Posted on 02/14/2013 7:39:59 AM PST by SeekAndFind
Fiscal conservatives unwittingly sabotage themselves by warning that the $16.5 trillion national debt will impoverish America’s children and deliver unborn grandkids directly into Chinese slavery. While these dire predictions may come true, calling America’s massive indebtedness a challenge for future generations triggers relaxation about an immediate priority: curtailing federal spending and borrowing. By defending “the children,” budget hawks let big spenders invoke Scarlett O’Hara to justify their profligacy, at least until the tykes mature. “Cut the budget later,” spendthrifts propose. “Tomorrow is another day.”
Unfortunately, annual deficits and the accumulated national debt are harming American adults right now.
Uncle Sam is a morbidly obese glutton with a bottomless appetite. Once he has waddled away from the buffet table, little remains for everyone else but bread sticks and a few drops of soup.
David Malpass, a New York–based economist with Encima Global LLC and a former Reagan-administration Treasury official, understands how Washington crowds out private-sector borrowers in order to finance reckless spending and service yesterday’s debt.
Back in December 2009, Malpass explained in the Wall Street Journal how the Federal Reserve’s purchases of Treasury bonds and mortgage-backed securities caused capital to be “rationed not on price but on availability and connections. The government gets the most, foreigners second, Wall Street and big companies third, with not much left over.” Consequently, Malpass added, “for small businesses and new workers, capital rationing is devastating, spelling business failures and painful layoffs. Thousands of start-ups won’t launch due to credit shortages, in part because the government and corporations took more credit than they needed (because it was so cheap).”
Three years later, the conditions that Malpass lamented linger like an unshakable low-grade flu. Between the end of September 2011 and the same date in 2012, total outstanding federal debt grew by 12.3 percent, while corporate debt expanded by 5.9 percent. Among non-corporate businesses, it fell 1.2 percent. For households, it dropped 1.9 percent. This is anomalous, Malpass notes, since “small business credit has usually expanded at a faster rate than corporate credit.”
This is a stunning plunge in lending to entrepreneurs and small businesses — the twin engines of job creation. “Credit markets once provided $300 billion to $550 billion net new credit per quarter to the non-financial private sector,” Malpass recently observed. “This helped fund new investment, inventories and other working capital needs. . . . Private sector credit increased only a net $66 billion in the third quarter of 2012.”
Why should banks risk capital on innovative new companies with brilliant ideas when Washington dutifully repays interest and principal on those boring old savings bonds — albeit with freshly printed cash?
And what happens when Uncle Sam devours most of the smorgasbord? Unemployment reaches 7.9 percent while the economy contracts 0.1 percent in the fourth quarter of 2012. Rather than hire people and expand their operations, business managers bite their nails and fret that paying off the debt will unleash a stampede of new taxes.
Touchingly oblivious to all of this, House Democratic leader Nancy Pelosi of California told Fox News Sunday last weekend: “It is almost a false argument to say we have a spending problem.”
If only Washington had a spending problem; it has a spending addiction. Congress and the White House should go cold turkey and terminate antiquated and destructive programs and agencies (e.g., depart the housing sector). From environmentally mundane western acreage to empty office buildings, federal assets should be privatized. Social Security and Medicare beneficiaries should face affluence tests. Also, the eligibility age of 65 to 67 should acknowledge that life expectancy is not 62 — as in 1935 (when Social Security began) — nor 70, as in 1965 (when Medicare commenced). Americans now typically stick around for 79 years. One need not read Ayn Rand to recognize this as musical chairs.
With all due affection for the children and grandchildren, they eventually will feel the wrath of Obama’s (so far) 55.5 percent national-debt hike. Meanwhile, trillion-dollar annual deficits, rampant borrowing, and the $16,519,246,387,401 national debt are punishing American individuals, families, and businesses today.
— Deroy Murdock is a Fox News contributor, a nationally syndicated columnist with the Scripps Howard News Service, and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.
The whole notion that the cost of current spending can be paid by people in the future is fallacious—the result of sloppy thinking. Indebtedness DOES impoverish one’s descendants, but the actual cost of current spending is always borne IN THE PRESENT. You can’t reach into the future and bring wealth back into the present.
As L.V. Mises put it: The entire cost of WWII was paid the instant the last bullet was fired. (Where did that last bullet come from except through labor and materials that were all supplied BEFORE the last bullet was fired?)
Every time I hear someone (Hannity) complaining about how we’re making “our children and grandchildren” pay for current spending, I know he’s a muddlehead.
Governmental leaders were tricked/coerced/etc., into ceding the government’s authority to create money to the Federal Reserve. It’s the Fed that is creating money, then lending it the the Treasury.
Thus, the Treasury is now forcing itself to borrow when it has every right to create. Congress can abolish the Fed and create the same money the Fed is now creating.
It’s of course idiotic to create hundreds of billions of new dollars per year, and borrow $1T in total, in an economy of this size, but nevertheless it’s being done anyway. But at this point, bandits are in control of our money supply, they are lending to us and creating money if they can’t find enough buyers of our debt.
So who precisely is acting as the creditor to the government, i.e., the loan shark ? The primary brokers of Treasury debt have boards of directors that are controlled by globalist members, and the Fed boards are packed with globalists. So when Treasury goes to the Fed seeking to issue more Treasury bonds, these are the people they consult with; the bonds are either bought by the primary brokers or marketed around the world by them, or, if it can’t all sell, the Fed prints new money to pay for those bonds. “Don’t worry, we’ll market all your bonds, and, if we can’t, we’ll print new money and pay for them with that. Don’t worry, we’ve got you covered. You just need to keep us covered, i.e., pass the laws, write the executive orders and provide bail outs according to what we tell you is necessary.”
Globalism has packed the boards. It will not allow the borrowing to stop. All globalism has to do is marshal its trillions of resources, i.e., numerous major publicly-held corporations, non-profits, think tanks, investment banks, private equity, unions, funds, activist groups, news media, entertainment industry, academia, etc., to insist that government keep spending. And boy do they marshal those resources - just ask any member of Congress. And there are other people that might be able to shed light on what’s going on, but you can’t ask them because they’ve jumped out of buildings or had some other suicidey-accidenty thingy happen to them.
The ultimate conflict is not against liberalism or communism, though they are globalist servants.
The ultimate conflict is the people against the globalists and their senior cadre, the people against the ideology of monopoly and totalitarianism.
Another malign aspect of the “children and grandchildren” cant is that it directs attention away from this question: WHO in the PRESENT is getting screwed by government spending?
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