Politicians often find scapegoats for America’s economic woes. It is rare – if ever – that they point the finger at themselves. Yet, the basic cause of the current severe economic problem lies in the machinations of government.
It is clear to even a casual observer that Congress has abused its power to tax and spend. It has taxed success to subsidize failure. It has purchased votes by enacting an unending stream of entitlement programs, financed by taxation, foreign debt and a progressive degradation of the U.S. paper dollar.
This cynical boosting of consumption at the expense of production has resulted in the American consumer now accounting for some 70 percent of United States GDP. By consuming three times what it produces, America has become the largest debtor in history. The Administration now forecasts annual deficits of trillions of dollars for the next decade. This is all the direct responsibility of Congress.
The executive branch is also to blame. Under President Bush II, the United States entered a Global War on Terror, with a mission so ambiguous it was almost sure to bankrupt its executor. To this day, and despite campaign pledges to the contrary, President Obama continues to waste massive amounts of blood and treasure on two fatally flawed wars in Iraq and Afghanistan and on maintaining over 1,000 military installations in 135 countries abroad. No one should forget that the assumption of an international military role depleted the wealth of Rome, Great Britain and the former Soviet Union.
But at least the Republican president slashed domestic spending to compensate, right? Actually, Bush II passed cherry-picked tax cuts for special interests and spearheaded a new prescription drug program for Medicare recipients, at a cost of some $40 billion per year. This was a capstone of sorts to a century-long experiment in entitlement and intervention.
This federal spending went from a drag on the economy to a true albatross by the 1970s. After former Fed Chairman Paul Volcker and Ronald Reagan courageously bought our currency a new lease on life, Alan Greenspan was given the helm at the central bank. Colluding with Presidents Clinton and Bush II to simulate economic growth for political gain, Greenspan, and his chosen successor Ben Bernanke, unleashed a torrent of new dollars into the banking system, where they were leveraged to finance the largest asset boom in history.
We are now in the process of deleveraging from this boom. It is painful, but it represents an opportunity. A government genuinely interested in economic restructuring could be focusing on cutting spending, lowering taxes, and reducing corruption, instead of playing ‘pin the blame on the capitalists.’
Today, we are likely heading into the second wave of massive recession. There is a concerted effort by the government to blame the fallout from their schemes on the free market. You, the educated observer, should recall that the most rabid capitalists – Peter Schiff, Doug Casey, Jim Rogers, Lew Rockwell, Ron Paul – were the only opponents of the bubble economy while it was occurring. Meanwhile, those that seek to pass judgment on capitalism – Bernanke, Greenspan, Tim Geithner, Jim Cramer – celebrated the artificial boom and were shocked at the resulting bust. Why does anyone even listen to these fellows anymore?
No, this crisis is not a failure of capitalism, but the result of a sustained attack upon our capitalist system. If we allow it to be used as a pretext for more government control, we will endure a ‘lost decade’ like the 1990s in Japan.
To avoid this fate, taxes must be lowered, especially corporate rates. Instead, we are increasing taxes on businesses and individuals. The government must cease its corporate bailouts which subsidize failure at the expense of success. Instead, we are now giving away money not just to failing giants, but to reward those with less efficient vehicles – when they didn’t even ask for it.
Most importantly, the Fed must be controlled. Presently, in addition to its ‘open market operations’ that subsidize government and industry, the central bank is paying interest on the bank reserves it holds. This encourages banks, borrowing at nil percent, to lend at zero perceived risk to the Fed rather than accept the higher risk of lending to small and medium sized businesses – thus snuffing out any remaining embers of economic vitality. Meanwhile, the massive Fed-enabled borrowing by the U.S. Treasury is crowding out healthy American companies from debt markets.
It takes years to dissect the myriad ways in which the federal government cripples the economy. After all, politicians spend most of their time obscuring their true intent. Do your own research if you have the time and interest, but at the very least, do not uncritically accept the party line. Capitalism is to blame for the government’s financial crisis like a house is to blame for an arsonist setting it aflame. Congress, the Executive, and especially the Fed, have meddled in the market with impunity for thirty years. Now that the consequences – about which they were fairly warned – have brought our economy to its knees, don’t let them shift the blame.