FEDERAL FRANKENSTEIN
By James R. Cook
Washington politicians erroneously believe that an inexhaustible pool of money exists to be spent on endless government programs. It's accepted by them that the higher incomes and wealth of the most productive citizens are to be freely used to assist the less prosperous, not only in America, but more recently across the entire globe. In the face of the greatest government deficits in history (by double), new spending and new programs roll out unabated.
The government covers a portion of its deficit spending by borrowing the savings of individuals. That replaces the process of savings and capital accumulation with capital consumption. As the big federal parasite squanders this money, it effectively eats the seed corn that would otherwise grow numerous private projects. It's ruinous for the economy. It lowers living standards and, by lowering incomes, it deprives the government of tax revenues, thereby contributing to even larger deficits. The Robin Hood system of taking from the rich to help the poor eventually liquidates itself. The bigger the government and its finances, the worse the economic consequences.
Today the majority of our citizens look upon the government as a source of benefits. They expect to receive from the treasury a variety of subsidies and financial assistance. They expect guarantees and the elimination of risk. They look to the state for security and a solution for all the world's problems. Faith in government knows no bounds.
Results don't seem to matter. For example, huge government social subsidies were supposed to alleviate poverty and lessen crime. It backfired. The greatest threat to American well being is a growing underclass of supremely dysfunctional lowlifes. Bored senseless, relieved of any requirements to make their own way, their minds atrophying, massively addicted to drugs and alcohol, their character and integrity in a shambles, they are paid by the government to have children and be parents. You can't begin to touch on the insanity of it.
What a mess the government makes of things. Look at public housing; the periodic demolition and new construction. Look at highways and the massive ever-worsening traffic jams. Look at subsidies that prop up wasteful and uneconomic fuels like gasohol. Look at the cost of healthcare sent into orbit because government subsidies have overwhelmingly increased demand. The litany of government failures and inadequacies extends to the highest levels of domestic security and intelligence.
For one thing, government has no bottom line; no profit or loss, no objective standard to measure results. They aim to spend more, not less. They are known for their inefficiency and wastefulness. They squander the nation's wealth. The different agencies and bureaus work at cross-purposes. Advancement of government employees depends more on the favor of superiors than serving others. Rather than rely solely on merit, the government uses gender, race, educational credentials and longevity as criteria for advancement. Competence and merit take a back seat. Rigid operating rules protect government employees from criticism by their congressional overseers, but they sacrifice common sense, efficiency, promptness and creativity.
According to the philosopher Leonard Read, organizations that ultimately rely on force and compulsion to take your money, or exert their will, can never be creative. Furthermore, you never find the entrepreneurial spirit or the kind of take charge leaders that get things done in private enterprise. Bureaucrats resist innovation and improvements. No wonder so much gets bungled. If you've ever worked with government, you know that it's totally foreign to what has made America great.
Government agencies dislike free enterprise and disdain profit making. They are suspicious and hostile towards business. They dangerously impact business productivity. They wish to regulate and plan the operation of business, and also direct the activities of the individual citizens. Yet, they lack definite plans, uniformity and follow through. Despite these shortcomings, Congress has granted them the power to make laws of vital importance to everyone's life, and they fashion them endlessly. Try as we might, we can't seem to slow the growth of government. The politicians come and go, but the bureaucrats stay.
Economic Savior
This is the strange creature in charge of our economic health. They have a monopoly on money. They manipulate fiscal policy, interest rates, credit and banking. Their mismanagement has reduced the purchasing power of the dollar by 90% in half a century. They have made inflating and asset inflation a way of life. They have replaced stable prices, free markets, sound money, capital formation and savings with overconsumption, government fiat, manipulation and intervention. Those who place their trust in the government's ability to run the economy satisfactorily, and make no provisions for any other outcome, stand to be rudely disappointed.
Now the government has launched the greatest monetary and fiscal stimulus ever known. They have tacitly encouraged homeowners to borrow to the hilt against the equity in their homes. They have encouraged feverish speculation in stocks, bonds and real estate. They have fostered a massive trade deficit fed by loose money and credit policies. They have promoted spending and squandering over thrift and savings. They have put us on the road to a stupendous economic crisis that will shake us to our foundation.
There's always the possibility that this current round of funny money will ignite the economy and produce another speculative boom, but it's unlikely (and it will only make matters worse). So far no major economic evidence points to a recovery. All we have are a couple of consumer polls from a few hundred people who say they might spend more. Meanwhile, a sickening chorus of money managers on financial TV repeat the same tired story of an economic recovery in the second half that they have been wrong about for the past two years.
The government wants the stock market to recover. They don't care about value. They are doing everything in their power to drive stock prices higher. That includes a positive economic spin from the Fed and questionable economic statistics. You can choose to believe that the government will ensure that everything comes up roses. Or you can put trust in assets that will benefit you if the government screws everything up. You've probably heard this quote from George Bernard Shaw before, but it nevertheless bears repeating. "You have to choose (as a voter) between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."
The road to big government is the road to social disintegration. In the end, the safety net erected by the state will fail to do its job. Government programs, with their high cost and run-away expense, will contribute to the bankruptcy of the nation. Markets will crash and the dollar undergo a disastrous drop. Interest rates will soar and the debt will never be repaid. We can only hope this crisis will be over with quickly so that its lessons can be learned. Pray that we do not experience a lengthy historical decline, as did the Romans.
It is only capitalism and the multitude of American entrepreneurs, relatively free to innovate and profit, that has kept America prosperous despite a sticky-fingered government. That may be changing. The parasitical state is destroying our money and killing the economy in the guise of restoring its vigor. Meanwhile, its expenditures drain our sustenance. Hope for the best, but prepare for the worst.