Spending our way out of debt…….Isn’t that an oxymoron?
With the recent release of the White House’s Mid-Session Review the eminent truth has surfaced. This review basically admits that the new administrations policies will force our nation to borrow more than $9 trillion over the next ten years.
Shall we ask the formidable obvious question, “How are we going to pay for it”?
Washington Post had this to say about the deficit difference from the original $7 million that was projected.
The extra $1.9 trillion in red ink mainly reflects the Office of Management and Budget’s adoption of more realistic — that is, more pessimistic — estimates of economic growth and unemployment. White House officials protest that their original, rosier numbers made sense at the time; actually, plenty of forecasters, including those at the nonpartisan Congressional Budget Office, made more accurate calls. This situation was foreseeable and should have been acknowledged earlier.
Biden tells us “The truth is, we and everyone else misread the economy” and that they had no way of knowing this.
Well folks, how about history, what does history tells us?
History tells us this debt is not sustainable, no matter who or what was the source for creating it. Many economist worry that the deficit will drive us even deeper into recession and this could potentially be accompanied by inflation or even hyperinflation. I am not an economist, but in doing my research this is definitely in the realm of possibility, not probability, but possibility. In all seriousness, all that really has to happen for the US to get hyperinflation is for the Chinese to stop buying our debt. When we can no longer roll over the debt, hyperinflation will start.
I realize that the Weimar Republic is a stretch to use as an example, but if you look a the chart of their hyperinflation at http://tinyurl.com/m6z8j2 , you can see that it took a million-fold increase in the paper money supply to create the horrific scenarios that we associate with hyperinflation today. Although the US is likely headed for inflation, hyperinflation would be the extreme, but we cannot rule it out. Look at the numbers, it isn’t an instant multiplication by one million. It takes a couple years of the currency rapidly debasing to achieve massive hyperinflation. Imagine if all of your currency was halved in value in 3 months. Then halved again in 6 months. Then halved again in 1 month. That’s how hyperinflation starts to roll, then cascade through an economy. Meanwhile governments implement currency controls, pay with promises, hand out’s, iou’s, etc.. sound familiar?
I can’t predict the future but I feel confident in saying that the potential for the collapse of the US dollar in my lifetime is more likely than not, based on the current economy. I am not much of an investor, but from what I’ve seen, it is always a good idea to hold REAL things in a fiat money system. Fiat money itself is a terrible thing to hold as a medium and long term store of value.
History tells us everything, even the future. It has given us repeated lessons about fiat money and inflation. Daniel Hannan recently berated the Prime Minister, and in doing so he said it about as clearly as it can be said – you cannot spend your way out of recession any more than you can borrow your way out of debt.
No government could create such havoc were it not for fiat money, it is in my opinion evil and it is the root cause of our problems.
“Now, it’s not that you’re not apologizing … [I]t’s that you’re carrying on, willfully worsening our situation, wantonly spending what little we have left..” (Emphasis added) – Daniel Hannan.
Okay, getting back to the US and our economy. Do you know your history. and I ask that because I want to know if you remember what caused The Great Depression? Yes, that’s right, Inflation. And what was supposedly to be “The cure”? That’s right, the same nonsense that’s going on now, massive government intervention. It didn’t work then, it didn’t work in the 1970s, it didn’t work in Japan and it’s not going to work here and now. Now, let’s take one a little further step back in the time machine, all the way back to, say, the 1921 Recession. What was the cause? That’s right, Inflation. And what was the cure? Do nothing.
That’s right, actually history tells us that President Harding didn’t know what to do, so they ended up doing next to nothing. This was actually the correct response. A severe but short recession followed. Then recovery.
Heritage.org senior policy analyst Brian Riedl details the carnage that we are currently facing in our economy:
• Since World War II, the largest budget deficit recorded was 6.0 percent of GDP in 1983. The Bush Administration oversaw budget deficits averaging 2.0 percent of GDP. The projected 2009 budget deficit of 11.2 percent of GDP would nearly double the post-war record.
• The 2009 budget deficit will be larger than all budget deficits from 2002 through 2007 combined. More than 43 cents of every dollar Washington spends in 2009 will have been borrowed.
• While President Obama claims to have inherited the 2009 budget deficit, it is important to note that the estimated 2009 budget deficit has increased by $400 billion since his inauguration, and the whole point of the “stimulus” was to increase deficit spending to nearly $2 trillion based on the unproven notion that would it alleviate the recession.
• The 22 percent spending increase projected for 2009 represents the largest government expansion since the 1952 height of the Korean War (adjusted for inflation). Federal spending is up 57 percent since 2001.
• In 2009, Washington will spend $30,958 per household–the highest level in American history–and under President Obama’s budget, the figure will rise above $33,000 by 2019.
• The White House brags that it will cut the deficit in half by 2013. The President does not mention that the deficit has nearly quadrupled this year. Merely cutting it in half from that bloated level would still leave budget deficits twice as high as under President Bush.
• The public national debt–$5.8 trillion as of 2008–is projected to double by 2012 and nearly triple by 2019. Thus, America would accumulate more government debt under President Obama than under every President in American history from George Washington to George W. Bush combined.
And, of course the icing on the cake, the very bitter, not so sweet, icing on the cake, is that this is all before, before we potentially add another $1.5 trillion to the deficit with the Health Care Entitlement Reform.
We have a choice, and that choice is to stop the spending and stop the spending yesterday. In the 1980s and 1990s, Washington consistently spent $21,000 per household (adjusted for inflation) says Brian Riedl of Heritage.org and he believes that:
..simply returning to that level would balance the budget by 2012 without any tax hikes. Alternatively, returning to the $25,000 per household level (adjusted for inflation) that Washington spent before the current recession would likely balance the budget by 2019 without any tax hikes. So with very little sacrifice, and no new taxes, the government could get its budget under control and the American economy could get fully back on track in three years. Isn’t that worth considering?
Why do our Grandchildren and our Great Grandchildren have to be saddled with this enormous debt that they did not create?
Europe has already gone down this road in the late 60’s, just as we did in the 70’s and Japan did in the 90’s. Must we repeat history or insanity should I say, and expect different results, I think not.
Until next time, Stand proud, be Passionate my fellow Patriots and we will prevail.
BreeLee Johnston is the founder of United American Tea Party which is a Chapter of Just Patriots Inc in St. Johns County. She is a member of the National Leadership Council of Tea Party Patriots as well as the Florida Coordinator for ICaucus.org and contributes a regular guest editorial to Historic City News.