Dose of Clarity

It has become all too easy to blame politicians for the condition of our nation, yet we give very little thought to our complicity as citizens considering we are responsible for who attains and retains the offices of our Government. We avert responsibility in favor of expressing platitudes of political corruption as if that is a new development when money and power are at stake. The truth is that we have become an entitled nation that continues to vote for all the big Government offerings with absolute disregard of any financial repercussions. Endless spending seems to rule the day, thus we continue to obstruct any cuts to our budget despite the knowledge that such levels of profligacy are unsustainable. It is absurd that debates regarding the budget have any credibility if cuts to our recent spending binge are not central to the discussion, but this assessment is easily diminished by pretending that taking more money from less people will solve the problem. It makes no sense [Read the rest of this entry...]

There is a basic sentiment circulating the Occupy Wall Street protest that one percent of the population has done extraordinarily well while the other ninety nine percent has struggled. This may very well be the case, but what is the objective of the protest in this regard because it is not reasonable to think that the wealthy will suddenly show up and distribute their money among the crowd. It seems that the protesting efforts are misplaced and without focus. There is too much energy being expended over how the economic pie was divided and very little attention is being given to finding a way to change that dynamic. It is important to remember that the pie is not a permanently fixed amount, it can be continuously expanded. Focusing on the existing division is basically accepting that all ambition for the future is lost and economic growth is dead forever, therefore everybody should just fight for the remains of yesterday. This notion should be strongly rejected and America needs to get back to the business of creating, innovating, and producing value as a means [Read the rest of this entry...]

Election success for a politician becomes jeopardized upon the slightest mention of a tax increase due to the simple reason that such a policy seldom receives popular approval, so consequently the inevitable result is to find an alternative strategy to sustain spending. There exists a less painful way to attain the same objective without the associated risk from proposing a tax increase and that is done by simply issuing Government debt. Upon issuance there are only two choices available in the future to pay for this debt, either more revenue will be raised through taxation at that later date or else a deliberate choice will be made to default instead. It is easy to assume that every politician knows that future leadership will never opt to default therefore a tax increase will be imposed once no other option is available. Citizens across the nation will be outraged once they realize this eventual [Read the rest of this entry...]

The public’s mindset right now regarding our fiscal situation is one of anxiety which is being carefully constructed by politicians and the media portraying the absurd notion that without increasing the debt ceiling a default is imminent. There is absolutely nothing further from the truth; in fact it is next to impossible for a default to occur without our Government actively choosing to bring about such default. Regardless of the outcome of the debt ceiling discussions, the Treasury is raising revenue in excess of $2 trillion annually and the interest expense on the debt is about $400 billion. This clearly leaves an excess of about $1.6+ trillion available for other remaining obligations, therefore averting a default takes nothing more than our Government acting responsibly and paying the interest owed before any other disbursements are authorized. It could not be any simpler, the interest should be paid first and then everything else prioritized for the [Read the rest of this entry...]

With all the political discussion right now about the National Debt and the battle concerning the Debt Ceiling, it provides a good time to reflect on a few thoughts regarding deficit spending outlined by the following questions:

Q: What is it called when the Government borrows money to cover the excess spending versus the revenue raised?

A: Issuing public debt – This takes the form of Treasury securities and has been the preferred path in recent decades. However, these securities are supposed to be paid off when they mature, but in reality they are perpetually rolled into new debt offerings, thus actual full payment never occurs. New debt pays for the old debt.

Q: What is it called when the Government issues new [Read the rest of this entry...]

As the National Debt has recently soared past $14.3 trillion, it now seems that some in America are beginning to show a hint of concern while others still appear to have little interest in the matter. The debate is raging about taking concrete steps to reduce this debt as we face yet another increase in the debt ceiling, and as usual the opposing sides are digging in. One side believes we should raise the debt ceiling and continue the same spending that has brought us to our current condition while the other side asserts that it is time to reverse course. These types of battles continue to fall along partisan lines thus making you wonder if anyone in Washington D.C. really cares about the debt at all, or is it just another opportunity to game the citizens to stay in power. The reality is that politicians are only going to care about what gets them elected and subsequently reelected thus the burden falls upon the people to care enough to want a real solution. My contention is that there are not [Read the rest of this entry...]

The mere fact that the United States has such a large National Debt should be a point of shame for all citizens of this nation. We should be embarrassed that we have chosen to live beyond our means for decades with hardly any effort to curb this behavior. To put it simply, this amassed debt is the result of previously purchased lifestyle that still remains unpaid. We continue to believe decade after decade that we are entitled to more than we produce, thus expecting the excess to be paid at a later date, or worse yet, directly defaulting on that obligation or essentially defaulting by printing more money. Politicians facilitate this mindset by kicking the can down the road because the solution is certain to be painful, and that does not bring good results at the polls. There is endless debate and bickering about how this should be solved and who should bear the brunt of the needed sacrifice. The President has even assembled a Debt Commission to debate possible [Read the rest of this entry...]

Many people believe that practicing capitalism has failed us in society by bringing hardship upon common people due to the greed of the few that benefited at their expense. This is an economic system that is practiced among citizens and businesses operating in their own interest with the Government intervening through regulation and taxation, but such Government does not practice it directly by planning and determining the economic outcomes. These activities are conducted among citizens in society and they should bear the consequences whether it is the benefits of good decisions or the failure of bad ones. It is well known that capitalism creates excesses that must be occasionally corrected and there are times that some misdeeds do go unpunished. Nonetheless, it is a very efficient system overall because outcomes are directly shouldered by those that initiated the respective activities – or so they should be in a “truly” capitalistic model. Whether capitalism [Read the rest of this entry...]

It boggles the mind to really think about what our Government has become on the most fundamental level. It has evolved into nothing more than a monetary distribution system that benefits some at the expense of others. It seems obvious to any logical thinking person that its function should be to collect revenue from all citizens earning income in order to provide for the common good of all citizens. Somewhere along the line it began to collect an increasing share of revenue from a decreasing segment of the population in order to provide benefits to its chosen groups. Basically, it takes from some to give to others. The Government is collecting an ever-increasing amount of money to compensate and expand itself first and foremost; then choosing how the remainder will be distributed, thus selecting the winners and losers in society by giving preference to one over another. There is so much talk about redistribution of wealth these days, but that has been going on for years. [Read the rest of this entry...]

It is with mild fascination that we watch the result of the debt and spending debacle unfolding in Greece along with its developing civil unrest. The struggles of that nation to accept the consequences of their past decisions combined with the responses from other anxious nations in the Euro zone with similar issues makes for good political theatre. We casually watch from afar discussing the various implications as they play out on the world stage, yet we seem to miss that it is simply a prelude of what will be coming to our own shores if we continue down our current path of irresponsibility that appears so unrelenting. How could it be that we think our condition is so different from theirs? How do we observe from a distance and arrogantly think it is an isolated problem that will never materialize here? The situation is very comparable regardless of all the justifications of our importance and stability [Read the rest of this entry...]