The Deficit Trials

In 1986, an American company, WR Grace, prepared a TV ad dealing with their concern over America’s growing level of debt. The ad was not shown. The networks deemed it to be too controversial. Now that simple statement is worthy of several essays alone. But we, today, want you to just click on that ad and see the future as those with a foundation in fundamentals saw it so clearly, 25 years ago:

 http://www.youtube.com/watch?v=AiBCRQL58_k

In case you're wondering. "What was the US debt in 1986 when the ad was made?"  The debt of the United States as of September 30, 1986:  $2.125 trillion.  Today, it is $14.216 trillion. An almost seven fold increase in 25 years.

We know that many Americans are concerned about the US debt but have no idea what to do about it.  Frankly, we don't really have to do anything about it.  We can just let it keep rising at this geometric pace and all will occur in accord with our simple formula: deficits = debt = destruction. 

The snake oil being sold to all of us by the likes of Greenspan, Bernanke, Krugman and Geithner has been well documented on these pages.  Will any of this matter to them?  Of course not.  It will only matter to our grandchildren, just as presented in the WR Grace video twenty five years ago.

In 200+ years the debt of the US grew to $2 trillion.  Resulting in massive devaluation of the purchasing power of the dollar (please click on "Purchasing Power of Dollar" in Key Statistics section at right.)  In the past 25 years the debt has grown by $12 trillion.  What do we have to show for $12 trillion that we could not have done without?   We owe our grandchildren an answer to that question.

Watch the children in the video.  Detroit is their future. 

Never in the history of our world has a generation of entitled people been so selfish.

Why do great nations fail?

You most likely have seen the TV commercial by now. It starts out with the title of our essay – why do great nations fail? It appears to be some form of Chinese lecture hall, a smug professorial type lecturing to an auditorium of observant young people. It catalogs a series of historic failures and then focuses on the United States and its promiscuous spending and debt and closes with the conclusion that Americans now work for the Chinese because they (the audience) hold the debt. Also, at the end, they mock us with smug giggling. Pretty good stuff. It most certainly supports the fundamental that a picture is worth thousands of words. But is it on target? Is the ad accurate? Does it tell the real story?

Well, if you are a follower of TheFundamentals you would probably answer that question in the affirmative. After all, our catchy phrase, deficits = debt = destruction, is the basic theme of that ad. By the way, the ad is the product of an outfit called Citizens Against Government Waste. You can check them out at http://www.cagw.org/  and also view the 60 second ad there. By all means do so if you haven’t seen it.

But back to our questions? Does the ad tell the whole story about why nations fail? And the answer does need a bit further investigation. Are the spending and the deficits and the debt the whole story? Is it just an entitlement mentality coupled with corrupt politicians pandering to their special interests and a whole bunch of “protected classes” of voters who they depend upon for their continued survivability?

Why do great nations fail? Why is the United States so close to failure?

The answer is that we have forgotten or chosen to deliberately ignore why we were successful. And that issue does go deeper than the spending and the deficits and the debt. It even goes deeper than the Chinese holding so much debt and buying up so much of our productive capability and our intellectual know how and our priceless, intangible competitiveness.

We have chosen to burden the source of our success. And that source is wealth creation. Wealth creation is making things and growing things and extracting things. The source of all wealth in contained within those few brief words/concepts. That’s all there is to it. If you want jobs; real jobs. If you want growth so that there are good jobs for a growing population you had better grasp that you need to create wealth. And to create wealth you need to seize what is in the ground and either sell it to others or do something with it yourself and then sell that end product to others. You need to grow and cultivate the flora and fauna and feed nations with the end product. And make other usable products from the left over’s. You see, by doing these simple things, you create wealth. You create jobs. Lots of jobs.

Now if you decide that you want to make a better world and burden those simple processes with things like laws and rules and taxes and regulation and fees and interference from powerful forces like government bureaucrats and union organizers and do gooders and groups of people with their focused interests on higher pay and higher benefits and more say so in when you can do what; then you are making a choice to burden the very source of your success. At TheFundamentals we liken this activity to the old fable about the golden goose. The goose you see laid one gold egg every day. And that egg was the source of wealth for the farmer and his wife. But they became curious about why only one egg? Could we get two or three? So they dismantled (our politically correct choice of descriptive words so that no persons self esteem is damaged) the goose to investigate. And guess what happened? Yep. They killed the goose.

So the next time you see the ad remember, please, these three things:

1. Without economic strength there is no strength
2. Economic strength comes from wealth creation
3. Too much burden (dismantling) kills wealth creation

Bernanke wants you to think it is really complex.  It’s not that all that complicated folks.

The Faces of Entitlement

As our nation cuts back in Washington and as our states cut back everywhere but Illinois, New York and California, the weeping, wailing and gnashing of teeth of the unions and their only apparent lifeline to the future, public employees, will rise to a level that will make the state capitol gallery in Madison Wisconsin over the last several weeks look like the peanut gallery on the old Howdy Doody show. Public employees constitute about 16% of the nation’s employment. The total workforce, when employed, is about 150 million. With 10% unemployment, those employed drop to about 135 million. Of the 135 million working about 22 million work for state, local and federal governments. Not inconsequential percentages but most certainly nowhere near an adequate minority to justify their howling, whining, threatening and drastic level of complaining which TheFundamentals accurately predicted would happen in its April 9, 2010 essay entitled, “A Modest Suggestion.” http://thefundamentalsus.blogspot.com/2010/04/modest-suggestion.html

Simply put, public employees do not face the discipline of the marketplace which means competition and the fear of going out of business. Private sector workers know you must compete on wages, benefits and pensions and, most importantly, results to survive. On the other hand, without competition, public employees develop an entitlement mentality that is now being challenged by the much larger private workforce which is simply saying, “ENOUGH!!” These private sector worker/taxpayers expect the politicians they are electing to diminish the massive gap in wages, benefits and pensions. These private sector workers/taxpayers are not going to go away regardless of the lies, distortions and distractions created by union organizers like Richard Trumka and Andy Stern and Karen Lewis (see below.)

These three and their ilk are fighting a big uphill battle. Most people who work in the United States work in the private sector for a lot less salary and wages; a lot less benefits and days off and most do not have anything even close to a pension plan that lets them retire with 70 or 80% of their last few years paychecks after 25 or 30 years on the job. They get nothing even close to that kind of pension. More than likely they get to contribute a portion of their lower salary to a defined contribution plan (IRA or 401k) and their employer kicks in 2 – 4% of their paycheck and then the employee gets to invest the money and try to accumulate additional funds to supplement their social security check proceeds which are being discounted if applied for before the age of 66.

So, the gap between government pay and private pay is large; the benefit and days off gap is even larger and the pension/retirement plan gap is off the charts it’s so out of balance.

The disparity must end. There is a large group of current public employee retirees that have been fortunate in getting the excessive payments. The current public employees will face cut backs and will have to contribute more and new government employees will find their benefit and retirement plans much more comparable to the private sector. If they don’t like that situation let them go to their over pensioned predecessors and get some of their loot.   That would be an interesting test of "solidarity."

In the meantime, don’t expect the howling to abate right away. The howlers will demand tax increases on the middle class and the upper class wage earners. And soon the howlers and their union organizers will recognize that the largese they have grown to expect is the direct result of a growing private workforce and they will conclude that the fastest way to achieve more largese is a combination of protectionism, tariffs and currency controls (i.e. trade restrictions.)

Both movements must be fought and must be decided on behalf of the private sector workers. There is no alternative to rebuilding the jobs growth foundation of the American economy than the long overdue cutback of public sector employment numbers, public sector employee wages and benefits and the replacement of the current defined benefit pension programs with a combination of social security and IRA/401k plans. It’s happening just as we predicted. It’s about to be joined at the national level. Folks, the civil "servant" war is underway in America.  The faces or the entitled are shown above.

Pensions v. Services

One of the viewpoints seldom mentioned in the mainstream media's malingering and methodical mustering of support for anything government; anything union and anything entitlement related has to do with our topic today. TheFundamentals would conjecture that you, our readers, have not missed out on the simple point that taxpayer money paid for pensions to millions of government retirees is not available for buying goods and services that are needed by "public service" recipients.   Now that is a rather combobulated way of saying that even if you are a big or even a medium supporter of government programs and handouts and stimulus deals and other “public service” things that government employees says they are doing for you, then you would be at the head of the line demanding that your taxpayer funds are going to be spent on all those programs and activities and not directed into the hands of pension recipients. Unless, of course, you think that there is an endless supply of more and more taxpayer funds. Even the simplest thinker in the media and in government employ can grasp that priorities must be set and priorities would seem to favor the goods and services over the pensions.

But we don’t hear that argument in the media other than from a few combative governors, who are trying to cut back on wages, benefits and pensions so that services can receive top priority. What services you say? Well, how about education services and how about road maintenance and how about infrastructure building and how about water systems and sewage systems and how about public transportation and how about special care for the many needy children and handicapped citizens and just plain suffering humans in our neighborhoods and hospitals and community centers? At TheFundamentals, we support helping the needy and being good care givers to those without alternatives. We just happen to think that providing such goods and services is a much greater priority than funding collective bargaining agreements and phenomenally rich pension programs that have found their genesis in said “bargaining agreements.”

So, the question to our friends who are so adamant in their upraised voices for union positions on matters of employment, wages, benefits and, most of all, pensions is, “Do you think there is an endless source of funding for both services and pensions and, assuming you agree that there are not, what are your priorities – services or pensions?” See this article in the Sarasota newspaper in which, apparently, the very wealthy fantasy and science fiction writer, Stephen King, does think that you can have it all: http://www.heraldtribune.com/article/20110309/BREAKING/110309471  We say to folks like Steve – go for it. In your fantasy world you may not need to set priorities.  Send in your own money if you think there is no problem with supporting everything with no priority setting.   Remember this website?  https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454   It's for people like Steve who want to spend their own money to pay down the US debt.  How much have you sent in recently, Steve?  But, for the rest of us who set priorities in our lives, our priorities for tax payments are goods and services; not pensions.

If you have followed our many essays on this topic, you know that setting priorities is a fiscal fundamental. We all set priorities. Some make a Mercedes Benz in their garage a priority. Some are happy with a car that starts and runs. Usually, not always, the priority we set has something to do with our available resources. We always seem to come back to this resource issue. Now, at TheFundamentals, we say no to borrowing and no to printing currency. We do understand that there is a group out there, on both sides of the political spectrum,  that do not embrace this fundamental. But most of us do accept the basic concept of the need to make choices.

So, what is your choice?  If we can't have it all, do we prefer goods and services over pensions?   At TheFundamentals, we support goods and services over pensions. Where do you stand?

The "Invade Iraq" Letter

January 26, 1998

The Honorable William J. Clinton

President of the United States

Washington, DC

Dear Mr. President:

We are writing you because we are convinced that current American policy toward Iraq is not succeeding, and that we may soon face a threat in the Middle East more serious than any we have known since the end of the Cold War. In your upcoming State of the Union Address, you have an opportunity to chart a clear and determined course for meeting this threat. We urge you to seize that opportunity, and to enunciate a new strategy that would secure the interests of the U.S. and our friends and allies around the world. That strategy should aim, above all, at the removal of Saddam Hussein’s regime from power. We stand ready to offer our full support in this difficult but necessary endeavor.

The policy of “containment” of Saddam Hussein has been steadily eroding over the past several months. As recent events have demonstrated, we can no longer depend on our partners in the Gulf War coalition to continue to uphold the sanctions or to punish Saddam when he blocks or evades UN inspections. Our ability to ensure that Saddam Hussein is not producing weapons of mass destruction, therefore, has substantially diminished. Even if full inspections were eventually to resume, which now seems highly unlikely, experience has shown that it is difficult if not impossible to monitor Iraq’s chemical and biological weapons production. The lengthy period during which the inspectors will have been unable to enter many Iraqi facilities has made it even less likely that they will be able to uncover all of Saddam’s secrets. As a result, in the not-too-distant future we will be unable to determine with any reasonable level of confidence whether Iraq does or does not possess such weapons.

Such uncertainty will, by itself, have a seriously destabilizing effect on the entire Middle East. It hardly needs to be added that if Saddam does acquire the capability to deliver weapons of mass destruction, as he is almost certain to do if we continue along the present course, the safety of American troops in the region, of our friends and allies like Israel and the moderate Arab states, and a significant portion of the world’s supply of oil will all be put at hazard. As you have rightly declared, Mr. President, the security of the world in the first part of the 21st century will be determined largely by how we handle this threat.

Given the magnitude of the threat, the current policy, which depends for its success upon the steadfastness of our coalition partners and upon the cooperation of Saddam Hussein, is dangerously inadequate. The only acceptable strategy is one that eliminates the possibility that Iraq will be able to use or threaten to use weapons of mass destruction. In the near term, this means a willingness to undertake military action as diplomacy is clearly failing. In the long term, it means removing Saddam Hussein and his regime from power. That now needs to become the aim of American foreign policy.

We urge you to articulate this aim, and to turn your Administration's attention to implementing a strategy for removing Saddam's regime from power. This will require a full complement of diplomatic, political and military efforts. Although we are fully aware of the dangers and difficulties in implementing this policy, we believe the dangers of failing to do so are far greater. We believe the U.S. has the authority under existing UN resolutions to take the necessary steps, including military steps, to protect our vital interests in the Gulf. In any case, American policy cannot continue to be crippled by a misguided insistence on unanimity in the UN Security Council.

We urge you to act decisively. If you act now to end the threat of weapons of mass destruction against the U.S. or its allies, you will be acting in the most fundamental national security interests of the country. If we accept a course of weakness and drift, we put our interests and our future at risk.

Sincerely,

Elliott Abrams   Richard L. Armitage   William J. Bennett

Jeffrey Bergner   John Bolton   Paula Dobriansky

Francis Fukuyama   Robert Kagan   Zalmay Khalilzad

William Kristol   Richard Perle   Peter W. Rodman

Donald Rumsfeld   William Schneider, Jr.   Vin Weber

Paul Wolfowitz   R. James Woolsey   Robert B. Zoellick

Source:  http://www.newamericancentury.org/iraqclintonletter.htm 

Meltdown

It is estimated that the Japanese culture began at least 10000 years ago. That is 100 centuries or 1000 decades. America has existed for 400 years or 4 centuries or 40 decades. Why is this of some import as we watch American television (can you imagine anything worse that having Diane Sawyer showing up at your own personal tragedy, say a death in the family or a bad accident or a missing child, and acting as if she was concerned?) and all they want to do is keep talking about meltdowns. Well Diane and all your silly “media personalities” at Fox and NBC and PBS and CNN, please read on.

Japan will survive just fine. They will help each other; they will expect and receive valuable assistance from their public servants and they will welcome the assistance of others who have expertise that they need in this time of devastation. But, Diane, what they do not need is you and your silly camp followers interfering with their way of dealing with this natural disaster. They know what needs to be done. Please leave them alone so that they can clean up; mourn their horrible losses and help each other. Please turn off the cameras; turn off the microphones; turn off the lights and either help out or go back to your four star hotels and have a drink in the fancy restaurant and then leave. Please leave and don’t force any more struggling humans to have to also try to be accommodating to your demands while they are trying to get to tomorrow and take care of their children and their other loved ones.

Now, will you listen? Of course not. You are an American. You are an American media person. No one could possibly know what they are saying if they suggest you either turn off the equipment and help out or just leave. No one can tell a brilliant American media person that just leaving would be an act of charity.

But here is the carrot Diane. A special incentive just for you. Here is what you are missing. Here is where you can actually scoop all those brilliant journalists and the folks from the national press clubs and the gang back at the New York soirees. Here is why TheFundamentals is addressing this message just to you Diane. You are the great seeker of important news. You like to get there first with the camera; the microphones; the personal interviews with victims and government personnel. The experts. Be they academics or bureaucrats or consultants or those special folks who you know because of your vast network and your experience and your wisdom in all these matters of disasters; of meltdowns.

Here is the scoop Diane.

We will whisper it. Just for you

There is a meltdown taking place back home. That’s right Diane. Right now. Right here. A meltdown that will not be overcome as will the aftermath of the Japanese earthquake and resulting tsunami. No. The meltdown in the homeland will not go away Diane. We know that you are counting on those really smart fellows like Bernanke and that little guy from the NYTimes – Krugman and that genius Greenspan and all those really smart people from the east coast that you see at all those parties. But you see Diane; this tragedy is going on all over America. Not just on the coasts but those are not bad places to start – like the Jersey coast and the California coast and the Long Island coast and the Maryland coast. But there is more. You can go to the Midwest where there is no coast and you can find the meltdown moving along just fine. You can go to the southwest and find meltdown. You can go to the northeast and find meltdown. It’s all over Diane. It’s just waiting for you and your heroic news folk to show up. But you see Diane there is one small difference between our local meltdown that you and the boys have been missing and the Japanese meltdown that is very well defined. You see Diane our meltdown is of our own making. The poor Japanese needed Mother Nature to give them theirs. But here at home we are doing it to ourselves.

Now that’s a story we would like to see you cover. American meltdown. No earthquakes. No tsunamis. Nope. Just greed. Just laziness. Just a whole bunch of arrogance. Mixed in with glorious quantities of foolishness. In America we don’t need earthquakes to produce tsunamis to produce meltdowns. We do it the easy way. We spend money we don’t have on things we don’t need. We borrow and borrow and we find brilliant economists to justify the process. We create currency from computer transactions. And then we sit back and justify it. We actually hire politicians to do the justification. And we count on people like you to run to foreign lands and ignore what is going on here. Our meltdown is moving along just fine, thank you.

NPR: National Paranoia Radio

Americas partially publicly funded radio network apparently believes that those who provide a good portion of the “public funds” via the so-called Corporation for Progressive Broadcasting (aka Corp for Public Broadcasting) suffer from a variety of societal ills which they describe as racism, Islamaphobia and, this one we really think is the nuts – xenophobia. At least the NPR staff and listeners who paid hundreds of thousands of dollars for those fancy unusable east coast college degrees knew what they were talking about, huh? Correction: in the previous sentence we said “staff and listeners who paid.” That is incorrect. Their mommies and daddies and their beloved government paid for the unusable degrees.

First, before we proceed with our analysis of this wondrous NPR enlightenment, we would like to thank the folks at National Paranoia Radio for expanding the conversation on what ails the country. Here we thought it was the unneeded wars and all their costly destruction of lives and the unneeded spending and borrowing and debt that will most likely be repaid with dollars so devalued that it will take wheelbarrows of currency to fill up your gas tank. But no. It is not that complicated at all. It’s not wars and deficits and debt and greedy people at all. It’s that darn middle class; well, let’s call it the way the paranoids did; it’s that darn white middle class of working taxpayers who are afraid of their fellow black Americans and the growing group of Muslim Americans and almost anything else that doesn’t fall into the first two groups but, for the sake of this analysis, let’s just call them foreigners. What’s wrong with America, according to NPR, is what all this time we thought was right with America – the hard working middle class. We have got to get rid of that darn middle class. All those folks who don’t like Negroes; don’t like swarthy people with beards sitting next to them on the airplane and don’t like foreigners.

Thank you NPR for this enlightenment.

Now if you have followed our analysis this far, you might be aksing yourself, “Self, why do they want taxpayer funds from these Neanderthals in the white middle class?” Why not tell them to take their taxpayer money (that’s what we call “public funds”) and keep it? Well, we know and it goes like this:

1. Just because they think you are a Neanderthal does not mean that they won’t take your money to feather their comfy nests and provide fancy liquors and wines at the party’s they hold for their like thinking ilk that frequent places like Davos and the Aspen Institute and Bill Clinton’s global initiative to disrobe interns. As long as they don’t need to talk to you they will take your money. (lesson one)

2. They don’t like elections. Particularly elections just two years after they thought that they had reached the promised land and then all of a sudden the racist xenophobes go and vote out their majorities and replace them with people who talk about cutting back and doing without and acting responsibly. You see, the paranoids were not taught boundaries in their youth. They were taught to change the world. Using, of course, tax monies snitched from the middle class. (lesson two)

3. They are terrified down to their well pedicured little toesies that they might have to go out into the real world and rub elbows with the stinky racist, Islamaphobes and do things like make something or sell something or grow something (eeks.)

4. You see folks, they have no skills. They have degrees but no knowledge. They have traveled but they have not gone anywhere. They debate and discuss but do not challenge themselves. They see and live beyond the present because they are terrified of entering the arena of today and competing. (lesson three)

5. Now to the topic of xenophobia which is particularly intriguing to us in our analysis. The xenophobe is described as one who is afraid of the unknown of the bigger world, the experience that lies outside their carefully and closely placed boundaries. We ask “who is the real xenophobe?” Our neighbor in the middle class who goes to work every day; follows a set of beliefs, of fundamentals about being a good citizen by working, paying taxes, educating their children and looking out for others but not expecting handouts or cushy paychecks with fancy benefits and pensions? Or the person who insulates themselves in a world of unusable degrees paid for by mommy and daddy and government grants and loans and then surrounds themselves with like thinking people from academia and government and not for profits and foundations as they go about the pretension of solving only big problems with other people’s money?

The middle class is not paranoid. It knows when it is being attacked. Taken advantage of. Treated unfairly. Dismissed and disrespected by nonperforming fools who take the money of the middle class and then call them highfalutin names to show their lecture learning lunacy. The middle class does not care if you call them tea party activists or fundamentalists or just what they are: hard working, taxpaying citizens. They are fed up with feeding greedy, do nothing, lazy, over educated fops who self elevate in the name of dreamed about accomplishments.

NPR is a group of paranoid, over educated, under worked fools who are long overdue for a real world comeuppance. It’s called unemployment. Congress (House of Representatives), stick by the bill you passed and let NPR, PBS and CPB survive on their own. Obama calls these three outfits’ worthwhile and important priorities. Keep that in mind in 2012. In the meantime, no taxpayer money to these pandered fops.