Our current political leaders--and their sycophantic hangers-on such as New York Times columnist and recent Nobel laureate in economics Paul Krugman--do not care about tomorrow. They are concerned only with today. Yesterday provides no guidance to inform us of the likely consequences of today’s actions; furthermore, tomorrow never comes, so who cares? Thusly, our government piles debt upon debt with the promise of even more debt in order to bribe the people to remain quiet about the loss of their liberties.
The latest insult to our intelligence is the promise that replacing our current healthcare system with one run by the government will provide not only more access but cheaper access for all. One need only observe that if this were the case, why those of us who are satisfied with our current healthcare plans must sacrifice them in order for these unnamed others to receive better care. Is there something about our current, private care that deprives others of care? Of course not. If government wants to create a new, expanded welfare program, let them sell it to the public in a straight-forward manner as a new spending program that must be financed out of new taxes or cuts in other government programs. Since government is not willing to do this, we are left with the conclusion that providing a new welfare program is not the real purpose of the government’s healthcare proposal. The real purpose is to amass new, expanded powers for government to rule over us. The phony “crisis in healthcare” that must be solved through complete government control of the industry can be explained in no other way.
The Ticking Debt Bomb Will Cause the Dollar to Collapse
But this essay is not about the attempted government takeover of healthcare, but about how government will finance such an undertaking. In the preceding paragraph I said that government can increase taxes or cut current spending on some other program to finance its healthcare adventure. But government has a third, more stealthy way--it can create debt. And this is what government is doing on an unprecedented and unsustainable scale. Total U.S. debt as a percentage of GDP is close to 400% and rising rapidly. As Frankfurt economist Thorsten Polleit explains in his recent essay “An Unsustainable Path to Debt Expansion” (http://mises.org/story/3754), even the most conservative upward trend will cause total economic collapse within a few decades. The cause of this collapse will be a loss of confidence by holders of dollars that debt can be repaid without continuous reductions in the purchasing power of the dollar.
Now, this sounds very academic, doesn’t it? Most folks’ eyes glaze over when one discusses things like monetary debasement, loss of money’s purchasing power, etc., as if these terms were of academic interest only. But what if you knew that that the dollar in your pocket would be as worthless as a Zimbabwean unit of currency within a few years? Would you seek to amass as many dollars as possible, even selling assets to obtain dollars? I doubt it. You would seek to get rid of dollars and dollar denominated assets in exchange for something that would not fall in value. Ludwig von Mises called this phenomenon the “flight into real value”. When the holders of dollars believe that currency debasement (fall in the value of the currency) will not stop but rather will accelerate, they will attempt to get rid of dollars as soon as practicable. Professor Polleit points out that since the dollar’s final break with gold in 1971 the relative debt burden of the U.S. in relation to our economy’s annual production has accelerated from well under 200% to almost 400%. Government’s promise to initiate new programs means that this trend cannot fall but will accelerate. Therefore, we must conclude that the dollar will collapse.
The Only Way to Prevent Collapse
There is only one way to avert total collapse of the dollar—cut government spending and end the dollar’s debasement. The former must precede the latter, because, as Professor Polleit explains, government will not default (technically) on its debt as will private companies. The government will repay its debt in a technical sense only--by paying debtors in debased dollars. But debasement will lead to the collapse of the division of labor society and bring economic chaos on the 1923 German model, which wiped out the middle class and created the psychological conditions for the rise of the national socialist (Nazi) totalitarian state.
Therefore, the only path open to averting collapse is the abolition of government programs and cabinet level departments whose insatiable appetite for spending drives government debt. Government wealth transfer programs are not debt obligations of government. No one holds Social Security debt as one would hold a corporate bond or even a government bond. The Social Security program is just a spending program and may be ended in an instant. This we must do before spending on Social Security, Medicare, Medicaid, the Prescription Drug program, and the new healthcare mandates drive the debt burden to the tipping point. Ending these programs is not the same as defaulting on government debt. It is simply ending tyranny, for it is only the coercive intervention of government that sustains them.
Workforce Deregulation Will Open Job Opportunities for All
At the same time, government must completely eliminate all regulation of the economy, especially the workforce. People who have retired on Social Security and can still add something to the economy must be allowed to do so. Those who have yet to retire on Social Security must be given as much time as possible to plan for a retirement without Social Security. Abandoning all coercive wealth transfers and prohibitions against willing labor, such as minimum wage laws, will reduce the cost of labor and restore full employment. Reducing all the regulatory burdens of government will increase the sanctity of property rights, spur capital accumulation, and cause prices to fall. All this will go a long way toward mitigating the pain that will be suffered by those who currently depend upon government's coercive transfers of wealth in their favor. Once government has slashed its spending on other worthless programs--such as those sponsored by almost all cabinet level bureaucracies other than defense, state, and treasury--it can abolish the Fed and convert the dollar to a private, commodity backed currency, which will prevent government from ever again embarking on such a spending binge. A commodity backed money immediately reveals the true cost of any government expenditure and illustrates for the people the unassailable fact that all government is a burden on the people and not some sort of economic stimulus. At this point the government’s role in the economy will be that as envisioned by our Founding Fathers, as policeman for protecting us against fraud, theft, and coercion. Once again government will be our servant and not our master.