Dollars, Polity and Law
Revamping the Political Economy
by
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The United States confronts numerous major problems of which the most serious is the impending economic collapse. This collapse is fueled by enor¬mous debt that is expanding at a steady rate. Other major prob¬lems: a Congress with an approval rating in the 10-14 percent range, an imperial pres¬idency that would be the envy of ancient kings, a Supreme Court that increas¬ingly assumes legislative functions, and the conduct of futile military operations in the most corrupt nations on earth for muddled political objectives. Then, too, the Con¬stitution lacks the provisions necessary to keep the polity inbounds when it comes to fiscal matters. Lastly, the scope of these problems is so massive and inter¬twined that any resolution must address them all in tandem. Lesser options would fail, given the size of the debt. In July 2014, that debt passed the $17.6-trillion mark. There may be safety in numbers but not those kind. Yet even that amount is petty cash compared to long-term unfunded benefit liabilities. Given ¬the increasing ratio of beneficiaries to work¬ers, various pro¬jections place that burden in the $130 trillion range. Worse, the na¬tional debt is in¬creasing by a trillion dollars every year even without taking those liabilities into account. Lastly, the annual deficits are higher than reported because of skewed accounting practices. Those practices include offsetting the deficit by any surplus that is re¬ceived in the various trust funds, and immediately spending that excess on govern-ment operations unrelated to the purposes of those funds. Then to compound mat¬ters, the imaginary interest credited to equally imaginary balances is used to fur¬ther reduce reported deficits. As proof, find the difference between the federal debt at the beginning and at the end of any fiscal year, then compare it with the an¬nual deficit reported by the Treasury Department. The difference is the lie. But why is collapse inevitable? In one word: magnitude. The national debt, combined with expenditures continuously exceeding revenues, has rendered the economy untenable for the long term. The drum beat¬ing that boosted sub-prime mortgages and brought about the Great Recession of 2008-2009, has expanded ten¬fold in the form of mortgaging the future with end¬less deficit finan¬cing, thus in¬cur¬ring debt that cannot be repaid. Worse, the federal government is now back to en¬couraging insuring mortgages when mort¬gag¬ers lack sufficient income. As such, the entire economy is oper¬a¬ting full steam at the sub-prime level. This madness presumes debt is OK in any amount short of the proverbial straw that broke the camel’s back. ¬Wrong. Load a camel one straw short of criti¬cal mass, then drive it a few yards, and the beast will collapse anyway. That is, collapse from debt is not a static moment to be avoided; rather it is a compounding IOU for which col¬lection will be ruthlessly enforced by operation of economic dynamics. Heming¬way illustrated the point in The Sun Also Rises. The character of Mike Campbell is asked how he went bankrupt. He replies that it was slow initially “then sud¬den[ly].” For the U.S., Act I is now on stage, marked by slowly rising prices and local tax¬es, stagnation of wages, business profits falling, services facing cut¬backs, and equities bid up in a futile attempt to compensate for lost or reduced income. Act II will unfold soon enough. . . and drag on for several years as the government futilely prints trillions of dollars in order to stimulate the econo¬my deeper into its grave. As for Act III; well, that depends on the populace. THIS SITUATION IS COMPOUNDED by five factors: (a) subdivision of the economy into domains at mutual odds, (b) the voracious entitlements maw, (c) priority of Wall Street over Main Street, (d) the increasing maldistribution of wealth, and (e) a Key¬nesian mind-set carried to an extreme. Economic domains. Economics is a singular entity with many facets. Yet in prac¬tice the economy has been subdivided into three domains, each with its own advo¬cates as may be influenced by distended portions of the federal budget and various tax incentives. They are the entitlements realm, Wall Street, and Main Street. Entitlements realm. About 75 percent of the federal budget funds entitlements, notably Medicare, Medicaid, Social Security, food stamps, and the Earned Income Tax Credit. This does not include debt-service costs. Furthermore, as the popula¬tion ages the worker-beneficiary ratio drops while increasing medical expenses. Indeed, that maw will soon add more subsidized health care insurance in order to cover the unemployed and the 46,200,000 citizens now living in poverty. Then, as unemployment rises, tax revenues decrease and safety-net spending increases. Wall Street wider than Main Street. Politically, Wall Street trumps Main Street, hence the former’s failings had to be bailed out, vastly inflating deficit spending while unemployment took a back seat, witness “jobless recovery.” Bear in mind that Main Street is at the core of healthy economics: manufacturing, agriculture, produc¬tive invest-ment, home ownership, and local banks. By contrast, Wall Street concen¬trates on making money by leveraging it, with most of the profit accruing to 2 or 3 percent of the population. However, it remains networked with Main Street by a few corporations having swallowed up hundreds of banks and insur¬ance companies. Maldistribution of wealth. The concentration of wealth and income among a minus¬cule percentage of the population . . . has been noted numerous times. While only Marxists and their ilk advocate the same in¬come for every citizen, there is a danger when too much income and wealth are concen¬trated in a very small percentage of the population. Such concentration re¬duces the income of the middle class and drives more people into penury. Keynesian mind-set. Keynes’ theory was that during hard times, fiscal tightening should give way to stimulus spending, even if that means incurring more debt. In time, this thinking devolved into supply-side economics. . . . The theory was that the economy would expand at a more-than-compensating rate if the government poured extra money into it. . . . ¬But that’s not the way things worked out, to wit: $17.6 trillion in debt and counting, combined with the highest sustained unemployment rate since the Great Depression.
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About the Book
Revamping the Political Economy after the Impending Collapse No country can borrow indefinitely without fatal consequences. But that is just what the United States is doing; adding nearly a trillion dollars annually to its already massive debt, as overseen by a Congress with an approval rating in the 10-to-14 percent range. In the process, the mind-set that spawned the sub-prime mortgage now renders the entire economy sub-prime. This book explains why and how resolution might obtain after the collapse. The essence is termed polity economics, given that the bifurcated concepts of capitalism and socialism have lost their utility yet persist as incompatible political touchstones. This perspective includes some twenty explicit elements, all addressed at length. Yet by itself, it too will also eventually fail. For it is also essential to restate the Constitution so that it becomes efficaciously aligned with the evolved culture and ethic of the United States, especially to instill stability within the fiscal operations that have come to dominate the country. The ABC’s of that admittedly profound document simply do not address the D-through-Z’s that have devolved over more than two centuries. Excerpts On fiscal carrying capacity. Isn’t the United States simply too big to fail? History laughs. Every empire and nation has been laid waste when it continuously reached for more than it could grasp, which leads to the primary argument in this book: Every economy has a substantive need for just so much money and fungible assets: a carrying capacity, so to speak. When that capacity is exceeded, money becomes a commodity in its own right. Given propensities to accumulate money and inflate values over a bread-and-butter baseline, the economy degenerates in three successive tiers. The first tier harbors the inevitable distensions of economics, such as periodic business cycles and recessions. Yet money remains a tool, not the essence. But if recessions are avoided, money begins to compete with the substantive aspects of an economy. This is the second tier, where leveraged values inherently devolve unstable, followed eventually by a depression. Yet even depression can be staved off by massive bailouts and unsustainable debt. This is the third tier. Money takes priority over substance, until, that is, the economy collapses. On political versus supposed economic rights. There may be free speech; there is no free lunch.
About the Author
George M. Hall is a retired colonel of the US Army, a graduate of West Point, class of 1958, an earned doctorate from American University, and a law degree. He is a published author of more than twelve books and twenty articles. He is also a member of the adjunct faculty of Pima Community College, Tucson, Az, certified to teach physics, engineering, computer science, psychology, sociology, history, and anthropology. He and his wife of 56 years live in Tucson, having moved there from Alexandria, Virginia in 1986. They oversee the Stephen Ministry in their parish, serve as Stephen Ministers themselves, and are active in the area network for this ministry.