and avoid your taxes altogether. 

There’s a simple economic truism:  Print too many dollars and each dollar is worth less. It makes no difference whether you’re printing more dollars for a good cause, to repay loans, to stimulate the economy, to bail out an industry or group of debtors  or whatever; the net effect is the same:  more dollars in circulation = less purchasing power for each dollar = ultimately higher prices all around.

Forget all the Keynesian crap and wonkish talk about “increasing the money supply” and “multiplier effects” of government spending.  That’s all misdirection. 

The fact is, our government spends much more than it takes in in taxes and fees. To cover the shortfall it sells interest-bearing securities – in effect a mortgage on future government revenues – to investors here and to foreign investors like China. It also sells these and similar IOUs to itself to offset what politicians continue to loot from Social Security and other “guaranteed” funds. So a lot of “reserves” are really just paper promising that the government will pay itself back at some time in the future. 

And it prints more money.   And issues more securities  

That’s what’s going on right now.

It’s a house of cards and everyone in government knows it, from the President on down.  Congress knows it.  Most financial-beat reporters in the media know it.. 

Yet everybody keeps acting like it’s no big deal. 

It is a big deal.  Both parties are at fault.  So is the American public whose never-ending demand for its “fair share” off government money is based on the mistaken – and dangerous – belief that there are always more billions stashed away somewhere.

There aren’t. 

The debt the government is accumulating is real.  The IOUs it’s floating are not.

At some point it will come to a head.  Someone will have to tell the public the party is over. 

Even if we took the entire assets of the wealthy in this country it wouldn’t make a dent in the deficit of $16 trillion, which is a number so large it’s hard to imagine.

So think of it this way:  In a country of 320 million people, that’s $50,000 – in today’s dollars – for every man, woman and child. 

That’s real money. 


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