Diary

Socialism Won in Debt Deal

The debt deal is a major victory for socialism. Oh, sure, there are no new taxes for the time being. And sure “spending” is being cut by $2.4 trillion. But the fact is that the debt limit has been increased by $2.1 trillion and that will last about 18 months and then there will need to be another increase.

And the spending “cuts” are just reductions from the expected growth in the debt, not real cuts. And even those cuts never will become law as time progresses. Because a budget has to be passed each year and the usual groups will cry poverty and those cuts will be negotiated back in unless we vote the Democrats out.

In other words, socialism has won – again. The Tea Parties mean nothing until we can get a reform-minded president and Senate. And the American economy will never recover as long as Obama and the Democrats have power. The debt is just too big.

But we have had big debts before, have we not?

Indeed. After World War II, our national debt was 116% of our Gross Domestic Product (GDP, or the total value of the economy). That debt came from four years of massive spending for the war. Today our debt is 100% of GDP coming from an ever-growing welfare state. World War II largely destroyed the economies of our competitors in world markets – Japan and Europe. And so following the conflict the American economic boom occurred because the US was making 50% of the world’s finished goods in our factories (cars, washing machines, clothing etc.).

And the debt fell and fell and fell in the ensuing decades because there was so much economic activity and so much money coming into the federal treasury. By the time president Jimmy Carter left office in 1981, the debt was only 32% of GDP, and that came after Carter slashed military spending deeply, leaving the armed forces dangerously ‘hollowed out’ even as the Soviet Union was at maximum power.

Ronald Reagan revived the American economy and the military, and during his presidency the debt increased to 51% of GDP, which was largely a result of Congress reneging on its vow (called TEFRA) to rein in spending.  Still 51% was small compared to the US today, and most of the world in 1989.

But in the last 20 years, we have witnessed an era of strong globalization which has dispersed manufacturing to all corners of the earth. So America’s growth has slowed while our debt has spiked. This is economic poison.

Now the United States economy is producing only about 19% of the world’s finished goods and that number is falling every day. Not because we cannot compete, but because we have new forces undermining our economy from within – devastating Democrat party policies of high taxes on our businesses, environmental assaults on business and on resource extraction, trial lawyer attacks on the private-sector, massive regulation including ObamaCare, and labor union agitation.

Today we have a stagnant economy and a 100% debt rate. We have a sprawling, growing, dependent welfare state, our population is aging rapidly with more and more demands on old-age government programs, and technology transfers are allowing any nation in the world to manufacture the things we once did, chipping away at our economic base inch by inch.

And with our newly exploding debt, the Democrats will be pushing for new taxes every single day, as they have in the past. Because  no real cuts will be made in the rates of spending until we get Tea Party US senators and a responsible president.

Indeed Obama already is claiming that we need more taxes, that “the rich” must pay more, and private corporations must ante up on their private jets and on everything else. This is all more class warfare and ignores the central point, that if more and more money is sucked out of the economy as our growth slows, that there will be less and less investment in new jobs and growth. And the economy will spiral down. And we will end up with more debt, and more unemployment and more poverty.

In one famous case in the 1990s, when a big excise tax was slapped on luxury yachts in order, ostensibly, to get more money for the government, thousands of people lost their jobs in the yacht-building industry because sales went kaput. Because rich people stopped buying boats when the price was pushed up artificially by the government through taxes. And ultimately the government lost money on the deal.

This is what socialists never will tell you – how the economy really works. Of course millions of Obama’s most ardent supporters, not knowing how the economy works either, are suffering badly these days. And soon they will have to make a judgment about the wisdom of this leader. And it will not be good.  

We were told that the debt agreement would spur the stock market, but it went the other way. Because the private economy has feared Obama from the start. In an omen, the market fell 5% by a whopping 486 points the day after Obama’s election in 2008. On the day of Obama’s inauguration, it fell a record for an inauguration day, 332 points. It closed at a 12-year low of 6547.05 on March 8, 2009, less than two months after Obama took office.

There is nothing at all about this debt deal that changes anything to the positive. The welfare state continues to grow, spending continues at record rates, and the debt continues to mount unabated. And with Obama in the White House, there is no way out.

Think about your family. Everything else being equal, would you rather have zero debt or $1 million debt? Of course you would choose zero. Because common sense says that debt is bad. Yet the world economy is made up of nations that are all deeply in debt, including the richest nations. This is devastating for the future. And it all comes from a false theory called socialism, under which governments offer more and more “programs’ for their citizens. But now that the money has run out, there simply is nothing left until we do the right thing and cut our spending drastically.

Please visit my website at www.nikitas3.com for more conservative wisdom.