The New Slavery: Debt

Debt has become a national epidemic.

We, individuals, are slaves to the myth of universal home ownership, and the debt that comes with it. You don’t own your house. Only a part of it. And if you’ve paid it off, the community still owns it. Don’t believe me? Quit paying your property tax (a form of rent). The very term “real estate” comes from the Spanish “re-al” which means “royal land.” No one owns land free and clear in the USA.

We, as a nation, are slaves to chronic government debt. We have started to think of it as normal.

The United States of (Neo) Slavery.

We, as a society, are buying more than we produce, creating a trade imbalance which…you guessed it….enslaves us at all kinds of levels.

When our real (adjusted for inflation) wages don’t go up, they push credit cards on us to keep demand for goods and services up.

We are a debtor nation of debtors.

When the bubbles burst (and the gold bubble could be next), we are left “owing our souls to the company store” with no means to pay it back.

Hardly a way to live up to the ideal of “The land of the free and the home of the brave.”

My grandfather and my father-in-law, the two people in my family who rented (rather than bought) homes, for most of their lives, died richer than anyone else in our clan. They only bought homes when they retired–and paid cash.

Paying interest (along with paying taxes) is pouring money down a black hole.

And the tax credit on mortgage interest is a joke, unless you are really, really bad at math. If you think it’s a good deal, please, I beg you, never go to Vegas. I hear, all the time, “I don’t want to pay off my house because I would lose my deduction.” Good Lord. Go ahead and continue to pay more interest than you will ever get deducted from your taxes. Every month.

It happens to churches too. I have actually heard the phrase: “If you are serious about mission you will take out a mortgage on your church property.” The Crystal Cathedral is collapsing in a morass of 8-figure debt.

We lethally destroyed the British army at Yorktown, and won our freedom. We took a HUGE blood-hit as a nation to free our African slaves. We hit the beaches, facing machine gun nests and barbed wire, at Normandy to free Europe.

Only to enslave ourselves.

The government, in the early 21st century, made it far too simple to go massively into debt and the result is the Great Recession. Today in LA, tens of thousands of people are gathering outside a sports arena to get help with mortgages they cannot pay. It’s a huge nut to crack every month.

My cynical side believes that perhaps those in charge in the 1930’s were tired of labor unrest and demonstrations. So they made it (too) easy to buy a house, knowing that those with endless mortgage (Latin-French for “until you die”) payments were less likely to hit the barricades in protest. Big mortgage payments would keep us docile.

Ever notice how the unrest of the late 60’s and early 70’s was calmed with a deluge of easy-credit plastic cards? I owe, I owe, so off to work I go….

Debt is out of control in America.

We need a national makeover.

How Much Government to Have?

I have always considered myself a small-government guy.

Love going to Hong Kong where they run the whole place out of one modest building.

But let’s re-frame the question:

What endeavors do we want to tackle collectively, and what do we want to work out as individuals?

Building highways, defeating the Nazis, running an aircraft carrier, having a fire department, going to the moon, etc. are all things that we can do best collectively. The more people in the pool, the more we can do.

Education is an expensive item with much complexity. In small towns (and there are a lot of them) that are too small for competition, a collective community school seems like a good idea. In large cities, my sense is that vouchers and competition would work better. But vouchers assume that the government should have the money to hand out. What if it were totally privatized? How would we ensure that underclass children get the skills to enter mainstream society?

And public education does indeed create an English-language socialization for our bazillions of immigrants. Most Mexican kids here in Cali prefer speaking English. Only the schools have done that.

If it were totally up to the libertarians, why not extremist Muslim grade schools backed by oil money in every big city? Just one of the “options.” So unraveling the public schools’ semi-monopoly can have a dark side.

And as far as big government goes, Ronny and W did more to create that than any other president in my lifetime–it’s just that much of it was military. As I’ve said before, military spending counts as government spending and it’s one of the most expensive forms of big government. Eisenhower warned us about the military-industrial complex (right about the day I was born, by the way).

I’d like to do a major post on “rethinking education.” Another one on “rethinking military.” I think that these two big ticket items encourage outrageous spending based on obsolete world views. The educational and military situations have changed and we still build schools and weaponry based on former challenges that no longer exist.

It’s not only expensive–it doesn’t get the job done.

Too many American kids go to college and not enough of them get real job skills. Universities are not for everyone.

And why do we really need aircraft carriers and tanks? We need better ways of removing pockets of terrorist extremism and neutralizing crazy world leaders (North Korea). A pitched tank battle is way unlikely. As is a carrier war like the one we had with Japan. We also need to figure out how we are going to engage the Muslim world–much of what we now do just makes it worse. They don’t think as we do but we operate as though they do (rewards and punishment scenarios).

And then there are entitlements. It’s choking California. Many public servants here retire on more money than most in the private sector ever will make.

So how much government should we have?

Education, military, entitlements?

What are your thoughts?

What is the national debt? Whom must we repay?

From whom have we borrowed? Whom must we repay?

What difference does that make since the government sets the value of money by increasing or decreasing supply?

Is inflation a way of whittling down the debt? Is that why government always seems to produce inflation?

Is inflation an insidious form of extra taxation?

Is the national debt just a bank subsidy?

What are your thoughts?

Tax and Spend: Surprises in the National Debt

Spent some time on Wikipedia and elsewhere today.

Why? Listened to the State of the Union last night (it’s all the Republicans’ fault) and then listened to talk radio responses (mostly: Obama is an evil socialist who just might have really been born in Sweden, not Hawaii).

Wanted to find out for myself what’s really going on with the debt/deficit/spending thing.

Got surprised by a lot of things. The right/left divide has created an ideology-bound way of bending the truth about debt/deficit. Both left and right just see what they want to see. And they love to blame each other.

Facts suffer under this ideological pressure to prove one’s side as “correct.”

For instance:

Q: When (in the last 75 years) was the cumulative (real % of GNP) national debt the lowest?

A: During the Carter years. Lower than the 40’s, 50’s, 60’s, 80’s, 90’s or whatever we decide to call the last decade.

Q: When was federal spending the highest?

A: FDR’s reign. Nowhere in our history even comes close in federal spending as % of GNP. The Great Depression and WW2. Since then, it’s been less clear which side of the aisle is the biggest spender.

Also, the national deficit and the national debt are not the same thing.

For some of you this is 101, but apparently not for most Americans, a majority of whom are unable to distinguish correctly between the two.

The deficit is the annual gap between government income and spending; the “hole” in the annual budget, if you will.

The debt is the cumuilative total amount we owe (to whom is pretty unclear, no matter how much you look into it); the result of lots of deficits in a row.

I am a pro-family, free market, fiscal conservative (not that this matters, just want to be clear that there is no “liberal” agenda here) and was surprised to find out that the following presidents increased the total national debt, during their total time in office, by these percentage amounts:

Jimmy Carter: 45%

Ronald Reagan: 189%

Bush the Elder: 55%

Bill Clinton: 36%

Bush the Younger: 89% (not so bad over 8 years, considering the challenges he faced)

Obama: We don’t know yet, the first years for all of the above presidents were not indicative of the patterns to come for their terms.

Of course, Reagan, Clinton and “W” were 8-year presidents. The others were 4-year guys. Factor that in. Also, inflation is always a rich field for misinformation. It often gets left out or mentioned specifically in order to skew info. 1960 dollars are not the same as 2010 dollars, so sometimes “record” deficits are not really records. No president, in real GNP %, has spent as much as we did in WW2.

Same is true for population changes. America has about 300 million people (we’ll see how the 2010 nose count goes) which is almost twice as many as when I was born. Comparing the debt of a nation of 300 million to the debt of a nation with 150 million is apples vs. oranges.

It seems that, in real un-spun facts (which no one would dispute), the presidents who have most increased the National Debt of the US, in my lifetime, have been primarily–Republicans.

So how do the Democrats get the ‘tax and spend’ rep?

No matter how you cut it, no matter whose numbers you use, Bill Clinton was the most frugal of the presidents in our lifetime–and the prosperity during that era, in my opinion, may have resulted from that (my libertarian tendencies are showing). Not that I approve of him, his policies, or his views. But I like his deficit numbers. Who doesn’t?

The last recorded annual surplus (the opposite of an annual deficit) was during Clinton’s term. A Democrat.

My only explanation is that Republicans somehow don’t count defense spending as “real.”

In all fairness, Republicans aren’t ‘tax and spend,’ they just spend (and cut taxes). This opens up huge deficits.

Bush the Elder had the courage to call this “voodoo economics,” and he was right. He took it back so he could be Ronny’s VP, but it was true then and it’s true now.

Now granted, thank God that Ronald Reagan spent so much on defense–he bankrupted the Soviet Union without firing a shot; history will remember him for that. But he raised the stakes with money he didn’t have.

Glad he did it? Yes.

But it was real spending.

Granted, the social programs that the Democrats prefer are usually more or less useless in terms of real results (good intentions–lousy outcomes). But they cost way less than aircraft carriers.

And those who want to paint Democrats as socialists, ironically LOVE socialized military (obviously the most expensive form of socialism around). But somehow that doesn’t count.

Please hear me, I also, along with the Republicans, prefer a well-funded socialized military. A private military (pay the Hessians to protect us) would be a mess. And the corruption would be unbelievable. Interesting that no Republican would deny our men and women in uniform the right to socialized medicine…which they all have.

We fought a war (WW2) on two continents and destroyed massively evil regimes (Nazis, Fascists, etc.) in four years with socialized military. I am also very proud of our men and women today in the military–they are amazing.

Not that I have totally formulated how I feel about all this, but it’s important for social and market conservatives like myself to look at real numbers. We tend to want to idealize Republicans and demonize Democrats. Overspending is apparently an equal-opportunity employer!

The truth is important. In my adult lifetime, the big spenders have been the Republicans. The only difference is, they cut taxes at the same time–which piles up debt.

Military spending counts as real spending. And there is a real cost to being a warrior nation with extensive, long term, expensive deployment (Korea, Vietnam, Iraq, Afghanistan) in a hemisphere (Eastern) where our country isn’t (Western). Last I checked, with all of our valiant efforts, those four countries (where we have spent so much money and spilled so much blood) are still nut cases. Half of Korea is arguably the strangest place on planet earth.

If we are going to make real progress against big government, we have to look at real numbers. Including military spending.

How much of the world are we going to protect and how many failed states are we going to rescue from crazy dictators? Can we afford to straighten out the whole world? Where does it end?

Seems simpler to me. Agree on what % of our GNP we want to spend on the public sector (including military). Make real laws (Constitutional Amendment) against spending more that that. And then prioritizing, through democracy, how that fixed amount gets spent. Decide on how much of the globe we are going to police and stick to that. Let the Europeans worry about Kosovo, etc.

Living within our means.

My libertarian side says that our economy would flourish. And our military would focus on defending (which they do well) our homeland.

Just ideas. But since they’re my ideas, I think they’re right.

Unless you have better ones, which may well be true. Let me hear from you.