America’s Broke

The downgrade in America’s credit rating for the first time in history could be a good thing — if the American people, and not just their politicians, learn from it.

Actually, the politicians (the great majority of them, at least) will learn nothing from it. Each party will blame the other. In a way, they’re right. Both parties brought us to this point through unending, reckless spending. The last eight decades have been an almost uninterrupted spending spree in which each party sought to outbid the other in redistributing the wealth of Americans.

But none of this could have happened without the consent of most Americans. The downgrade in rating is not only a failure of government, although it’s obviously that. It’s a reflection of the irresponsibility of most Americans.

It’s true that not all Americans who support the massive government spending are irresponsible, at least in their personal lives. Some are, but many are not. Yet it was still irresponsible of them to support a government doing what they never would have attempted themselves — spending way, way beyond their means.

The bigger and the more reckless the spenders, the more they deserve the blame. In this respect, the Democrats are worse. The final acts of the crisis started with the Republican Congress and President George W. Bush. They spent recklessly in the billions. Obama and the Democratic Congress spent in the trillions. Yes, the Democrats are worse. But in principle both parties are to blame.

However, politicians in both parties understood it was the will of the people to spend all this money. Sure, in the abstract nobody wants deficit spending. But most people do want, and still demand, the programs that cost the most, particularly Social Security, Medicare and Medicaid. These programs were sold as safety nets and savings accounts. They are neither. The best proof of this is the bankruptcy of the government. A government unable to pay its bills is no safety net.

We could shut down the entire Defense Department today, as some liberals would probably like to do, and government would still be bankrupt. We can pass all the “compromise” debt measures we want, and it will only be the same old story. The cost of government is still increasing, not decreasing. Raising taxes will not pay for those increases and, even if they could, they would turn our already semi-permanent recession into an absolutely permanent depression. Phony spending cuts to take place ten years from now are not the solution; spending cuts NOW are the only way out of this mess. It won’t happen.

The bottom line is simple. You cannot spend what you do not have. This has always been true of you, or I, or any individual person we know. However, government and politicians made it look like you could. They fixed the numbers to make it look like they’re not spending more than they have, or that it doesn’t matter if they do.

Real consequences have finally started to arrive, as arrive they must whenever you declare war on reality. The downgrade of America from its AAA rating is surely only the beginning. Washington D.C. has not changed its behavior, and shows no intention whatsoever of doing so.

There are silver linings to just about any cloud. Some say the effect of the downgrade will be to force Congress to make multiple trillions in cuts later this year, when cuts are mandated to take place. It’s impossible to imagine that Obama will agree to any real cuts without tax increases over and above the Bush tax rates that will expire in another year. Obama holds firm to his socialist principles, and Republicans always cave. It never changes.

Tax increases will not be good for the economy, and what’s bad for the economy is bad for the budget. There is no budget without a private economy, and there will be no balanced budget so long as Americans keep insisting that government spend money on all these things it no longer has money for.

Reality always catches up to liars and evaders. The vast majority of our elected leaders are liars and evaders, and a majority of Americans continue to persist in lying to themselves that “this can all be fixed if they just stop the bickering.”

Bickering is not the problem.

The problems consist of impossible and contradictory expectations. Neither party will solve this problem the only way it can be solved: By privatizing most of what the federal government does, thereby cutting out spending for most of what the federal government presently does. It’s simply not going to happen, not even close. So the only thing left is: Reality.

Reality will intervene because of its very nature. These government programs are going to privatize themselves, as the economic impact of our government’s moral and fiscal bankruptcy takes hold. In short, these programs will fade away because there’s simply not going to be any money left for them. Politicians may bicker about how to hold on to what’s left, but they cannot bicker about the scarcity they have created. They’ll continue to artificially inflate the currency, making the value of those government handouts worth less than they were. Politicians can create money but they cannot preserve value. The reduction of the American credit rating was inevitable. So too is everything else that comes next.

The welfare state is done for. As for the private economy, there’s always hope — if the people will demand that government get out of the way. Even now, America is no third world country. America could probably rise again as a great economic power within several years, if only government would get out of the way. But the majority of people will not let that happen, at least not yet.