This is a Tea Party speech from April 15, 2011 in Grants Pass, Oregon.
The United States rose up from a handful of rebellious colonies to become the richest and most powerful nation in the world. Why? Because we led the world in production. For 200 years, America delivered the goods.
But, in the 1970’s, all that suddenly changed. For the first time in history, the U.S. started having trade deficits. That means our net consumption exceeded our net production. And, every single year since 1975, our nation has consistently consumed more than it produced. It doesn’t take a rocket scientist to know that’s not sustainable.
The depressing truth is America is no longer a world leader in production. We are trailing the pack. We are now a debtor nation, and our biggest creditor is China. — What the hell happened? And how will we ever recover? And, the more disturbing question is, what will happen to America if we don’t?
If we ever want to restore America to its proper place in the world, the first thing we need to understand is why we no longer have a productive economy. It’s pretty simple, really. — Because we no longer produce. Why not? – If we take a good hard look at the nature of production, maybe we can figure that out. The three key elements of production are capital, labor, and raw materials.
First, you need capital for research and development. To develop a new product that meets a real need in the marketplace takes a lot of research. It may take many years to develop. Research and development is extremely expensive, and there’s no guarantee of success. There has to be an enormous potential return on investment to justify that kind of risk.
That kind of return on investment is what our current administration refers to as “excessive profits.” And they have this notion that “excessive profits” should be punitively taxed. When government puts a lid on the potential for return on investment, what happens? The investors take their capital and invest it someplace else, — someplace that welcomes production, and wants to build up their economy and provide employment for their population. (Unlike the United States, it would seem.)
The second thing you need for production is raw materials. No matter what you want to produce, you need some combination of raw materials to produce it, whether wood, paper, metal, glass, fiber, or petroleum products. All raw materials come from the earth; they don’t come out of the air, or some genius’ imagination, or the printing presses at the Federal Reserve. They all come out of the ground, either through timber, mining, or agriculture.
Here, in Southern Oregon, we live in one of the richest areas in the country, in terms of natural resources. We’re rich in timber. We’re rich in minerals. But, if this part of the country is so rich, why is it so poor? Why is unemployment so high? Because we’re not allowed to use the natural resources with which we’re abundantly blessed. Overregulation, and the endless environmental litigation it has spawned, has all but curtailed the timber and mining industries, — the very industries that provide raw materials for every sort of production on which our economy relies. And the overregulation doesn’t stop there. It’s hobbling the manufacturing industries, too.
The third thing required for production is labor. We’ve actually got a surplus of that. Look at our unemployment numbers, nationwide. Private sector jobs are steadily declining because our industries are stymied by excessive regulation and punitive taxation. So how does our government address that issue? It tries to replace the jobs lost due to declining production by creating new jobs in the public sector.
The trouble is those jobs do nothing to restore our national productivity. Public sector jobs and service jobs don’t create any new wealth. They just swirl money around in the economy. And, as that money swirls around, more and more of it leaks out to other countries, as we buy foreign-made products because we can’t or don’t produce enough at home.
As the real wealth leaks out of our economy, the Fed prints up more and more new money, which only dilutes the value of the money we already have in circulation, leading to higher and higher inflation. As long as we consume more than we produce, there is no way to add real value back into our economy, and our currency will continue to lose whatever value it has. We must restore production to have a sustainable economy.
This country was founded on the sacred principles of liberty and freedom. Not just individual freedom, but economic freedom. America became a world leader because America delivered the goods. That’s what it’s all about. That’s what it’s always been about. We have to stay solvent to preserve our liberty. If our economy fails, we’ll lose our freedom. Stifling production smothers the economy. And that’s what our government is doing.
Contact your Congressmen and Senators and tell them we want our economy back. Government can’t solve this problem. Government is the problem.
Responsibility isn’t something people are born with. It’s learned. It’s learned by prioritizing, making tradeoffs, weighing the benefits, costs, and risks of alternative courses of action, and dealing with the consequences of one’s decisions.
When an overprotective parent spoils their child by shielding them from hard lessons, or gives the child whatever it wants so the child will love them more, they fail to instill in the child a sense of responsibility. Instead they encumber it with a false sense of entitlement to whatever the child desires. Later, the child is faced with a rude awakening when thrust into a world where it has to compete with others who are accustomed to making hard choices and working for the things they desire.
Once a sense of entitlement is engrained in someone’s belief system, it’s difficult to overcome. Developing a sense of responsibility is counter to their conditioning, and they cannot easily grasp the notion that they are really not entitled to anything they haven’t earned. When something doesn’t come easily, instead of getting fired up with a sense of determination to work harder and make the necessary sacrifices to achieve their goal, they feel resentful that it isn’t provided for them. Whatever nominal effort they put into it seems like it ought to be enough. They feel a deep sense of personal injustice that they can’t have things that other people have, oblivious to the tradeoffs and sacrifices others have had to make to acquire those things.
In the real world, nobody is entitled to own a house. If you can’t afford a house, the responsible thing to do is to work and save and sacrifice until you can afford to buy one. By encouraging people to buy houses they really can’t afford, the government sets them up for failure later on when the house payments become a burden they cannot sustain. And when that time comes, the “homeowners” won’t consider that, until their mortgage is paid in full, the house isn’t actually theirs. Instead, they’ll feel entitled to the house in which they’re living, and deeply resentful of losing it.
A person who buys a house incurs a responsibility. If they’re shielded from the full impact of the responsibility they’re incurring, by making it easier than it would be (in a free market) for them to assume it, it gives them a false sense of security and makes the responsibility seem lighter than it is. That is not a wise thing to do. And the current economic crisis is a perfect illustration of that folly. Yet the government is going down the same path again, with the FHA taking on the role once played by AIG.
This is just one of many examples of the government fostering an entitlement mentality in its citizens. Perhaps, like the parent who spoils their child in an attempt to buy its love, politicians see this as a way to buy votes. But, like overprotective parents trying to make life easier for their precious dumplings, when government shields people from the onus of personal responsibility, it does not strengthen them; it weakens them. And it not only weakens the individual beneficiaries of the government’s largesse, it weakens the entire economy, and the underlying moral fiber of our nation.
For years, our government has been actively encouraging people to become less and less self-reliant. By the same token, it has been making us more and more dependent on government. The flip side of dependency is control. The more dependent one is on another, the more control the other has over them. Perhaps the underlying motivation is not so innocent as politicians trying to buy their constituents’ love. Perhaps it’s far more insidious.
The current crisis in our nation is not just an economic crisis. It has far broader implications. The only way out of this crisis is to bring about a fundamental change. — Not the kind of change that accelerates the crisis, leading to ever more weakness, dependency, and state control, but a return to the once deeply-held values that made this country great: personal responsibility, individual sovereignty, and economic freedom.
This past week, the Federal Reserve announced that it’s going to buy $300 billion worth of long-term Treasury bills over the next six months, and $750 billion of mortgage-backed securities, to try to loosen up credit and lower mortgage rates. It was also announced that they’re not going to raise taxes to come up with this additional trillion-plus dollars (on top of the recent bailouts and stimulus bill). Instead, they would just crank up the printing presses and print up the money.
How many things can you find wrong with this picture?
Wasn’t it loose credit that created the current financial crisis they’re purportedly trying to get us out of? Aren’t mortgage-backed securities the “toxic assets” that precipitated the collapse of all those banks and financial institutions that we’re already bailing out with our tax dollars? These are the very building blocks of the biggest Ponzi scheme in economic history, but the Fed, in its infinite wisdom, sees fit to gamble 3/4 of a trillion dollars of our money on the most discredited and dangerous financial instrument ever concocted to dupe unsuspecting investors. Only, at this point, they can hardly be said to be unsuspecting.
We’re supposed to be placated by the fact that, this time, they’re not using our tax dollars, but are printing up the money on their little printing presses. So, therefore, it doesn’t cost us anything, right? That would seem to be what they expect us to believe.
Economics for Liberals, Lesson #4.* When the Fed prints new money, it devalues all the money that’s currently in circulation. Printing more money literally dilutes the value of everybody’s savings, investments, salaries, and retirement funds.
Currency has no intrinsic value; it’s merely symbolic of the value of goods and services that can be exchanged. The only way to increase the total value in a system is to increase the production of goods and services that somebody wants to consume. The sum total of the currency in a system represents the sum total of the real value in the system (goods and services produced). The value that each unit of currency represents is the ratio of the total units of currency to the total actual value in the system. When the actual value (goods and services produced) remains stable, but the total units of currency are increased, each unit of currency represents less of the total actual value and, consequently, has less purchasing power. That’s what’s known as inflation.
Inflation is simply another type of taxation. Instead of taxing you on each incremental unit of value you produce, the Fed simply dilutes the value of everything you currently have, as well as every dollar you will earn in the future. It’s an invisible tax, because you don’t see the government taking it away from you. You see higher prices for everything you buy, and you blame the producers. But the producers are paying higher prices for everything they have to purchase to produce what they sell to you.
So everybody’s stuck paying higher prices for everything, but they don’t have any more money. So everybody’s purchasing power is reduced, making everybody, in real terms, poorer than they were before the currency was diluted. That’s because the money that was printed up by the government was not distributed to the people whose currency lost its value, but rather was used to buy whatever the Fed buys with it. — In this case, toxic assets that they know are overvalued.
How do I know with such certainty they are overvalued? Because, if they were not overvalued, they’d be able to be sold on the free market. The very fact that government has to buy them up indicates they’re not worth the price at which the government is buying them.
Economics for Liberals, Lesson #5. The value of an investment is based on the ratio of risk to potential reward. If the risk is greater than the potential rewards, the investment is overvalued and nobody will buy it unless the risk is reduced or the reward potential is increased. In many investments, the risk is simply the risk of losing what you invested, so the risk can be reduced by lowering the price. When a balance is reached between risk and potential, buyers can be found on the free market who are willing to assume the risk.
But, when the government assumes the risk, the people making the decisions aren’t risking their own money. They’re risking the taxpayers’ money, either directly (through taxation) or indirectly (through inflation). In this case, the Fed is cranking up the printing presses and diluting all of our savings, investments, salaries, and retirement funds to purchase investments that are known to be bad before they buy them. If any corporate CFO were to behave that way, knowing what we all know today, they would be fired.
And, to add insult to injury, they think we’re stupid enough to believe it isn’t costing us anything because they aren’t raising our taxes — yet. But the biggest irony of all is that the purpose used to justify this devious machination is to perpetuate the very circumstances (loose credit and easy availability of mortgages) that got us into this economic crisis in the first place.
Just how stupid do they think we are? Just how stupid are we?
*Lessons #1-3 are posted in Economics Lessons for Liberals: Minimum Wage.
Even in the midst of the deepest and most far-reaching economic crisis since the Great Depression, Americans are still pretty comfortable. The poorest of the poor in this country would be considered wealthy by the standards of most of the world’s population, taking for granted “luxuries” like plumbing, elecricity, and medical care.
The reason we’re so comparatively wealthy in this country, even during this worldwide economic crisis, is because this country has had a historically strong economy, built up over decades of productivity, of leading the world in industrial and technological innovation that has not only generated wealth for the entrepreneurs and investors who made it possible, but has created abundant opportunities for people who were willing to learn a marketable skill, and work hard at it, to earn their way out of poverty and into the middle class.
People like to go on about the “shrinking middle class,” but neglect to consider that the “poor” in this country today have, on average, a higher standard of living than the “middle class” had a couple of generations ago. It isn’t that there’s more actual poverty today, it’s that the bar keeps being raised on what we consider “poor.”
A rising tide lifts all boats, and that has been the case with our economy, up until recently. The standard of living bar has been continuously raised for everybody, generation after generation. This is not because the government provides for us all, but because the productive members of society generate not just money, but value, not just wealth, but opportunity, providing goods and services that continually improve the quality of life for all, while creating jobs and providing the foundation for a sound and healthy economy.
When you hamper or discourage productivity (or drive it offshore) through excessive regulations and punitive taxation, for the dubious benefit of the unproductive members of society, the economy as a whole must suffer. If a rising tide lifts all boats, what happens when the tide recedes? The overall standard of living goes down. We are standing at that inflection point today.
Years ago, we shifted from a production economy to a “credit economy.” Where our economy used to be based on goods delivered, now it’s based on promises, and many of those promises are turning out to be undeliverable. So what do we do now?
The solution is not to keep expanding our dependency on government, while sinking our nation ever deeper into debt, relying more and more on the government to provide what the producers no longer can because the government has tied their hands or driven them offshore. That course of action can only dig us deeper into the hole we’re in right now. The way to recover is to return to a production economy, where you only get rewards for what you produce. If you want something, you have to pay for it. To pay for it, you have to produce something for which somebody else is willing to pay you.
We need to restore productivity, not just have government hire more people and create more bureaucracies to employ them. We need to create value, not pump more money into the economy, which only serves to devalue the money already in circulation. We cannot borrow our way out of debt, nor spend our way into solvency. We need to return to the basic foundations on which this once-great nation was built: hard work, self-reliance, entrepreneurship, industry, and personal responsibility. It’s not rocket science. It’s common sense.
So why are our legislators doing just the opposite of what clearly needs to be done to regenerate our economy? Why are they jamming the accelerator to the floor as the economy heads over the cliff? Because the impending disaster that has been building up for years is now imminent, and they believe it to be inevitable. They’ve given up all hope of salvaging the economy, and figure they may as well grab what they can while there’s still something left to grab. They’re in a feeding frenzy of earmarks, stuffing every bill with as much pork as they can cram in. They are literally looting the economy, justifying their reckless plunder because they figure it’s all going down anyway.
So they pour more money into the economy, mortgaging our country to foreign interests, indenturing future generations of taxpayers, while they and their buddies rake theirs off the top. And the rest of us sit watching in dumb horror (or blind hope) as the value of the money in our bank accounts gets diluted by the flood of new dollars being pumped into the system, and the stock market plummets day after day.
And what happens when it all bottoms out and there’s nothing left to loot? In one scenario, we start over from scratch, the way our forefathers did, and struggle to rebuild a stable economy based once again on real productivity. In a more nefarious scenario, there’s somebody waiting in the wings with other plans for our nation…
It’s like watching a horror movie. No! Don’t do it!! Don’t open the door! You cover your eyes because you don’t want to look. You can’t believe they’re going to do it. But you know they are. Even though it makes no sense, and it’s obvious to everybody watching that it’s the absolute worst thing they could possibly do. They’re going to do it anyway. Why? In a horror movie it’s because it’s in the script. And ultimately, it doesn’t really matter, because it’s all make believe.
But this isn’t a horror movie. It’s real. And it affects every one of us, but we’re powerless to stop it. All we can do is write our Congressmen and say No! Don’t do it!! Don’t give them the bailout money! And that does about as much good as shouting at the movie screen Don’t open the door! Because you know they’re going to do it anyway.
First they said they needed $700 billion to bail out troubled financial institutions. Letters to Congressmen ran 20-1 against the bailout and, last September, Congress voted against the bailout bill. But they kept sweetening the pot with a little pork here and a little pork there until everybody in Congress had enough pork in the bill to lure them into voting for the bailout, in massive disregard of the indignant outcries of the people who elected them.
Then Bernanke and Paulson turned around and said, You know what? We’re not going to use this bailout money the way we originally said we would, because that would have been a really stupid thing to do. (Really? When did you figure that out, Mr. Genius? That’s what all the people writing to their Congressmen were screaming all along.) But, even after acknowledging the plan was hopeless, instead of rescinding the bailout, they decided to spend it on something else. After all, they already had the money; you could hardly expect them to just give it back! — Not that they actually do have the money. But that’s never stopped them from spending it before. Why should it stop them now? — So they voted to spend all this money they don’t actually have, and then decided not to spend it for the purpose for which they swore they needed it. So now they’re going to spend it on something else. They haven’t yet told us what, exactly. Why not? Because they don’t know. They don’t have a plan. But spend it they will.
They’ve put out the word that there’s $700 billion of free money on the table, and they’re going to give it all away. To whom are they going to give it? The criterion to qualify seems to be incompetence. But not just any incompetence, only massive incompetence will do. To qualify for some of this free money, a corporation or institution has to prove they’ve mismanaged their finances on such an unprecedented scale that they’re billions of dollars in the hole and have absolutely no way out, short of a federal bailout.
The three automakers deserve to go out of business. GM and Toyota each sold 9.37 million vehicles last year. Toyota made $17.1 billion. GM lost $38.7 billion. What more needs to be said? But, instead of letting economic Darwinism take it’s course, the government wants to compel the taxpayers to throw our hard-earned money at them so they can flush our money down the drain after their own. This is madness. Just say No! Don’t do it!! Don’t open the door!
And, of course, now everybody else is lining up for bailouts as well. Even city and state governments are getting in line. The economy is bad. An awful lot of businesses are losing money or going bankrupt, and local governments are losing tax revenue because their tax base is losing their jobs. So why not just stick a hose directly into the pockets of all the taxpayers in the country, and siphon out more and more money until the well runs dry, to keep businesses afloat that are unable to make a profit on their own merits? Surely, every business deserves to make money, whether or not they provide good value to their customers and investors. Free market be damned! Move over Rover, let Government take over. It seems the government is determined to prove they can waste even more money faster than the failures they’re bailing out.
Which brings us back to the horror movie. Everybody in the audience can see that disaster lurks behind that door. But the protagonist is about to open it. We’re all sitting on the edge of our seats, gripping the handrests, holding our breaths, and whispering through gritted teeth – No! He hesitates with his hand on the knob. Don’t do it!! (But we know he will.) He twists the knob. Don’t open the door! And then he does ———————–
Many people are insisting that the government has to bail out AIG because, in the current situation, if the government didn’t step in, the result could be a worldwide depression. I understand that. I still think it’s the wrong thing to do.
If the government doesn’t bail them out, we’re going to have an economic crisis. But we’re going to have one anyway, whether they bail them out or not. The money with which the government bails out these failed institutions will be borrowed from other countries. Then the taxpayers will be stuck with the bill for not only the bailouts, but the interest on the money to bail them out. And, when the bill comes due to the taxpayers, where will all that money be going?
The situation is going to get worse, whichever way we play the cards. But the way in which it gets worse will be different, depending on what we do now. And that’s important. Because our nation’s future depends on it. Do we want to let a failed system collapse, knowing it will have a seismic impact on the whole world economy? That would be bad. Or do we want to indenture our nation’s future to other powers whose interests are not necessarily aligned with ours? What other option is there?
This whole gigantic mess was caused by wide scale irresponsible borrowing. How is borrowing on an inconceivably more massive scale going to solve the problem? We are already the biggest debtor nation in the world.
Liberals are quick to blame it all on capitalism, but what actually got us here was government meddling. Further government meddling isn’t going to get us out. For years, the Fed kept interest rates low deliberately to fuel the housing bubble. It was a specific federal policy intended to make it easier for first time homebuyers to be able to buy homes they couldn’t otherwise afford. (Now strike the word “otherwise” from that sentence, and there’s the root of the problem.)
Federal policy was designed to encourage overspending. It was a government-subsidized Ponzi scheme, with the FHA, FannieMae, and FreddieMac at the top of the heap, backed by the full faith and credit of the U.S. taxpayer. All accountability was shuffled away, through multiple layers of loan aggregation. When people started defaulting on loans that should never have been made, and institutions started defaulting on their debts to other institutions, speculation on defaults (aka “swaps”) to hedge the bad bets became rampant. (That’s what brought down AIG.)
The entire economy, from the top down, is built on debt. At the bottom of the pyramid are millions of individuals borrowing from banks, who borrow from government sponsored agencies, while the government borrows from foreign countries, granting them financial power to wield over us in the future. Even as individuals are going bankrupt from bad debt, the nation is sinking ever deeper into deficit spending. The problem is systemic. The madness has to stop.
This country is headed for disaster because of fiscal irresponsibility at every level, encouraged by those who think the government can just manipulate the economy a little bit more, just another tweak here or another pinch there. A push here or a squeeze there. But it’s all an illusion as long as the debt keeps growing.
Debt is dangerous. We are selling our sovereignty, like a drunken wastrel squandering his children’s inheritance. Our deficit spending increases exponentially decade after decade. The national debt balloons. Instead of having any plan to pay it off, we keep borrowing more.
Stop the presses! (The ones printing up the dollars, that is.) Stop the borrowing. Stop the spending. Stop overregulating industry and labor so corporations have to send jobs overseas to stay competitive. Stop the subsidies for farmers not to grow crops. Stop all the greasy earmarks. Stop foreign aid. We need our leaders to sit down and acknowledge the fact that the nation is broke — worse than broke. We have a negative net worth!
We cannot go on as we have been. That’s a fallacy. Prolonging the inevitable just gets us deeper in the hole we’re going to have to eventually dig ourselves out of. Let’s stop now, and start demanding fiscal responsibility from our leaders and ourselves.
People don’t learn from their mistakes. They learn from the consequences of their mistakes. If you shield them from the consequences, they’ll make the same mistakes again. I say, no bailouts for lenders or borrowers or gamblers with other people’s money! Let the market correct itself, as painful as that correction will be, and then laissez-faire.