But What of the Future?

Every government "stimulus" and every "loan" is simply a tax on tomorrow. When we use a credit card or get a loan to buy something, we have created a future liability that will will impair our ability to consume more in the future. This, of course, assumes our wages don't rise as we would all like to think they are going to do.

When we take on massive liabilities that are beyond our ability to pay, or if we lose our ability to pay through job loss, etc., we end up defaulting on the debt or have to curtail all other spending to try to pay down the previous debt. This is the tipping point that the private economy in the U.S. (and other nations) finds itself in right now. We are at the saturation point where we are unable to take on more debt. This is due to a combination of too much previous debt, a collapse in the price of the assets that back the original debt, a plateau and/or loss of earnings and banks being hesitant to loan more money.

This is a normal long-term cyclical phenomenon that is due to a complex interplay between social mood and prevailing economic conditions and structure (availability of credit/debt, job market, free vs. controlled economy, etc.). The last 3 decades have witnessed a debt bubble of historic proportions in the United States. People who literally were dead, illegally in the country, in jail or even household pets would be sent pre-approved credit card offers in the mail. Loans were made for houses with no money down and with the mortgage on the home 10-12 times the persons' annual gross income.

This historic credit market reversal into contraction is a secular event that has already started and cannot be stopped by apparatchik decree. And it's not that our leaders are not trying. Cash for clunkers is a perfect and textbook example of the asinine and counterproductive means governments will go through to try to "get the party started again."

But this government debt and "stimulus" is much like the private debt orgy that preceded it: it "steals" from the future. The more we squander now at a time when we should be saving and paying down debt, the longer and harder the ultimate retrenchment will be. This isn't rocket science, it's basic math.

People think that somehow when governments do it, that it is magically different because things are couched in terms like "stimulus" instead of "robbing Peter to pay Paul," "bond sales" instead of "selling the country into hock," and "creating jobs" instead of "spending the money of tomorrow's entrepreneur today."

In the end, it is all just pulling forward future demand and it can be wasteful and reckless when done in the private sector, but it is almost always reckless and wasteful when done by the public sector (because of the waste and fraud inherent in government proceedings). The more we spend now to stave off what must happen now, the longer we draw the process out and the more we weaken our economic future. Nothing is free even though it may seem like it right now.

Those who are unconcerned with the future are usually unconcerned with the past and are doomed to repeat it. Governments have tried spending their way out of trouble when the debt bubble hits the wall before. Many, many times. But it has always failed and always will fail because the premise of Keynesian stimulus is stupid and counterintuitive. It is taught as dogma and only the methods and amounts of stimulation are debated in mainstream circles. Much like our War on Terror is an unwinnable war because a military tactic is not an enemy, taking on more debt to fix a "too much debt" problem cannot work and never will.

In the end, such fiscal insanity serves its purpose. It keeps the masses voting for he or she who promises the most bread and circuses. And when the reality that what our government is doing cannot and was never even meant to work finally sinks in with a critical mass number of Americans, most of those in government who were responsible for increasing the size of the mess will be long gone. It takes a hypervigilant, educated and engaged citizenry to safeguard the principles of democracy. Since that ain't gonna happen any time soon, the plundering (oops, I mean "stimulus," "mandatory health care that privatizes any profits left standing and socializes all the expenses" and "job creation") will continue unabated and the fiscal madness and government intervention into all aspects of the economy will increase, not decrease.

Any thoughts of something more than a brief cyclical recovery in this atmosphere are sillier than Keynesian economics itself. Japan's 20 year ongoing economic depression is still going strong - do we really think we're going to do better as we continue to make even bigger mistakes than they made? An important question is not asked enough by those in positions of power who continue to squander the country's wealth and future borrowing capacity: but what of the future?