My grandfather was a coal miner and a farmer, and one of the world's great economists. He said if you spend more than you make you'll go broke!
By Rich Kozlovich
As my regular readers know I subscribe to John Mauldin's Thoughts From the Frontline", which appears every Saturday. He published this article, This Time Is (Not) Different, saying:
The old saw about doing the same thing and expecting a different result is less simple than it seems........... when you see a long succession of smart people doing the same thing and getting the same bad result, it’s fair to wonder what they were thinking. Such is the case with government debt. National leaders who let too much debt accumulate always think their situation is different. It’s probably not.
This came to mind as I was thinking about the magisterial 2009 book This Time Is Different by Carmen Reinhart and Ken Rogoff. They systematically reviewed hundreds of debt-driven crises over eight centuries, finding (surprise!) all unfolded in roughly the same way. “This time” is rarely different. I reviewed This Time Is Different back when it was first published in a letter you can read here. With the US (and many other developed economies) now set to join the long list of countries whose debt habits ended badly, it’s even more timely no
The Congressional Budget Office projects the national debt to $50.7 trillion in 2034, but since the CBO is so bad at these predictions, and if things remain the same, one has to conclude, it'll be worse, and I think much worse.
Are the banks sound and safe? It turns out the FDIC has a shortfall of $70 billion. Now...that's a lot of short fall. Banks are paying a fee to the FDIC which is supposed to be self funding, how did that happen? No one seems to know.
The national debt is rising rapidly to a two trillion dollar deficit a year now, and the interest payment on that debt going to soon surpass the spending on the nation's defense. That's just the interest on the national debt. He notes in the year 2000 the national debt was $6 trillion, in 2016 it was $21 trillion, and will be $35 trillion this year, projected to be $46 trillion in 2028, just four years from now, and he notes the debt incurred by the individual states and local governments in the U.S will be an added $4.4 trillion in 2028. According to Mauldin that means the interest on all that debt "will be more than the total amount of Medicare and defense spending combined"! As for Social Security:
SSI assets will be depleted in 2033, at which point recipients would get automatic benefits cuts of around 20%. That won’t play well, obviously, but how would Congress fill the gap? Raise taxes, cut other spending, borrow more? No good choices. But doing nothing would no longer be an option.
And what about inflation in this mix? Make no mistake, deficit spending is a massive driving force for increased inflation, and the machinations by the FED on interest rates will not prevent "an accident waiting to happen" once the expected, albeit unknown crisis strikes, and no one can tell what that crisis will be, when that crisis will occur, or how. But it will happen, that's history, and that history is incontestable.
We're hearing all sort of plans, promises, schemes, some of which are downright treasonous, but I don't see anyone giving any serious thought, at least publicly, on how they're going to repay the national debt. Why? Because there's entirely too many people in the Congress and the government that don't want to fix the national debt, end deficit spending, stop the insane borrowing and spending because in some way they're benefiting from it.
Mauldin is of the view the national debt can't be fixed by just cutting foreign aid, welfare, taxing the rich, or raising tariffs. He feels it will require massive cuts in spending, and huge tax increases, all of which will "spark a societal conflagration". I disagree with that in part.
There are some things
that are so obvious it boggles the mind that no one seems to notice
them. The legislative and executive branches of every government entity
in the United States must.....must.... stop kicking the can down the
road. Then we need massive cuts in the size of government, followed by a deficit reduction budget. In 2022 the
federal government took in $4.4 trillion dollars, and spent $6.16
trillion and the deficit gap is widening.
Mauldin quotes the authors of "This Time is Different" discussing confidence in the nation's economy by the society and the predicted unknown crisis saying:
“Economists do not have a terribly good idea of what kinds of events shift confidence and of how to concretely assess confidence vulnerability. What one does see, again and again, in the history of financial crises is that when an accident is waiting to happen, it eventually does. When countries become too deeply indebted, they are headed for trouble. When debt-fueled asset price explosions seem too good to be true, they probably are. But the exact timing can be very difficult to guess, and a crisis that seems imminent can sometimes take years to ignite.”
As Mauldin points out:
Debt is sustainable until it suddenly isn’t. Some event, some last grain of sand, triggers the hidden fingers of instability and it all collapses. And anything can be that trigger. This is why debt crises are so destructive. By their nature, no one is prepared because no one sees them coming. A few expect them, yes, but they never know the timing. History shows over and over that in a debt crisis, everything is fine and then it’s not. The transitions happen fast.
Mauldin's view is there's a debt crisis headed our way, and I agree.
What will trigger it? Who knows, but it's coming, whether that trigger is another war, a recession, terrorist attacks, cyberattacks, a pandemic, or natural disasters, none of which is factored in the CBO's predictions, its coming. All of which has triggered more taxes, spending, borrowing,
He says this time it won't be different. I disagree, it will come, it will cause havoc, but there are solutions that are viable, and available.
Many years ago I was invited to a meeting where the Chairman of the Budget Committee, I don't remember if he was in the House or Senate, and the Speaker of the House, were attending and speaking. I pointed out there were five public employee retirement plans and when Strickland was Governor here in Ohio they were $60 million dollars underfunded. I asked are they still underfunded, and if so by how much.
The man gave us a dissertation on the budget process, and it was impressive; he really did understand how that all worked. But he never answered the question I asked, and I pointed that out. Finally he said it was still underfunded and he didn't know by how much. It's amazing how many questions these politicians can answer no one asked, and how many questions asked they won't answer.....unless you insist on an answer.
There's one question I've yet to see asked of all these politicians running for office: What do you plan do to fix the national debt? I would love to see someone really hold all their feet to the fire and refuse to accept the red herrings and diversions they all spew out.
Since they're clearly clueless, and/or gutless, it apparently it will take the bug man to give them the answer, starting with these two foundational truths. Culture is king, and history is everything!
Up until 1911 the goal of the federal government was to get federal lands into the hands of private individuals in order for that land to be settled, developed and generate capital, which is why there's very little federally owned property east of the Mississippi River. However, after the Teddy Roosevelt era of conservation that all changed.
Here are some realities based on 2013 figures. The federal government owns almost 25% of all the land mass in the United States, and most of that is west of the Mississippi River. In Alaska the federal government owns 225,848,164 acres, 61.79 percent of Alaska's total land, while Nevada is virtually a property of the federal government owing over 80% of the state.
That land should
have been turned over to the states after they were no longer territories,
and it’s time the states demanded it. That would get rid of these
tyrannical agencies that rule over those lands like petty dictators. There are vast amounts of natural resources tied
up in these lands all of which these leftist nitwits are controlling, and preventing
from being used. It's Time to Sell Federal Properties, all of which would pay off the national debt, return the money stolen from SSI, fund medicare, and fully fund the nation's defense.
As of 2013, offshore, the federal government owned some 1.76 billion acres of lands and mineral estate, extending out 200 nautical miles from our shores. The federal government’s total mineral estate holdings are therefore about 2.515 billion acres of lands. Thus, the federal government’s mineral estate land holdings surpass the total surface land area of the nation of Canada.
It's time to start liquidating a lot of federal properties, because the total dollars involved is massive. The total worth to the economy of fossil fuels on federal lands of $150.5 trillion, and based on 2013 figures that was over 9 times our national debt.
Federal real property totals over 900,000 assets with a combined area of over 3 billion square feet and more than 41 million acres of land. In fiscal year 2009, federal agencies reported 45,190 underutilized buildings, an increase of 1,830 underutilized buildings from the previous fiscal year. In fiscal year 2009, these underutilized buildings accounted for $1.66 billion in annual operating costs.
Let’s start with the cost of regulations, because they will amount to the same thing to business and the consumers, higher costs. In 2013 it was estimated that it would cost the American consumer 1.75 trillion dollars to pay for the regulations imposed by the federal government. According to the National Association of Manufacturers, that cost has soared to $3.079 trillion.
Although that number is disputed because of the way in which that figure was computed, it has to be recognized that its massive and we know its growing. And its the consumer who pays those costs, because as businesses costs go up prices go up. At least until the costs get so high that they go out of business because the consumer can no longer afford it.