"When you pay social security taxes, you are in no way making provision for your own retirement. You are paying the pensions of those who are already retired. Once you understand this, you see that whether you will get the benefits you are counting on when you retire depends on whether Congress will levy enough taxes, borrow enough, or print enough money...." ~ Allen Wallis
Does Anybody Really Know Where the Money Comes From?
When I'm not enjoying some classic R&B (e.g., Cameo or Anita Baker) or a heaping helping of Smooth Jazz (e.g., Brenda Russell or Boney James), or basically anything from a little-known, wonderfully talented, and completely uncategorizeable singer/songwriter named Alana Davis, I get into Classic Rock. From my standpoint, few old school bands are as classic as Chicago. And it is from an old Chicago song ' 'Does Anybody Really Know What Time It Is?' ' that the title of this essay is taken. (In fact, the song is so old that it was recorded when the band was named, 'Chicago Transit Authority' in that period of time before the City of Chicago sued them for the name and they had to drop the transit authority part.) Anyway, the second phrase of the chorus is just as germane, if not more so, to my subject because it seems to me that either one or the other just has to be true ' either nobody really knows where the money comes from, or nobody really cares.
Whatever Happened to 'Just Say No'?
There was a time when the myth of fiscal conservatism permeated the legend of Republicans long dead. At one point in time, people would brag about being 'a Goldwater Republican' and keeping government spending on a short leash. From conversations with my own conservative acquaintances, I know that there are still Republicans who think their party is all about controlling spending. (No, I didn't check to see if this opinion was a drug-induced hallucination, but I have my suspicions.) There are also those Democrats who can regale you with stories of how Clinton , when he wasn't enjoying a fine cigar, ran a budget surplus and whatnot.
We all know (or should know) that Ronald Reagan ' widely believed to be the last true example of a fiscal conservative ' increased the size of the government. I can assure you that the overall size of the government grew under Bill Clinton too. Taking those two personalities of historical fact into account, it would seem that now is about the time to utter those near-famous words, 'fiscal responsibility ' we hardly knew ya!' Not hardly.
Figure 1 ' Total Public Federal Debt (click chart for updated numbers)
As the chart above shows, during Bush's reign, US foreign debt rose from $5.6Tn to around $8.4Tn. (That's an increase of around $2.8Tn!) Now, some of this total is interest, some of it is due to a "normal" increase in debt, but there's also Medicare/Medicaid, financing the war on Iraq , other defense spending, etc. At what point do we start to wonder where the money is coming from, or how long we can borrow it like this? I am no expert, but from what I hear, creditors have a tendency to want their money back eventually. Might it be that the U.S. is a good credit risk because it has a never-ending supply of money? I think the answer is yes, and I think that never-ending supply could more accurately be called 'taxation livestock' ' in other words, us.
I'll never be mistaken for an economist, but it seems pretty obvious to me that no normal organization can continue to just borrow and spend money this way forever, no matter the number of unwilling donors available. Just as important however, is the fact that not only is 'obvious' government spending out of control, but also the 'hidden' government spending that comes from the printing of fiat currency. And almost as if we were learning at the knee of the master, the spending and borrowing of otherwise 'normal' Americans is also way out of whack. Not that anyone appears to notice. The M3 measure (the wide measure of the money supply) hasn't been reported since March this year ' 2006. And I'm far from the only person to start wondering about all this. Much more knowledgeable folks have asked similar and better questions not that long ago. Conspiracy theories aside, at some point we need to get back to basics ' does anybody really know where the money comes from, and does anybody really care?
As a smaller-scale example, let me relate an episode of fiscal promiscuity from my own town, Rochester , NY , dating back only months ago. I was at a citizens' meeting regarding political responsibility and whatnot. We had just finished discussing the business plan for our new 'fast ferry,' which struck me as lacking in a few necessary details ' for instance, a way to actually make any money. (Between that meeting and the publishing of this essay, Rochester 's ferry operation shut down, due to the fact that it was losing money hand over fist. Go figure.) Two of our local, state-level legislators were in attendance. Someone brought up the subject of the new 'performing arts center' that was being planned for our downtown area. (I still have no idea why this is a good thing, but that's beside the point.) The center was slated to cost around $50 million. It was unclear to me where that money was going to come from, other than, well, my pocket, but I even let that slide initially. Instead I rose and asked if anyone had figured out what the 'M and O' costs for the new center would be and how they would be funded. (M and O is capital project slang for maintenance and operations ' the fixed yearly costs of any building of this type.) No one had a clue. The point, according to our trusty state senator ' who actually referred to himself as 'the king of pork' ' was to make sure Rochester got that money, versus some other city! As I looked around that room of folks nodding approvingly, I could have sworn I heard the Twilight Zone theme music playing softly.
But my local legislators are far from the only politicians to have such thoughts. In fact, if anyone can identify any candidate for office or office-holder outside of Ron Paul who consistently votes against spending more government money, I would be shocked. Yet the overwhelming bulk of money used by the government comes from the taxpayers, which is us. Not only that, but the money used to pay the interest on the borrowed money comes from us too ' in the form of inflation. Still, all who claim to want to improve the country seek to do so by spending more money. How can something so obvious be so obscure to so many? Simply put, the government has no money except what they take from us. So spending money on crap like that downtown arts center ' not to mention all the other programs financed by state money ' is just crazy. Not even knowing how much it will cost to operate the building after it goes up is just part and parcel of the lack of oversight in most of these cases. Clearly, fiscal management is not high on the priority list.
So maybe we don't care so much about complicated stuff like national budget deficits and whatnot. Certainly when it comes to something as basic as property ownership and what it means to not only the stability of society but also our personal financial picture, we focus on details, right? That might be true except for the fact that nobody in America owns anything of substantial value.
They Can't Take That Away from Me?
OK, so maybe you own your television, your shoes, and that kind of stuff. What about your house? Fuhgettaboutit. How about your car? Not so much. If you doubt this fact, stop paying your property taxes on your house or your registration and licensing fees on your car. They might let you keep your car, but they will most assuredly take your house away. Interestingly, they will subordinate any loans on the property as well! So the people who loaned you the money to buy the place take a back seat to the people who did nothing but get paid monthly after you bought it. I don't know when it became true that you really don't 'own' your real property, but whenever it happened, we effectively became indentured servants to the State, except that we can't ever pay enough to be free. (Yes, I know 'indentured servant' has a special meaning. Believe me ' I really know.) But the simple fact is we all rent everything we have from the real owner ' the State. Doesn't that just make you want to stand up and salute?
So we have to pay, in perpetuity, for everything we supposedly own, just so the gubmint can have a steady stream of income to buy stuff they don't need at a price that's generally too high for reasons that are, more often than not, suspect. And when that pile of cash isn't enough ' and it never is ' the State simply borrows and spends money they don't even have. And we have to pay the interest on that debt as well. (Actually, people not yet born will have to pay that money, if the whole economy doesn't violently implode first.) That's a small price to pay for a society wherein the best qualities of man are celebrated and protected, isn't it? No. But thanks for asking.
When it comes to getting involved in the lives of others, the State always takes a good long look and employs the most logical means, don't they? Of course not. The examples of waste are legion. And from all indications, it's only getting worse as time goes on, not better. The latest estimates are that the Iraq War is costing something like $200M per day. Call me a nit-picker, but if we end up pulling out before we 'win' (and we very likely will), and the safety of Americans from global terrorism is not better off as a result of the invasion (and it very likely won't be) it seems like somebody should have some 'splainin' to do, and something should be radically changed about the State's way of doing business.
Don't hold your breath.