by David G. Woolley
Editor's Note: We promised part III of the Language of Nephi and we still plan to deliver. We're just building suspense and maybe some bad will. Sorry. Check back in a couple of days for what we think will be a very interesting post. Until then, please indulge us our economic view from the fiscal desk.
In this initial The Four Most Caring Words post we examine our current economic crisis by looking at some spending numbers. Then in Part II and Part III we'll have a look at similar economic booms and busts from the Book of Mormon. There really is some hard economic data in the Book of Mormon on nearly all the economic principles driving the current crisis. In the final post of The Four Most Caring Words series we'll detail the recommendations in the Book of Mormon for getting out of this kind of economic mess and how to avoid it in the future by adopting the heaven-ordained economic mind-set. Hope you enjoy our newest series The Four Most Caring Words. And don't forget to check back for our continuing series on the Language of Nephi. So many series, so little time.
According to Elder Robert D. Hales in a discourse given during last weekend's LDS General Conference we can't afford it are the four most caring words you can speak. Here at Top of the Morning we agree. Have a look at our video clip above which graphically illustrates our point. Debt has far too much power to trash free agency and when you get into the subtle and nuanced business of depriving your brothers and sisters of their free agency you're planting your feet solidly on evil territory. It’s no wonder the prophetic council for our day is to get out of debt and stay out of debt. Sadly, during the past fifteen or twenty years of economic plenty, households spent far too much on wants, over-extended their credit, and saved less than any other generation in the history of financial record keeping. It was a collective miscalculation that the good times were gonna keep rolling. We ignored the most caring words and told ourselves not to worry, we could afford it.
If debt is bad for households, can it still be a good idea for, say, the people who print the money? We don't think so. In fact we think that the only difference between micro household debt and macro national debt is the number of people it enslaves by removing their freedom to choose, essentially limiting their free agency, removing the path to self reliance and making large segments of the population dependent upon government dole. We're of the opinion that this massive spending is potentially satanic in the sense that it has the potential to enslave an entire country and possibly the entire globe by threatening the freedom to be self reliant, self determining and free. Permit us an adjusted-for-inflation dollar chat in support of our opinion.
The Bear Sterns bailout last October 2008 came in at around 29.5 billion dollars, give or take a few bonus compensation packages. Compared to the cost of building the Panama Canal at $790 million dollars or the Hoover Dam at $78 million dollars, that one bailout alone could buy Americans a Panama Canal for every state in the union with water to spare. That's a lot of waterway transportation infrastructure. Likely too much. If you add the $97.2 billion to bail out Bank of America and another $97.4 billion for the Chrysler and General Motors bailouts you've got the equivalent of about 350 Panama Canals. That's enough canalary for every river, stream and donnybrook on the planet. And that doesn't even include the $112 billion dollars for AIG. The AIG mess alone is almost as much as we spent on the entire Marshall Plan to rebuild Europe after WWII which cost us $115 billion inflation adjusted dollars.
Most of you may not have noticed the day the US government handed over $139 billion to General Electric. The CEO, Mr. Immelt, is on the President's economic advisory team which makes that bailout just a little questionable. It’s the sort of economic back scratching that has been the foundation for strong, healthy secret combinations since the day Cain slew Able. If you include the $235 billion dollars for Citigroup the running total reaches $710 billion dollars for big banks and corporations and we're just getting started.
The $300 billion for home owners who can't pay their mortgages is just slightly below the entire cost for World War I which came in at a whopping $324 billion. That's the entire cost. Them. Us. And every warring nation in between. Thankfully it’s not as much as the $400 billion handed to Fannie Mae and Freddie Mac last month. Those are the two government owned and operated lending firms that pretty much precipitated this entire mess and no one blinked an eye when congress last week passed out $220 million dollars in bonuses to the Fannie and Freddie people who recklessly approved loans to borrowers they knew could never pay them back. We were likely too busy being angry about the $218 million dollars in bonuses that went to AIG people to get mad at congress for slipping $220 million dollars of bonuses under the table to their friends at Freddie and Fannie. Or maybe we were just so inundated with bailout burnout to keep track any longer. But I can't help keeping track. The secret combinations just keep piling up.
These government spending numbers are ginormous. Anyone of these programs or packages would rank among the largest spending programs in US history. In fact, each one, separately, qualifies as record breaking for any spending program since the beginning of time. Nothing compares to this. Ever. Each spending program approved by congress and signed into law by our president, by itself, is right up there with the entire New Deal that totaled $500 billion in spending. Yes. The entire fifteen years of New Deal dole.
Now add to these spending programs the TARP money (Troubled Asset Relief Program) at $700 billion dollars and don't forget the $787 billion dollar stimulus spending package--that thousand page bill congress never read, and you end up with a grand total of codified into law, already spent 4.3 trillion mind-boggling dollars to date and that's only four months into this mess. That's eight times the cost of the New Deal and it even beats the all time record holder, World War II at 3.4 trillion inflation-adjusted dollars.
Unfortunately that isn't the end. Our president and congress have committed to spend up to 7.8 trillion more dollars in new programs over the next 8 years. That's new dollars, above and beyond what it would take to operate the government each year had we kept with our previous budget projections. Add it all up and you get a whopping 12.2 trillion dollars. That's twenty-four times the cost of the New Deal and we managed to spend it in four months not fourteen years.
With a budget like this we could Panama Canal across every land mass on every planet, orbiting moon, and asteroid in the solar system. Water or no water. There's simply no way to raise this kind of money. We don't produce enough goods and services in America to tax our way out of this spending predicament so our government has made the precarious decision to borrow from our increasingly wary creditor. China.
When all these Chinese debts come due, the US will likely be forced into some kind of bankruptcy. But since there is no such thing as a federal bankruptcy, and there’s no way on earth we can work our way out of this kind of spending morass, our money becomes worthless. We can't buy anything. We can't sell anything. We can't convince anyone in the world to loan us money or ship us goods, or food, or oil. It is a perfect economic storm of our own making. For years our government muted the four most caring words, and now those excesses of spending on too many things we wanted but didn't really need has precipitated a crisis, we are beginning to regret our collective political silence.
Or are we?
We know we can't afford all this spending. The government knows we can't afford it. And the government knows that we know we can't afford it. But still we passively persist in the engorgement of government through unprecedented debt on the fear that our propserity will collapse when we really should be tightening our collective spending belt. Really tight. Painfully tight. Budget-reducing, program-reducing, benefit-reducing, entitlement-reducing, lean-on-your-family, your-food-storage, and your-faith-in-God tight.
In our Top of the Morning opinion, the only solution, and it is a solution available to us through a narrow time-window of likely ten or twelve precious-short months before we pass the spending point of no return, is for government to stop spending now and repeal much of the obligations signed into law over the past four months. That or we may end up paying what I can only articulate as the dreaded double tax.
The government can't tax dollars we've earned, paid taxes on and put securely away in savings. At least not by the current tax code. So what do they do with those trillions of dollars Americans have earned and placed in savings accounts or taken out of the stock market and placed in safe haven financial instruments during the past six months of financial panic? They make your money worthless. That's right. The government does it by printing new dollars. Lots of new dollars without borrowing the value of those dollars from a creditor through the sale of US Treasury Bonds.
The government took the first step toward the double tax a few weeks ago when the FED announced they were monetizing the debt, essentially cutting the tie between the printing of money and the borrowing of the value of that printed money in the form of a government IOU, what money people call the purchase of government debt by the FED without tying that purchase to any debt instrument like selling bonds to foreign governments. Mainly to China. The initial result of monetizing the debt to fund the printing of money rather than funding debt through taxation sent gold prices soaring nearly $80.00 an ounce in less than ten minutes of trading. The second knell in this death march was more subtle than the intial monetization. Over the past three weeks the government has had a rather difficult time selling bonds. No one wants to buy them unless we twist their arm. American debt has become a rather high risk venture so the interest rates we pay to China have soared along with the price of gold. You can't blame China. Can a government that borrows from itself, essentially writing itself an IOMe, still be taken fiscally serious by any intelligent creditor for very long?
The more deadly result of all this printing of money and monetizing of debt kicks in when all those dollars are passed out and begin flooding the economy at the mall, the gas pump, and the grocery store. Inflation. Too many dollars chasing too few goods and services. This is not your normal annually adjusted, warm fuzzy, when-I-was-a-kid-a-candy-bar-cost-ten-cents inflation. Which is followed immediately by loss of faith in the dollar. An inflation induced panic. At the current rate of government spending, inflation could reduce the buying power of your savings in half, or a third or an eighth of its current value. Or worse. That’s what economists mean when they say the current level of government spending has the potential to wipe out family savings and make large segments of the population dependent on government dole. What no one is talking about is that may be precisely the aim of all this spending: to make you dependent on government programs rather than providing you with the tools and the freedom to become self reliant. And you thought the government couldn’t tax the money you stuffed under your mattress. Wrong.
We can't afford it. These are the four most caring words you can utter and you may want to make sure your government leaders hear them from you again and again until they begin to understand the terrible consequences of debt powerful enough to enslave all of us in a free-fall from economic free agency into an the abyss of economic dependency. For the remainder of our lives.
Join us for our next post in the Four Most Caring Words series when we examine similar boom and bust dilemmas in the Book of Mormon, beginning with the ancient economic principal that has been at the root of all heaven-ordained economies. Thou shalt not covet. That command, or the lack of abiding by that edict, reiterated by Elder Boyd K. Packer in last week's LDS General Conference Priesthood session, is at the root of all the ancient economic data coming out of the Book of Mormon. The hard numbers are in that restoration scripture if you know where to look. And we plan on taking a very hard look.
Until the next post, Top of the Morning to you.
Join author David G. Woolley at his Promised Land Website.