Honorable mention also goes to Bill Bonner for “US Budget Deficit: Enjoying the Ride on the Road to Ruin” :Have you wondered why the costs of running for public office have soared? That’s obvious too – because the stakes are higher. As the federal budget grows so does the pork that each member of congress can pull out of the barrel.
The number of congressmen is more or less constant (though it grows with population…after a 10-year lag for the census). But the amount of money given out increases…making each congressional seat more lucrative. You can do the math yourself, but the point is – crime pays. At least, for a while…
The trouble with crime is that it only makes the criminals rich. Everyone else gets poorer. That’s the problem in places such as Nigeria and Haiti. Crime pays. Nothing else does. Economists have done studies of this…and, of course, they’ve discovered the obvious. In “high trust” societies, people are wealthier. No wonder; when people know they won’t be ripped off, they accumulate more money.
A high trust society is one where property rights are respected…and where the rules of the game are known…and change very slowly. A change in tax rates, for example, discourages wealth – especially if it comes unexpectedly. So does a change in monetary policy. When people don’t know what to expect from the currency they become reluctant to invest for a long-term payoff. Instead, they invest in lobbying.
For the most part, tax rates haven’t gone up. Instead of taxes, government gets its money from borrowing. The immediate effect is much the same; resources are absorbed out of other sectors of the economy and into the public sector. Once in government service, they are used inefficiently or completely squandered. Result: John Murtha gets an airport…a kid in Brooklyn doesn’t get a bicycle… The long-term effect is unknown…but will almost certainly be unwelcome. The government will eventually be unable to borrow at low rates…and unable to finance its deficits. This will result in default…or hyperinflation…or both. In anticipation, trust in the future will go down…and so will America’s wealth.
That’s why the shift to politics is the FINAL stage of an economy… It is inherently wealth-destroying. In politics the rewards are distributed according to who you know or who you are. What you know and what you can do scarcely matters. Trust declines…because the rules change as wealth is taken away from some and given to others. The incentive to produce new wealth declines. Investments in new capital, new businesses, new innovations and so forth go down. Investments in lobbying go up. The insiders get rich. The rest get poor. And the nation’s wealth declines…along with its economy and its power. This will continue until the political sector blows itself up – either in default, bankruptcy, hyperinflation, revolution or defeat by a foreign power. Then, the cycle can begin again.
It would be fairly easy to get the budget under control…that is, if there were no political system to prevent you. The US government shouldn’t be in the business of giving out drugs or regulating heart transplants. It also shouldn’t be in the business of telling the rest of the world what to do. The solution is simple: abandon the imperial agenda…let people take care of themselves, both at home and abroad…and downsize the federal government.
But that is not going to happen. We may be on the road to ruin…but too many people are enjoying the ride. We’re not going to stop any time soon. More than 40 million people on food stamps…thousands of military contractors…millions of government employees… People who want the government (other citizens) to pay for their gall bladder operations. People who pay no taxes. GM executives. AIG bondholders. University administrators. Lobbyists.
It is a wholly rational and completely foreseeable trend. People always seek to improve their wealth and status in the easiest way possible. What’s the easiest way? Take wealth from someone else. That’s why criminals are still in business…after thousands of years of trying to stop them.
But common criminals lack status – except in the ghetto. So, the smarter, better connected and better educated of their ilk go into government. Or they use government for their own ends. That way, they get other peoples’ money. But they also get respectability…even an elevated social status.
Congress is supposed to confront the problems of the nation…and solve them. But with more people getting something from the government than supporting it, Congress is not likely to change course. It responds to the perverse will of the people…and to its own corrupt predilections. We are all victims of democracy now…
The government grows…deficits become unstoppable…and the empire sinks under the weight of so many parasites.
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