Nobel Prize winning economist, and world renown Princeton economics professor, Dr. Paul Krugman, says there’s nothing to worry about, “The deficit worriers have it all wrong,” and added,”One more thing: Fiscal expansion will be even better for America’s future if a large part of the expansion takes the form of public investment — of building roads, repairing bridges and developing new technologies, all of which make the nation richer in the long run.
There are a number of problems with pretending that this is all right, and that it will, like Laffer (the Laffer curve) theorizes, work itself out with low taxes, but it’s just not so.
It’s the convergence of the running deficit (which, at $1 trillion annually should create massive expansion and prosperity, which should be creating signs of recovery), the massive use of government funds to maintain order in the capital markets (with instruments that are so difficult to discern the value of that financial firms and investors all over the world stopped bidding on them), and the underlying current income statement of our government, combined with the short, intermediate and long term obligations that are coming due, that combine to bring difficult times to our doorstep for the forseeable future.
Our gross tax revenues are approximately $2.5 trillion, according to the Department of the Treasury, so having an outlay to purchase financial instruments and extend credit in the amount of $8-9 trillion dollars is significant. Our Gross Domestic Product, which is the assembly of all dollars flowing through the economy on a “gross” basis is only $13.8 trillion for the fiscal year ending December 2007. The government is an interesting entity, as in a constitutional republic, they are bound to act within the law, in the best interests of our republic, and to have integrity with regards to providing information to us pertaining to our fiscal policies and circumstances.
The value of the DJ Wilshire 5000, which includes most every stock of significant value, is $12 trillion dollars. The value of all wealth (gross) in the United States is some number between $43 trillion dollars (Bureau of Economic Analysis) and $60 trillion. So numbers with trillion after them are big numbers (which we all know to begin with).
The government is just printing money, which reduces the value of the money in existence, and generally causes market failures when the amount of debt relative to the GDP exceeds a ratio at which ability to pay is reduced and delinquencies increase. When the printing of money exceeds the market’s desire and ability to accept the nation’s currency, that currency experiences a terminal stage that is called hyperinflation.
We are printing money at levels never seen historically as a percentage of tax revenues and GDP. Immediately following World War II, we did run some deficits and expenditures that were significant, but we invested in infrastructure and other capital items, so in spite of spending money it was on assets with a long life cycle (like a mortgage would be). The bottom line is we spend too much and have no policies in place to grow the revenue base of the United States by creating better jobs and greater tax revenues, or by reducing services and government. It has to be one or the other.
It’s time to stop this bad policy and demand change. Every person, everywhere, knows that our policies are wrong. We must stop waging war, building an empire and doing pretty much anything that strains our resources to the breaking point and concentrate our strength at home. Infrastructure and long term projects would be good uses of government funds, but a plan to shrink government so it can operate on the revenues we can realistically collect is imperative. A constitutional republic is ruled by law, not by government. Government needs to be large enough to serve the people and protect and enforce the laws. We are trending towards an oligarchy, a state where the 2 party political system and the lobbyists who are paying those politicians for access are ruling this nation. It’s time to take our nation back.
Be careful, be watchful, and good luck!