Thursday, 25 May 2017
Highlights

Jefferson's Metaphor #36: You can no more spend your way out of debt than you can eat you way thin. It defies the laws of economic physics. So what's the go forward strategy? Here are a few to cogitate.

Educated decisions based on full disclosure: Popeye's friend, the gluttonous J. Wellington Wimpy, was made famous for saying, "I’d gladly pay you Tuesday for a hamburger today." At least he addressed the cost of the burger with a repayment schedule. That's the way it ought to be. If our politicians were to use this same philosophy, it would sound more like, "How about a hamburger for you hungry citizens?” Sure I'll take one. Oh wait. What do you mean it will cost $15 each and you are going to put it on the country's credit card and charge us interest for the next 30 years? Nah, forget it. I can feed myself more efficiently and still have the freedom to choose what I like to eat without paying any interest. Don't make me say it. OK, if you insist: There is no free lunch.

Feel the pain now to understand the consequences: When the awareness of wearing seatbelts came into the mainstream, the cars of the day made the most annoying buzzing sound when the driver wasn't wearing a seat belt. Albeit, the loud buzzer was a punitive and effective way of motivating the driver to do the smart thing - wear their seatbelt. Nowadays, my car has the most pleasant tone that really isn't that motivating. Would Pinocchio and the other boys have spent the afternoon at the "carnival" if they knew they'd be turned into slave jackasses?

"Blackmail the citizens: by cutting the most visible and vital services. "Sorry folks, we’re cutting back on air traffic controllers. Have a safe flight."

There is no effective mechanism to shrink government: Even when the rest of us have taken an economic hair-cut, the recipients of social security, welfare, etc. have automatic increases built into the National Budget. Shall we all feel the pain equally? Prior to expanding government, let us inquire about the exit strategy. When will the need for this program cease? When will the flow of dollars stop?

The ineffective tools of choice include - Across the board budget cuts: Imposing a (fill-in-the-blank)-percent across the board budget cut is a short term fix, at best. If there is a function/department that's not necessary, cut it out completely, don't just make it smaller. Did you know there are still government-paid tea tasters on the payroll and we're still paying farmers not grow crops? I'd like to say it isn't so, but it is. Why not start paying General Motors to not make large SUVs? (I realize that joke is only half funny because that's effectively what's happening now.)

Blackmail the citizens: by cutting the most visible and vital services. "Sorry folks, we’re cutting back on air traffic controllers. Have a safe flight." We finally crumble under the pressure and say, OK ! OK! Increase taxes. We really ought to consider cutting out the Transportation Security Administration (TSA) where "Your safety is our priority". I think their motto ought to be, "We're creating stupid rules that are arbitrarily enforced by otherwise unemployable high school dropouts with the appearance of safety." By the way, thanks for adding an airport tax to my airline ticket. Thanks for confiscating my fingernail clippers and factory sealed bottle of water so I can pay $3 for the same bottle of water after passing through the security check point.

"The Federal Balanced Budget Amendment.... doesn’t address the overall size of government."

At the state level, the Legislative filibuster/ blackmail used by our "friends" in Sacramento isn't working so well. Instead of playing together nicely toward a common goal for the citizens (remember us?) and addressing the core issue, there is new talk of reducing the number of minimum votes to gently pass budget increases. The "change the rules by changing the balance of power" strategy stinks. What they are effectively saying; "if I can’t have my golden goose now, I'm changing the rules."

Jefferson’s Editorial: Frankly, I commend the Governator for not negotiating with the budget terrorists and their incremental pork. Note: California differs from the federal government in that bond issues (incurring debt) must be approved by the voters. In the case of the federal government, they simply issue debt as a result of the budget and subsequent incremental legislation.

"I propose all elected officials have at least 20 hours of CPE annually in finance and economics... another 20 in human psychology.... You know, the money and the people thing. I’d throw in another 40 hours for ethics."

The Federal Balanced Budget Amendment (of which the implementation keeps getting deferred) has both merit and limitations. It only addresses the equalization of spending and tax collection. That's good.

However, it doesn’t address the overall size of government. That's bad. There is nothing that will prevent further expansion and increased taxation or debt accumulation. Take our friends across the pond in the UK, as the epitome of expanded government and creative ways to fund it. They have a higher tax levied on the operator (the citizen) of a color TV, than on the operator (citizen) of a black and white TV.

"Pull the curtain out from behind the wizard.... politics (poly meaning many, and tics meaning blood suckers)... I’ll buy votes today and have the next generation of constituents pay it back later, after I’m out of office."

Up the anti on our elected officials: Just about every other profession (excluding attorneys) requires Continuing Professional Education (CPE) to keep their license. I propose all elected officials have at least 20 hours of CPE annually in finance and economics and another 20 in human psychology (child development, addiction, etc.) You know, the money and the people thing. I’d throw in another 40 hours for ethics.

Pull the curtain out from behind the wizard: The problem with politics (poly meaning many, and tics meaning blood suckers) is this: I’ll buy votes today and have the next generation of constituents pay it back later, after I’m out of office.

"Our government is doing to us (the citizens) what the banks did to unsuspecting borrowers (currently in default because they lacked the capacity to pay)."

Here’s my fix: List the National Debt interest separately on the tax return. Dear citizen you owe $5,000 and another $1,000 as your portion of interest on the National Debt. Your total income tax bill is $6,000. I advocate aligning the consequences with the action or activity.

I'm for saying all federal expenditures should be paid out of the current year's budget. Certain capital projects, like Hoover Dam for example, are pretty costly and would create a huge distortion if all costs were absorbed in a single year. This is much the same way most citizens couldn't pay for their house in one year. I do advocate issuing bonds, for a specific project for a fixed period of time, not to exceed 10 years. Casually issuing Series EE bonds isn't going to cut it anymore.

"The Cruel Irony... my generation is the first generation in the history of the US that will have a lower standard of living than our parents."

The Cruel Irony: Our government is doing to us (the citizens) what the banks did to unsuspecting borrowers (currently in default because they lacked the capacity to pay). The demographic reality is that my generation is the first generation in the history of the United States that will have a lower standard of living than our parents. One of the biggest contributing factors is the National Debt. The government borrows money, driving up interest rates. The National Debt is mortgaging our children's and grandchildren's future.

"How Obama Handed Your Children, Grandchildren, Great Grandchildren, Great Great Grandchildren..... a Big Fat BILL - The Monster Within."

The Epilogue: I have found that when I get one area of my life in order it also helps me apply the same lessons elsewhere and get other areas of my life in order. My objective is to educate and motivate, not shame.

"We need two types of leadership: The Fire Chief to put out the "current forest fire" and Smokey the Bear to prevent future "forest fires."

I've tried to parallel issues with similar behaviors and relate them to the National Debt as an inevitable economic dragon that needs to be slain. If you're OK with the current state of affairs and the direction this country is going, then keep doing what you're doing because you are going to keep getting what you're getting.

The good news: Our national leadership is talking about it. The bad news if we don’t quit overspending "cold turkey" we are going to relapse. We need two types of leadership: The Fire Chief to put out the “current forest fire” and Smokey the Bear to prevent future “forest fires”.

In summary: the National Debt is a colossal problem. It grows so slowly and quietly. Our economy is currently in stage two economic cancer. The good news; it is curable with early treatment. However, without aggressive changes in behavior, the National Debt will eventually lead to our demise.

Jefferson Pinto is a retired CPA, holds an MBA from one of the finer accredited universities in this country, and is the VP of corporate operations for his day job.

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