It seems like only yesterday we were basking in the warm glow of Thanksgiving's Tryptophan euphoria. Unfortunately, any hope of an afternoon nap, much less a Detroit Lion's victory, was abruptly cut short as the clang of alarm bells began sounding throughout the country before the gravy-laden dishes had even been cleared from the table. Merchant's desperate for cash were calling; it's Christmas time again.
As we move through another holiday season, our sensibilities will undoubtedly be lulled to sleep once again as an endless stream of advertisers assure us that the realization of love and happiness may only be attained by spending money and going further into debt.
This is the way of capitalism. The message has been ingrained since our childhoods and it's hammered home daily by marketing executives across the land. A pinch of greed, a dash of self-entitlement and a few hairs from the lapdogs of envy that keep us competing with our neighbors comprise the potion that has fueled our economy for the better part of a century.
For the most part, I fully support the concept as long as it's tempered with a healthy dose of reality and a sense of basic responsibility, but this year is a little different. Given our nation's current financial crisis and the difficulties facing so many, the idea of our citizens being expected to obediently acquire their traditional shares of Christmas debt seems superficial and somewhat hypocritical.
Our government refuses to live within the constraints of a balanced budget so perhaps it's not entirely unreasonable for them to assume that we should do the same. The main difference, aside from the fact that we would go to jail if we behaved as Congress does, is that a majority of Americans will work hard throughout the coming year to pay off their newly acquired holiday debt.
Perhaps Thomas Jefferson expressed the perils of debt best with the following quotes:
I sincerely believe that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.
But with respect to future debt; would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19 years.
This is not a partisan issue. The exploratory snowball that President Bush tossed carelessly down the hill has simply gathered momentum — picking up a billion or two in government debt here, rolling over a private company there, crushing the occasional right or freedom unlucky enough to stand in its path. If left unchecked, it will soon become self-sustaining and unstoppable as it cuts a path of destruction through the heart of our nation.
Our new President and the Democrat-led congress are clearly at the helm right now, but the same careless mindset has afflicted our elected officials for years. We looked the other way when our irresponsible leaders wrote thousands of "rubber checks" during the house banking scandal. We pretend the Social Security coffers are not stuffed with worthless IOUs and we ignore the basic, common sense notion we all know in our hearts to be true: that spending more money is not the way to get ourselves out of debt.
Taking more than 200 years to dig ourselves $6 trillion into the red in 2002, our country's national debt has doubled in just seven short years reaching an astronomical $12.1 trillion. Congress will be voting soon to increase the debt ceiling to $13.6 trillion with current estimates placing the United States national debt of 2012 upwards of $16 trillion.
As our debt continues to soar out of control, the Fed is working overtime to keep the paper flowing, but with each midnight run of the printing presses we lose a little more value in our ever-declining dollar. Glen Beck has graphical representation of our latest money printing endeavors here.
For another sobering look at the value of our dollar compared to the currency of other countries, click here.
Other nations have begun to take note of this disturbing trend as both Russia and China have recently called for an overhaul of the world's current US-based economic system as reported in the Financial Times:
China's central bank proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.
Zhou Xiaochuan, governor of China's central banks said that the goal would be to create a reserve currency "that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.”
This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money, said Qu Hongbin, chief China economist for HSBC.
Responding to Chinese concerns, Chief investment officer of Nine Points Capital Partners, Damon Vickers, has predicted a global currency crisis on CNBC stating,
If the global currency crisis unfolds, then inevitably you get an alignment of a global world government. A new global currency and a new world order, so we may be moving towards that.
Governments and individuals around the globe are racing to deploy their own golden parachutes should the US economy be forced into early retirement. India recently purchased 200 metric tons of gold from the IMF as reported by the India Times:
For India, the purchase, apart from signaling that its economy has come full circle, is a way of spreading its assets which are said to be currently over-weighted with foreign currency, mainly in the form of sovereign US Treasury bonds. In other words, it is a hedge against a falling dollar.
As noted by the Washington Post, the projected deficits through 2019 are as follows:
President Barack Obama has repeatedly claimed that his budget would cut the deficit by half by the end of his term. But as Heritage analyst Brian Riedl has pointed out, the Obama stimulus package nearly quadruples the previous deficit so cutting it in half is not exactly a noteworthy accomplishment.
Offering further explanation and culpability that spans both political parties, Reidl notes:
President Bush expanded the federal budget by a historic $700 billion through 2008. President Obama would add another $1 trillion.
President Bush began a string of expensive financial bailouts. President Obama is accelerating that course.
President Bush created a Medicare drug entitle ment that will cost an estimated $800 billion in its first decade. President Obama has proposed a $634 billion down payment on a new government health care fund.
President Bush increased federal education spending 58 percent faster than inflation. President Obama would double it.
President Bush became the first President to spend 3 percent of GDP on federal antipoverty programs. President Obama has already increased this spending by 20 percent.
President Bush tilted the income tax burden more toward upper-income taxpayers. President Obama would continue that trend.
President Bush presided over a $2.5 trillion increase in the public debt through 2008. Setting aside 2009 (for which Presidents Bush and Obama share responsibility for an additional $2.6 trillion in public debt), President Obama's budget would add $4.9 trillion in public debt from the beginning of 2010 through 2016.
In the words of CBO director, Douglas Elmendorf, this is simply unsustainable.
I concluded the talk by emphasizing that fiscal policy is on an unsustainable path to an extent that cannot be solved by minor tinkering.
To make matters worse, our nation's employment outlook continues to decline as business owners tighten their belts and brace for the next wave of regulations and oversight to descend from Congress. We were recently told that we had to spend nearly a trillion dollars to save our economy and prevent the unemployment rate from climbing above 8%. As the current rate hangs at 10% (due to figures gathered over Thanksgiving, it’s down slightly from a recent 10.2%), our nation has lost millions of jobs since Mr. Obama's promise to create 3.5 million new ones by 2010 as the following Heritage graph illustrates.
While the government's own job statistics posted on revovery.gov seem to offer a rosier picture, recent investigations cast some serious doubt on the claimed effectiveness of the stimulus bill as Reuters reported recently:
The data collection and reporting from those who received money from the $787 billion U.S. stimulus plan is riddled with errors and inaccuracies, according to a federal audit of the report released on Thursday.
After a long and arduous climb lasting several decades, our country currently stands upon the precipice of financial collapse. The prudent would naturally take a step back from the edge, the fiscally acrophobic would flee in terror, but the vast majority of our nation's collective lemming troop seems to be steeling themselves for one final leap into the abyss.
A far cry from “ask not what your country can do for you,” our current financial policy is starting to resemble that of the esteemed Wimpy J. Wellington from the old Popeye cartoon strips. As we gorge ourselves on a seemingly endless supply of Federal Reserve burgers today, we can only hope that our children will "gladly pay for them next Tuesday".
Once the frenzy of the holiday season subsides, we will be faced with the stark reality of fresh statements arriving for our national credit card. We all know what needs to be done, our elected officials clearly do not. The same principles of responsibility and common sense used every day by average Americans who balance their checkbooks at kitchen tables throughout the country should also apply to our national bank accounts.
Government and more government is not the answer to our financial problems. Printing and spending more money is not the hidden secret to creating wealth. Our nation is rapidly transitioning from the world's leading economy to its largest charity case. Our exports now consist mainly of promises and debt while we import truckloads of Chinese cash. Free markets will provide real solutions and incentives for the true producers of our economy that go to work everyday at the task of creating jobs and profit. It's small business, capitalist ideals, competition and yes, failure, that will save us if they're allowed to.
In just a few short weeks, when the champagne bubbles of New Year's Eve have unceremoniously evaporated and our thoughts turn to resolutions for the future, many that sought a new age of open and enlightened politics will be left with nothing more than the bitter taste of old wine in their mouths and hope's unrelenting hangover.
For a real-time reality check, take a look at the National Debt Clock.