"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27,2010

Friday, October 23, 2009

Fiscal Policy

Americans have witnessed exaggerated unintended consequences of fiscal policy and monetary policy gone berserk. Terrified of an economic correction in 2001 and a stock market correction, the economic masterminds of the universe deemed that a combination of increased government spending and lower taxes (fiscal policy) and ridiculously low short interest rates (monetary policy) would be appropriate government policy to avoid some small pain brought about these needed economic adjustments.

The result of these three acts – massive federal spending (joined freely and aggressively by most of the 50 states), lower marginal tax rates and short term borrowing rates coupled with a discipline-free credit evaluation process have now produced record levels of bad real and contingent assets – loans, bonds and future payment commitments for entitlement programs and public sector employees benefits and pensions, at levels that may not even be quantifiable. This process and its results have birthed their own bogeymen. The blame game identifies the bad guys as Wall Street greed merchants, sleepy regulatory agencies and, depending upon the issue and the proclaimer, insurance companies and other capitalist entities. The real bogeymen are 2.7 million federal employees; view them for yourselves at: http://www2.census.gov/govs/apes/07fedfun.pdf  and over 19 million state and local government employees – view them at: http://www2.census.gov/govs/apes/08stlus.txt . These numbers are truly numbing!

American fiscal policy is a complete failure. Everyone seems to know but the DC fools.  Moderate economic corrections are deemed to be politically unacceptable. This is absolute nonsense. What should be unacceptable is the dominance of special interests which prevent weak and corrupt politicians from cutting back on government spending when tax revenues encounter shrinkage due to economic slowdown or recession. These politicians are akin to a person not cutting back on caloric intake after an undisciplined holiday period with excessive eating and drinking. Look around you. Have you ever seen so many obese people? This mentality of no personal or communal discipline is now the norm in the US.

Special interests are so imbedded in America’s political power process that politicians think that saving a government job is a benefit to overall economic growth. It is exactly the opposite. The more government jobs that are funded the fewer wealth creating jobs will be formed. It is as simple as the logic of the fat person. Tomorrow things will be better. Nonsense. Tomorrow starts today and if you don’t cut back today you will never experience a better tomorrow. Sacrifice and frugality are fundamentals everywhere but in the fiscal and monetary policy of Washington DC and state capitols. And, an increasing plurality of American voters is buying into this fiscal policy nonsense!

1 comment:

Anonymous said...

Well written…but what the h… do we do about the 7-8 million fed and state gov employees AND the excess military people as well? Neither party nor any strong political group focuses on either of these areas that could provide bountiful $ cuts. GM was forced to cut back on brands…why not the military – cut $X billion from defense and tell the five different services to achieve the cuts via consolidation; X less generals/admirals, etc. And cut 20% of the large number of foreign bases…this would be easy to do if we could get beyond politics. As far as fed gov employees in DC…have them count off 1-2-3-4, pick one number – and the selected number people all go home and find productive jobs…no one will notice their absence after a few months…obviously need to exclude the President, the Vice President, the speaker and other productive democrats! -