We Can't Really Cut Government Spending and Survive, Can We?

Vince Hughley asked for my thoughts on this graphic.



The graphic seems to think that it is better to continue spending money we don't have instead of allowing the deficit to go down.  Keep in mind that allowing the deficit to go down does not mean that we are balancing the budget.  We are still going into debt, but not by as much.  It's like the $100 you save by putting a $900 stereo on your credit card instead of a $1,000 stereo.  You still added $900 to your debt, so you haven't really saved anything.

People have lost sight of the reason that the federal government needs money in the first place.  If you go back in time to the early days of this country, the federal government actually had very few responsibilities.

It was to provide national protection through the armed forces.  It was to facilitate trade between the states.  It was to facilitate international trade.  Our navy was to keep trade routes safe for our traders internationally.  Do you see a theme developing?

It was to provide a mail service that would facilitate communications and trade nationwide.

That's pretty much all our federal government was to do.

The government was restricted in how it could carry out its activities through the rights that were granted to the people and to the states through the Bill of Rights.  These rights were to ensure the security, sanctity and freedom of the American people.

Given this, how did we get to where we are now?

How is it that the federal government feels justified in spending 1/3 of our GDP on its own programs?

We did not even have an income tax for our first one hundred years of existence as a nation.  Did you know that?  We had tariffs, duties and excise taxes on imports, and we had a national sales tax.  That was it.

The government did not give to charity.  Charities received their money via donations, and the government allowed them to help the needy.  Most educational services pre-Lincoln were provided by local churches or mothers who would teach their children at home.  Most women did not work outside the home at that time.

What changed?

Well, in 1913, we gave control of our money to a privately held corporation called the "Federal Reserve."  The Fed, in order to be able to act efficiently, does its actions in secret, without any oversight from the Congress, the president or anyone else.  One hundred years later, our nation is trillions of dollars in debt, and the Fed cannot account for over $16 trillion of money in circulation.

In the 1930s, in an effort to save people who were not prepared for the Great Depression, FDR signed a bill into law that created Social Security and Medicare.  This was a Ponzi scheme that has ultimately led to embezzlement by the federal government of these funds and creative accounting that uses the balances in these funds to show the deficit as being smaller than it is.  The system currently has about $90 trillion of future benefits owed that will not have any funds when these payments are due.

The government eventually converted the postal service to an independent organization instead of a government department.  It is the third largest employer in the nation behind 1) The Federal Government (surprise!) and 2) Wal-Mart.

The government decided that it had to tax incomes, which the US Constitution specifically forbade.  The Sixteenth Amendment passed in 1913, which you may recall was the same year that the Federal Reserve was created.  THIS WAS NOT A COINCIDENCE.

OK, so back to the question of cutting government spending.

Right now, whether you like it or not, all decisions about national politics are made by bankers.  They fund the elections, so they own the politicians.  The run the Federal Reserve, so they control ALL of the money in America.  If you don't believe me, remove any denomination of US currency from your wallet and see to whom it belongs.

If you look at any current bill, you will see that it is labelled as a "Federal Reserve Note."  Have you ever thought about what that means?

It is a note.  A note is a promise to pay (think Promissory Note).  The money you hold is not money at all!  It is simply a promise by someone else to pay a fictitious amount in exchange for the bill.  Nothing backs the currency.  It only has value, because people agree to use it in trade.

For many years, our nation issued gold and silver certificates.  You could convert the currency on a 1:1 basis for gold or silver.  In 1933, FDR took us off the gold standard.

FDR did something unique.  He made it illegal to own gold.  If you owned gold (other than jewelry), you were REQUIRED to sell it to the government at a price the government set.  He bought all the gold held by Americans.  He then raised the price of gold by 20%, which devalued the currency by 25%.  Nice way to start, eh?

In 1971, Nixon stopped allowing US Dollars to be converted to gold.  At that time, the valuation of an ounce of gold was fixed at $35.  Spot price as of this moment is $1,338 per ounce.  Since 1971, the USD has lost 97.38% of its 1971 value.

Now, why would anyone want to allow this to happen?  Well, follow the money.

Who owns the most gold in the US?  The Federal Reserve.  Who would benefit most from an increase in the price of gold?  The Federal Reserve.  Who killed JFK?  You get the picture.

Now, back to taxes.

Since the federal government mismanages everything it touches, those in Congress over the past 125 years have decided that the federal government should be as involved in everyone's lives as possible.

There are two ways to accomplish this.  Either, make people dependent on the government or make people give everything they own to the government.

Making people dependent on government is not hard.  Government Employment, Welfare, Food Stamps, Section 8 Housing, Health Care, etc. can accomplish that.

Making people give everything they own to the government is harder.  You have to raise taxes.  You can only raise taxes without riots if you act like you are giving something back (Entitlements, Obamacare, etc.).

This graphic illustrates that:

1.  People go HUNGRY (Means no more food stamps)
2.  People lose HEALTH CARE (Funny, I thought that the reason we need Obamacare is because people don't have health care.  Actually, they are referring to a loss of free Medicare.)
3.  People LOSE THEIR JOBS (Teachers, police and safety inspectors are mostly employed by state governments, local governments and school districts.  Most of these are not federal jobs and are not directly affected by a lower federal tax base.)
4.  Roads and bridges fall into disrepair (Again, only federal highway projects would be affected by this, but it is more a matter of priorities.  The money we spent in Iraq and Afghanistan to build schools, highways and bridges could have been spent here instead.)
5.  Children receive FEWER educational opportunities (Do you really think we are doing a good job in this area now?  You must be nuts!)

The one point that makes sense is that THE DEFICIT GOES DOWN.

If your family is deeply in debt and you want to get out of debt, the fastest way to do that is to cut spending and do without some of the luxuries that you enjoy.  People forget how much of their life is spent on luxuries. The following are luxuries:

1.  TV
2.  Telephone
3.  Personal transportation (car, motorcycle, boat, etc.)
4.  Fancy clothes
5.  Washer/Dryer
6.  Air conditioning
7.  Electricity
8.  Running water

You might take issue with #7 and #8, but much of the world survives without that.  I could make a longer list, but you get the idea.  Anything beyond shelter and food can be considered a luxury.  Your wife might not be happy, but some might consider her a luxury also.  Just kidding!

Now that over 50% of Americans depend on government in some way or another (soon to be 100% with Obamacare), and the rest are forced to pay for everyone else, it is only a matter of time before the payers surrender and join the ranks of the payees.

The reality is this.  If we could get the federal government's hand out of the pockets of hundreds of millions of Americans and American businesses, and replace the current tax system with the FAIR TAX (The flat tax is regressive.  The FAIR TAX promotes savings and investment, which we need in this country), employment would increase, the tax base would grow, fewer people would need outside assistance, and our country would put itself in a position to build back into being a world leader.

This will probably be the last time Vince asks for my thoughts on a subject.  :-)

Ask anytime...

Special: Bailout Update

Early edition this week. I just received information on where some of the early bailout money went, and how it is allocated. I seem to recall hearing that the monies were to be invested in such a way that taxpayers would be repaid as quickly as possible by those to whom help was given. I didn't believe it then, and given the new information that I have found, I certainly don't believe it now.

Here is a partial listing from the original $350 billion in allocations:

• $250 Billion for purchases of Senior Preferred Shares under the Capital Purchase Program (This is the money we are supposed to get back right away, when things turn around)
• $ 20 Billion to Bank of America - The government is to share in the losses on a $118 billion package of assets. (If we are sharing in the losses, how do we get this money back later?)
• $ 20 Billion to Citigroup, same as BofA above, where the government (you and me, folks) will share in losses on a $301 billion package of assets. (Again, same question as above.)
• $ 5 Billion to Citigroup to cover additional losses with TARP funds.
• $ 40 Billion to AIG Insurance. (This is certainly money well spent!)
• $ 21 Billion to prop-up the US Auto Industry. (Of course, the industry doesn't have to make any substantive changes, but GM is offering $20K buy-outs to ALL employees and a $15K new car voucher, if they will retire or quit early. Why not just offer $20K to every taxpayer to buy an American-made car?)
• $ 20 Billion to the Federal Reserve to improve consumer access to credit. (Really? Do we need this? Isn't loose credit what got us into this mess in the first place? Also, doesn't the Fed already control all of the money supply?)

This just explains where about $376 Billion of our dollars went. With over $1.5 Trillion to $2.0 Trillion in total bailout money, which will be added to our current $1.0 Trillion deficit; where, when, and how will we ever pay this money back?

The answer is, we won't! The Fed will have to print new money in order to make these payments on behalf of the government. They are trying now to sell $2 Trillion worth of Treasury Securities in order to fund these programs. Who still has money left, and who is going to lend to the US government now? Good luck with that!

This is just another example of your government screwing you big-time! While you can't fight back against the government, you can use the bailouts of financial companies to your benefit.


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Since the Federal Government is giving so much money to financial institutions, they have been mandated to work closely with debtors to work out arrangements for debts. Since the government has agreed to cover the losses, it only makes sense for an intelligent consumer (that would be you, dear reader) to take advantage of this situation for your own gain. After all, it is OUR tax dollars that these companies are receiving. Take advantage of the help that is being afforded you. Until next post, I wish you well, and I hope that this information will help you. Spend wisely, and sleep well!

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Stimulus Package: WillI It Fix the Economy?

I am saddened by the fact that the people we choose to lead our country are trying to fix the economy when none of them has any clue about basic economic principles.

If you want to fix the economy, here is how you do it:

1) Let the banks fail. We already have the FDIC and Federal Reserve to bail them out and protect depositors.
2) Let non-competitive companies fail. The automakers have not been competitive for years, because the unions have ruined their cost structures with inflated salaries and unrealistic retirement and health benefits.
3) Give money to the consumers, and let them choose where to spend it. Let the people vote with their wallets for which companies and industries are offering the best combination of value and service.

The United States was established on sound economic principles and good morals. The productivity and ingenuity of the American people has long been our steadfast advantage. Unfortunately, our lame educational system and overzealous (greedy) unions have conspired to encourage stupidity and laziness.

The founding fathers would probably puke if they saw us today. We have gotten fat and lazy, and we have lost our ambition. People did not travel half-way around the world over 300 years ago, to an uncertain future, so that they could have a job at the local 7-11.

The Free Enterprise system is geared toward business ownership, not indentured servitude (jobs). The American Dream is not about home ownership, it is about business ownership.

Our people have been deceived, and it is about time that some REAL change is made. The country is destined to fail, and this fact is belied by the government trying to steer the economy by spending money it doesn't have.

Get ready for high interest rates, a very tough credit market, a continued housing crash, and rampant inflation. The government will have to start printing money in order to cover its debts. This will increase the prices of imports, drive inflation, cost jobs, and reduce purchasing power.

I hope everyone is happy with the CHANGE for which they thought they voted.

BTW, where is the change, when all I see is the same old people being appointed to important jobs? What changed, exactly? Democrats are still spending money, and Obama lied about the tax thing (we all knew he was lying, right?).

While you are waiting for the economy to correct, fix your credit!