[The strength of America and the US Dollar in prior decades created strong demand for foreign investment in US Treasury bonds. This flood of dollars was like giving Congress a pre-approved, no-limit international credit card. Congress (under both parties) went on a 30-year spending binge on this international credit card, doling out projects for their local districts and favors to special interest groups. States, local governments and special interest groups developed an addiction to “free government money” ignoring the cost of such deficit spending on future generations. The demand for “free government money” allowed politicians to “sell” favors for campaign cash enabling them to retain the power their office to dispense even more favors for more campaign cash. With a national debt now in excess of $13 Trillion and unfunded government liabilities in excess of $104 Trillion, the 30-year party is coming to an end and, despite the hangover, it is time to pay the tab at the very time that our foreign creditors are revoking the international credit card (i.e. refusing to buy long-term US Treasury debt). So, how does the United States service a $13 Trillion debt and $100 Trillion of unfunded liabilities? More debt will tend to breed economy-killing higher interest rates. Higher taxes will tend to stall a fragile economy. Therefore, the federal government is using “the hidden tax” of inflation to pay its debts with devalued dollars. In 2009 alone, the Federal Reserve created nearly $1.5 Trillion new dollars out of thin air. History, and common sense, attest that this strategy ends badly. What Utahns, and our local and state governments to do? We need to be More Like Us – more like the Americans who laid the foundations of this great nation. “With a firm reliance on the protection of Divine Providence”, we can, as we must, “secure the blessings of liberty to ourselves and our posterity” and reject federal government overreaching of the few and limited constitutional powers delegated to it with the lure of “free government money” and the enslaving strings that come with it.]
In the late 1980s, Japan was widely perceived as the new model of economic prosperity. Books on the keys to Japan’s success flooded bookstores. Pundits proclaimed that the secret to succeeding in business was to be more like the Japanese. During this period of fervor to be more like the Japanese, James Fallows wrote a book called More Like Us. The premise of his book was simply that we did not need to be more like the Japanese to find success; we needed to be more like us – more like the Americans who created the greatest economic engine the world has ever known.
Today we face a unfathomable black hole of government debt and unfunded obligations in excess of $100 Trillion. Our federal government is currently overspending each year by well in excess of $1 Trillion. — Do you realize it would you take nearly 32,000 years to count one trillion dollars? — Not only have we amassed such enormous debt, but the average maturity on the national debt is less than three years. The U.S. Government has become the ultimate subprime borrower. And, now there is the growing drumbeat of our foreign creditors (that aren’t facing their own debt crises) pulling away from the dollar, from lending us more money. In other words, the world has come to the realization that our federal government is essentially comprised of a bunch of economic crack addicts, so they are cutting up the international credit card.
It Doesn’t Grow on Trees?
Over the last 30 years, the United States has gone from the world’s largest creditor nation to the largest national debtor the world has ever seen. As with many things, our success is becoming our downfall. Because the “full faith and credit” of the United States was deemed in many ways better (and easier to use) than gold, foreign nations with excess dollars were more than happy to park their dollars in U.S. Treasury bonds, the debt instruments sold by the U.S. Because there was a large appetite for U.S. Treasury bonds from foreign nations with trade surplus cash, it was as if the world gave Congress an unlimited international platinum credit card.
Think of the political possibilities; politicians could make, and fulfill, campaign promises to constituents and interest groups without incurring the political backlash from having to raise taxes or cut spending: they simply charged up the international credit card. Wars, bridges to nowhere, extended unemployment benefits, airports named after congressmen; nothing was too ostentatious for the no-limit international credit card. And, it was so easy to use. The generation who would have to foot the bill on the international credit card had not even been born when the spending binge began and they would not be old enough to understand what was happening to them and have the fortitude to complain about it, or vote in significant numbers, for at least two decades. It would certainly be someone else’s responsibility by then.
Were there no guardians keeping watch for these future generations who could see that there is no such thing as an unlimited credit card that never has to be paid back? Unfortunately, the vast majority of the watchmen were sucked into the “free money” free-for-all. Unfortunately, it appears that no one in positions of power remembered the adage of Benjamin Franklin: “think what you do when you run in debt, you give another power over your liberty”? Or, the warning from Thomas Jefferson that “the principle of spending money to be paid by posterity in the name of funding, is but swindling futurity on a large scale“?
Perpetual Motion Machine of Deficit Spending
Even the most conservatively governed cities, towns, counties and states began to see federal “free money” from the international credit card pouring into their neighboring communities in the form of parks, senior centers, development grants, public safety grants, etc. Even the most conservatively governed cities, towns, counties, and states lost sight of the fact that there really is “no free lunch” in the rush to get their fair share of “free government money” without any thought that there may be a cost to them or their community someday. Understandably, even the most conservative local governments began proposing all manner of creatively devised projects and proposals to get more “free government money” than their neighboring communities. Mayors and governors would boast of their ability to land “free government money” for their community. “Success” as a local government became defined in large measure by who could get the most “free government money” for the most imaginative projects. In short, nearly everyone was sucked into a biggest-pig-at-the-trough contest with no regard for any potential future cost.
Federal politicians were only all too happy to oblige the artificial demand that they created for government handouts. The more they could deliver to their district, or to the highest bidding interest group, the more money they could amass for their re-election war chest, or for their own personal gain (properly laundered, of course). Think of the politician who enters “public service” with modest means and retires from this career years later a multi-gazillionaire. Government favors and dispensations of law were traded for power, influence and gain. But, as long as enough “free government money” kept flowing to the district, most local officials thought best to not bite the hand that was feeding them because they too could pass on the favors and dispensations to their constituents. Bit by bit, right by right, power by power, the federal government ran roughshod over the few and limited powers delegated to it by the states and the people under the Constitution. Few were the wiser.
Time to Pay for the Drunken Binge
But all parties come to an end sometime. The euphoric stupor fades, giving way to the hung-over awakening to the Monday morning alarm clock and the realization that the several rounds of free drinks for the house ended up on your credit card for which your children are co-signers.
How does one begin to pay a One Hundred Trillion Dollar debt? Where does the money come from? Can’t we just head back to the bar mid-Monday morning and drown away the awful emerging reality for as long as it takes in more deficit spending? We all know the answer.
Debt + More Debt = Disaster
Delusional debt got us into this mess. More of the same will not get us out. As our largest foreign creditors make good on their warnings of the past two years to stop lending us more money to blow, the cost of attracting other nations to buy our debt will necessarily result in higher interest rates. High interest rates will have the effect of snuffing the life out of a fragile, consumer-driven economy. This is especially so when the consumers, already loaded with debt, have lost $20 Trillion of real estate equity, foreclosures and bankruptcy filings are rampant, more than 40 Million Americans are on Food Stamps, and unemployment is persistently high. Besides, just as more booze for the alcoholic is not the way to get sober, more debt for the habitually indebted will not make the $100 Trillion debt monster go away either.
Live Within My What . . .?
Maybe, the federal government could try spending less than they take in and use the surplus to pay down the debt. Given the fact that drinking the water in D.C. tends to genetically convert the DNA of even the most conservative of politicians into budget dyslexics, this appears unlikely. Let’s see, at the current rate of overspending more than $1.5 Trillion per year than the government takes in, and considering that tax revenues are trending down by nearly 20% year over year, it would take approximately infinity, and beyond, to pay down the debt. In fact, assuming the government could somehow spend less than it receives and apply the balance to pay off the debt and unfunded obligations at the rate of $100 million per day, every day starting right now, it would take nearly 3,500 years to pay off the total government debt and obligations but only if there were no new government spending, no new social programs, no new wars, no new economic disasters or bailouts, and no new deficits in the meantime. It would take more than 356 years to pay off just the $13 Trillion direct debt (without interest!) at the rate of $100 Million per day. Knowing this, why would Congress now stomp the debt/spending accelerator pedal to the floor instead of beginning right now to at least balance the budget and pay something, anything toward retiring the debt?
Hide The Tax: Inflation
Besides, Congress, ever anxious to appease their money-grubbing groupies, seem predisposed to tax their way out of any remotely difficult problem. This might have worked had they sought to pay off the balance on the international credit card long before the default rates and penalties kicked in. Given the shear magnitude of the problem now, this approach will result in nothing more than killing the goose in a frantic search for enough golden eggs. Besides, the safest budgetary game in Washington is called “Hide The Tax.”
The Hide The Tax game takes many forms (obscure penalties, fees, formulas, etc.). But, the most effective of all is “the hidden tax of inflation”. Inflation is not just rising prices. Rising prices are a symptom of too much money in the system. Too much money in the system happens when the Federal Reserve Bank (which is not federal, has no reserves and is not really a bank) creates new money out of thin air and buys U.S. Treasury bonds because our foreign creditors refuse to do so (remember, they are cutting up the no-limit international platinum card because they know an unrepentant shopaholic when they see one). The government then uses this newly created money for more spending and to pay current debts and obligations coming due with worth-less dollars.
Here’s just part of the cost of inflation: in just the last 90 days of 2009, 10% of every dollar you had saved or earned has been taken from you through the government and the Federal Reserve inflating the money supply. Through their money printing they have taken the value of more than one-third of every dollar you saved or earned in the last ten years. It’s really just like they have reached into your bank account or 401(k) in the dark of the night and crept away with the loot unawares. And they seem to be just getting warmed up at this point.
Think about this for a minute. Printing money out of nothing, for just the cost of the paper and the ink (or more often electronically) reduces the value of every other dollar in circulation. In 2009 alone, the Fed and the federal government have increased the money supply by more than 120%. To illustrate, suppose there were only 1,000 dollars in existence, and you have 10 of them, which will buy 10 apples. Then, 1,200 new dollars are added to the system out of nothing, and you still have 10 dollars. The nature and intrinsic value of the apples hasn’t changed but the value of the dollars has been diluted so that now your ten dollars will only buy four and half apples. You just lost 55% of the purchasing power value of your ten dollars.
For now, this newly printed money has been largely sent overseas to our foreign creditors or is being held in the vaults of bailed out banks as reserves. A crisis of the smallest degree (war, food shortage, greater loss of confidence in the dollar) will tend to create a stampede to turn worth-less dollars into tangible assets. When a massive amount of dollars, including newly printed dollars, begin chasing a limited supply of tangible assets, prices will rise, perhaps sharply, where it eventually might take a million devalued dollars to buy a loaf of bread. This is known as hyperinflation and it is exactly what happened when Germany tried to print their way out of their WWI debts and obligations. John Maynard Keynes, the go-to authority these days for government spending addicts, said it all 79 years ago: “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”
We know that the first step to recovery for any out-of-control addiction is recognizing there is a serious problem.
More Like Us
You can almost hear the response from those who haven’t yet realized the spending party is coming to an end: “Wow! What a party-pooper, dude!” Is there no way out? Of course there is. As Ronald Reagan said more than 45 years ago, “there are no easy answers, but there are simple ones.” We know the answers for an out-of-control deficit spending addiction by a power drunk federal government. They are the same simple answers we fall back on in our homes and our lives everyday. Stop the out-of-control spending now! Start cutting all non-essential spending now! Stop looking to the federal government as a source of “free government money” now! Stand tall as state governments and send an unequivocal message to the federal government you are restoring the balance of federalism now! Start preparing to care for the essential government services for the citizens of states and local governments, without reliance on “free government money” now! Invest our limited resources (time, talent and funds) in preparing the next generation to be productive, responsible and honorable citizens now! In short, the simple answer is that we need to be More Like Us – more like the Americans who secured the blessings of liberty for us. Our responsibility, our “rendezvous with destiny”, is to do all in our power to “secure the blessings of liberty to . . . our posterity.”
The greatest single statement on the rights of man for self-governance, the Declaration of Independence, proclaims that we are “endowed by our Creator with certain unalienable rights, among these are life, liberty, and the pursuit of happiness.” By operation of the “laws of Nature and Nature’s God”, we have been given power to exercise our unalienable rights to work, to prosper, to fail, and to try again. If we accept anew the truth that a Creator endows us with unalienable rights, we must also accept that we will ultimately render an accounting to this Creator for the manner in which we make use of our unalienable rights, particularly with respect to our fellow created beings. It was this sense of ultimate accountability that led our forefathers to join together as neighbors to build the first libraries and hospitals and fire departments. Recognizing the unalienable powers inherent within themselves, they did not plead for favors and dispensations from government. They acted collectively, of their own will, to improve the lot of men around them.
It was these same founding fathers who stood for the liberty of their posterity, at the very peril of their lives, their fortunes and their sacred honor, against the most domineering governing force on earth in their day; who with ragtag bands mounted a miraculous revolution against the best trained, most well-equipped military power then known to man. How were they able to prevail against such impossible odds?
Jefferson tells us that it was “with a firm reliance on the protection of Divine Providence” that they had the fortitude to “mutually pledge to each other our lives, our fortunes and our sacred honor.” It was this firm reliance on the protection of Divine Providence that led Washington on through defeat, after embarrassment, after tragedy, to the ultimate and miraculous revolutionary victory. The father of this nation acknowledged the source of their deliverance from tyranny as follows: “I am sure that never was a people, who had more reason to acknowledge a Divine interposition in their affairs, than those of the United States; and I should be pained to believe that they have forgotten that agency, which was so often manifested during our Revolution, or that they failed to consider the omnipotence of that God who is alone able to protect them.”
Have we forgotten that Agency who alone was able to protect and establish this nation against impossible odds? Have we lost sight of our responsibility to make use of the unalienable rights bestowed upon us to provide for the needs of our own cities and counties, towns and states, without the hallucinogenic drug of “free government money”? Have we forgotten that the states delegated only “few and defined”, and expressly enumerated powers to the federal government, reserving to themselves and to the people all “powers not delegated to the United States by the Constitution, nor prohibited by it to the States”? Have we forgotten the admonition of President Washington to remember that “Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master”? Have we lost faith in the power of Divine Providence to protect and deliver us against the impossible odds we now face? Have we forgotten that the freedom and opportunity we enjoy was purchased by the blood and sacrifice of those who loved liberty more than life? Have we lost sight of our duty “to secure the blessings of liberty to ourselves and our posterity”? Have we forgotten our rich heritage as Americans and what it means to be More Like US?
The Warning and The Call To Action
In 1964, Ronald Reagan issued awarning and call to action that is more compelling now than 45 years ago when given:
Are you willing to spend time studying the issues, making yourself aware, and then conveying that information to family and friends? Will you resist the temptation to get a government handout for your community? Realize that the doctor’s fight against socialized medicine is your fight. We can’t socialize the doctors without socializing the patients. Recognize that government invasion of public power is eventually an assault upon your own business. If some among you fear taking a stand because you are afraid of reprisals from customers, clients, or even government, recognize that you are just feeding the crocodile hoping he’ll eat you last.
There can be no security anywhere in the free world if there is no fiscal and economic stability within the United States. Those who ask us to trade our freedom for the soup kitchen of the welfare state are architects of a policy of accommodation.
They say the world has become too complex for simple answers. They are wrong. There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right. Winston Churchill said that “the destiny of man is not measured by material computation. When great forces are on the move in the world, we learn we are spirits-not animals.” And he said, “There is something going on in time and space, and beyond time and space, which, whether we like it or not, spells duty.”
You and I have a rendezvous with destiny. We will preserve for our children this, the last best hope of man on earth, or we will sentence them to take the first step into a thousand years of darkness. If we fail, at least let our children and our children’s children say of us we justified our brief moment here. We did all that could be done. (Ronald Reagan: A Time for Choosing Speech, 1964).
I am running for the Utah House of Representatives, Legislative District 47, because I believe we do have a rendezvous with destiny; a duty to do all in our power to secure the blessing of liberty for our posterity; remove the “handcuffs that government mandates place on principals, teachers and parents in educating the unique children that they know best and love most; put the economic security and self-reliance of Utah first by rejecting federal government intrusions of Utah’s lands and in virtually every aspect of our daily lives; to provide a stable, efficient environment that business can rely on to grow the economy, NOT the government, to increase the tax base, NOT taxes; to set the pace where Utah is the model to the nation of what it means to enjoy the blessing of self-reliance and liberty. I believe that the answer is for each of us, in our cities, our towns, and our great State to restore our rich American Heritage as an example for all to see. I believe that as we deliberately do so, without apology, our neighboring states will take courage from the people Utah and join with us to reject federal government intrusions through powers that were never constitutionally delegated to it by the states in the first place. I believe that with a firm reliance upon the protection of Divine Providence we will succeed as we are, in all aspects of our lives, More Like Us!
Ken Ivory is a small business and estate-planning attorney in West Jordan, Utah and a life-long student of the Constitution, American history, and international political economy. Ken is running for the Utah House of Representatives this year in order to “secure the blessings of liberty to ourselves and our posterity.” You can find more information at www.icommit.us. You can also contact Ken at email@example.com.
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