When America was great, we had a culture of independence and self-reliance. Most Americans understood that liberty and freedom included the responsibility to accept consequences for bad choices as well as rewards of good ones. Most Americans and businesses minimized debt, saved money, and bought insurance to protect themselves from unexpected emergencies.
For many reasons, that is no longer true. Today, most Americans and businesses are heavily in debt, and have little or no savings or insurance. They now depend on “somebody else” to get them through even the most minor setback or emergency. That “somebody else” is either credit card debt that can’t be paid back or the government.
Most of this is because of “progressive” government by Democrats and Republicans since the 1960’s. High direct and hidden taxes, high prices caused by complicated and confusing laws and lawsuits, and open borders cut incomes, and raised the cost of living. It is now almost impossible for most Americans to save.
At the same time, a popular culture of entitlement over work, discipline and achievement, and government welfare and bailouts for rich and poor alike discourages and punishes those who act responsibly and encourages and rewards those who don’t.
Even without coronavirus, this is not sustainable. The federal government was $23,000,000,000,000 in debt before the $2,000,000,000,000 coronavirus bailouts. That debt does not include approximately $100,000,000,000,000 more in unfunded social security, Medicare, and federal pension and retiree health care promises and guarantees. That debt comes to roughly $800,000 per taxpayer.
This does not include roughly $239,000,000,000 of New Jersey government debt and pension obligations or roughly $119,000 per New Jersey household. That means every New Jersey household owes nearly a million dollars in government debt on top of his or her personal debts.
In the past, we said it is unfair to put this debt on our children and grandchildren. It should be obvious that this debt is so massive that it will never be repaid.
However, as economist and historian James Grant often says, “Debt is always repaid, either by the borrower or by the lender”.
If the borrowers can’t pay, the lenders will pay by not collecting their debts. Economists disagree on how this will happen.
Some predict that creditors or lenders will get stiffed through hyperinflation. The government will simply give more and more bailouts until dollars are worth almost nothing. Then the government will pay off its massive debts with almost worthless dollars.
Some say the lenders will get stiffed through massive deflation. That will happen when a majority of Americans are unwilling or unable to pay high taxes that do nothing to run the government, but only pay for debt and Social Security, Medicare, and pensions for retirees who no longer produce anything in return.
Either way, retirees and everyone who directly or indirectly invests in government bonds or bond funds will get pennies on the dollar for their investments. Overnight, millions of people who now think they are wealthy and secure, will suddenly be broke and struggle to pay for their most basic needs.
“Progressive” socialists and Communists can’t wait for this to happen. A financial crisis that destroys the wealth of the rich and middle classes will let them claim that “capitalism” failed and that only a government with absolute power run by them can save the country. Like Communists a hundred years ago in Russia, today’s “progressives” socialists” will call wealthy liberals who help them destroy America “useful idiots who are no longer useful”. Radical leftist leader Saul Alinsky in the 1960’s often repeated what Russian Communist leader Vladimir Lenin said 40 years earlier: “The rich businessman (capitalist) will sell us the rope we will use to hang him with”.
Right now, few Americans seem to be thinking or talking about this. But that day is coming. Every bailout makes that day come sooner. That is another reason why it is so important to stop all bailouts and “stimulus” payments and get Americans back to work.
Let’s talk about these issues 9:30 AM any Saturday at our Breakfast Discussions. Normally we meet at the Shore Diner over breakfast. For the next few weeks or longer, we must meet online. If you have not done so already, please click above to subscribe to our free email updates. Or contact me for details and instructions. Thanks!.
Seth Grossman, Executive Director
453 Shore Road
Somers Point, NJ 08244