This is Madness
Thursday, February 26, 2009 at 05:21PM Let’s be clear: the Bush Administration, together with the Democratic majority in Congress, steered the ship of state close to the reef. They created a record $488 billion deficit in 2008, and started the bailout madness by spending $350 billion to bail out the banks and loaning $25 billion to keep Detroit in business.
But it is the Obama Administration, together with the fools in that same Democratic Congress, that is about to dash the ship upon the rocks. We are, it seems likely, about to witness the end of our nation as we know it. We will never be the same.
After requesting the second $350 billion in TARP funds, Obama signed a stimulus bill packed with pork that will cost $1.1 trillion with interest. Democrats are about to send him another $410 billion spending bill with over 9000 distinct earmarks. He’s proposing $75 billion to bail out people who bought houses they couldn’t really afford. His budget includes another $750 billion for yet another stimulus package, $250 billion for additional bank bailouts, and $634 billion for the government takeover of the medical field. Meanwhile, it is currently projected that Detroit may require another $100 billion investment – and Obama has indicated that the companies will get it. General Motors today announced a fourth-quarter loss of $9.6 billion, amounting to $50,000 per hour. Can anyone doubt that additional bailouts would be throwing good money after bad?
The bottom line is that Obama's budget of $3.552 trillion will create a deficit of $1.75 trillion for the upcoming year. That’s an amount so large mere words cannot convey how much it represents. It’s 3.6 times last year’s record deficit. It’s a number so large that most calculators cannot process it. One might as well ask how many grains of sand exist on all the world’s beaches. That’s $5833 for every man, woman, and child in the country. And even Obama is projecting a deficit over $1 trillion for next year, as well. The overall budget spends $25,573.48 per taxpayer. Let that fact soak in for a minute.
And here is why this is so disastrous for our country.
The federal government gets revenue from three basic sources: taxes, loans, and the printing press.
Obama has already announced that there will be no tax increases for two years, conveniently putting off any electoral consequences until the year after the 2010 midterm elections. He promises that only families who make more than $250,000 per year will face tax increases at that point. During the election, Joe Biden was a bit more honest, saying that families with more than $75,000 would likely face increases. Starting in 2011, there will be nearly $1 trillion in tax increases.
Until that new revenue begins to arrive, the federal government will have to hope that foreign governments continue to loan the United States money by buying Treasury bonds. In anticipation of this, the Treasury has been ramping up the auction of treasury bonds. Secretary of State Clinton spent part of last week in China, practically begging them to continue buying our debt.
There are two primary difficulties with this approach. First, the Chinese and other foreign governments are facing their own financial difficulties, and may not have the money to spare to buy that debt even assuming they want it. Second, and more ominously, these people are not stupid. When you live beyond your means, to the point that you are spending twice as much as you bring home in your paycheck, what does your credit card company do? They raise your rates and eventually stop giving you credit.
Interest on our debt currently amounts to 9% of the federal budget. Nearly ten cents of every dollar spent by the federal government goes to pay those foreign governments holding our debt. If those governments demand higher rates to compensate the higher credit risk - this is already happening - that 9% will rise, to 10%, to 11%, to 12%, and so on. That obviously will have a dire impact on the government’s ability to pay for all of these old and new entitlement programs, to which we’ve all become accustomed. The government will likely just roll that higher interest payment into an ever-larger deficit, which will leave the foreign governments with just one option: to stop buying the debt altogether.
If and when that happens, that will leave the federal government with just one way to pay its bills: to turn up the printing presses and simply make the money. The consequence of just printing the money is that the flood of new money dilutes the value of the money already floating through the economy. The money in your wallet is worth less when you wake up than it was worth when you went to sleep. This is the very definition of inflation, and it discourages investment and savings. Why save for your retirement when the money is worth less every day? Wages and prices will skyrocket to compensate – putting nearly everyone above the Obama Administration’s definition of wealthy and making nearly everyone subject to the increased tax rates. Banks that made loans at 5% interest rates, facing inflation in the 15-20% range, will go under unless the federal government compounds the problem by bailing them out with freshly-printed notes. Crushed by debt, more and more industries will beg the government to help to avoid collapse. The money the government gives them will have to be simply printed, making the root problem worse. This situation, when it happens, tends to feed upon itself.
The whole economy is in severe danger of spiraling downward in an orgy of inflation-fueled government spending. The only answer is to take our medicine, to stop spending the money, to let these companies go under, and to shrink the federal government back to its constitutional boundaries. If we did this, if we followed that path, we would have a difficult year or two and would begin to recover. Life would go on, and when it was all said and done America would be a better country for the restoration of fiscal common sense.
Unfortunately, out of what can be nothing but willful ignorance, President Obama and the Democratic Congress seems determined to plummet our nation into painful bankruptcy. To see what that future looks like, to see where this path leads, google “hyperinflation.”
See the images of Germans burning worthless money to heat their homes, and carrying wheelbarrows of cash to buy a loaf of bread. Look at what’s happening in Zimbabwe right now, facing an inflation rate of 69.7 sextillion percent per year. Prices there are increasing at a factor of 200 per week. Consider that this has happened in Argentina, in Bolivia, in Israel, in Brazil, in Greece – where prices at one point were doubling every 24 hours. This has happened dozens of times in dozens of places, and in every case the primary cause was turning on the printing presses to make up for government overspending.
Anyone who pretends that this cannot happen here is either in denial or is an arrogant fool. It’s a long way from here to there, but that’s where the winding Obama road eventually leads: an impoverished America, bereft of opportunity and drowning in worthless currency. And when your president has an unhappy habit of saying, “We won, so get out of the way,” well, there’s not a lot anyone can do to change the road. We’re just along for the ride, for at least the next four years, whether we like the view or not.
Speaking as a small business owner, this is a terrifying time in the private sector, trying to create jobs and build businesses. Judging from the 47% drop in the Dow since election day, others would seem to agree. Hold on, it’s going to be a bumpy ride.
http://www.bloomberg.com/apps/news?pid=20601087&sid=abOXicKiKopU&refer=worldwide
http://www.foxbusiness.com/story/markets/industries/industrials/bailout-detroit-auto-makers-cost-b-plus/ http://www.businessweek.com/bwdaily/dnflash/content/feb2009/db20090226_430413.htm?chan=top+news_top+news+index+-+temp_top+story
http://www.politico.com/news/stories/0209/19365.html
http://www.breitbart.com/article.php?id=D96JCFLG1&show_article=1
http://blogs.abcnews.com/politicalpunch/2009/02/obamas-budget-a.html

