The Fiscal Cliff and Our Rising Storm Clouds

Progressive governments worldwide have had a history of overspending. It is human nature to desire to overfill one’s plate in the cafeteria line—it all looks so good. And credit cards — how many people have trouble keeping them in their pockets when they are tempted by something they just have to have?
Now take that to the government level where the populist candidate for office knows that if he tells the voters they can have what they want at no charge to them, it helps insure his election. So he tells them, yes, and then worries how to pay for it later.
I was talking to a lady recently who has charge of her grandson and had to take him to the doctor. She then learned since the child’s mother is on welfare, all the child’s medical bills are paid by the government. The grandmother told me, “this is great – no bill.”
The U.S. has been on that path, off and on, for the last century, and in the process we have accumulated at the federal level a mountain of debt, so much so that the Chinese don’t think we’ll be able to pay them back and have de-emphasized new investments in U.S. Treasury bills. As I write this, the people in Washington are slugging it out over what to do about it and the related matter called the Fiscal Cliff.
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The storm clouds he saw over Mexico have been gathering over the US; this last year
alone three-quarters of the US deficit was financed by just printing money.
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If we were children we could say, let the parents worry about those things, but unfortunately those things will dramatically impact our children’s lives. Most of us have learned to live with some debt but we see what happens to people who overindulge—and that is where the nation now is.
Between the national debt, Social Security, Medicare and federal employee’s future retirement benefits, the U.S. government liability is $86.8 trillion, or $279,000 for each man, woman and child in America (per Chris Cox, former chairman of the Securities and Exchange Commission, and Bill Archer, former chairman of the House Ways & Means Committee). To this rapidly growing debt we are now adding Obamacare.
I grew up 43 miles north of the Mexican border, and Mexican banks near home would encourage us to deposit our money with them, offering higher rates of interest. My dad told me, “Keep your savings in the Farmers & Merchants, because you don’t know what the peso will be worth tomorrow.”
I responded, “But Dad, it has been 12 ½ pesos to the dollar for years.” He simply replied, “It’s not worth the risk.” He was right; over time it went to 8,000 to the dollar. The storm clouds he saw over Mexico have been gathering over the U.S.; this last year alone three-quarters of the U.S. deficit was financed by just printing money.
According to former U.S. Secretary of the Treasury George Shultz, “If we stay on the current path, they (the financial problems) will wind up being completely unmanageable, culminating in an unwelcome explosion and crisis.”
To the grandmother who was happy about no doctor bill: Yes, you got no bill, but your grandson will pay an egregious toll.
Art Hall, the publisher