Political Cannibalism
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- Published on Monday, 08 October 2012 14:06
- Written by Andrew Snyder, Editorial Director, Inside Investing Daily
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The numbers have us by the throat. No matter what our beloved politicians do, we can't win unless the math changes.
The problem with today's economy is simple, yet nobody dares talk about it. What ails us are not high tax rates, wild government spending, health care costs or even those free phones Obama is rumored to be handing out.
Those are all symptoms. They are merely man's natural, greedy reactions to the real trouble.
The real trouble, as I said, is simple. The numbers simply do not add up.
It is a problem we've discussed before. I believe it is the greatest problem our nation has ever faced. Our actions are powerless against the force that's pushing against us.
Like a ship sinking into the sea, all we can do is try to stay afloat. We'll toss everything we can into the sea to try to keep the gunwales above the waves.
We'll print money. We'll slash interest rates. We'll force money into economic crevices where it doesn't belong. We will struggle... and struggle... but until the numbers add up, we will continue to slip into the ferocious sea.
And eventually... we will sink.
I could show you many charts that illustrate why or how the aging of the baby-boomer population has thrown our economy out of balance. Just about any long-term set of economic data shows the effect of this massive population subset.
But this chart says more than enough to make my point...
If you understand what those two simple lines tell us, you understand we are doomed.
To a lot of folks (myself included), the black line is good news. It represents the amount of cash the government steals from its citizens. It shows Washington's total revenues as a percent of the nation's GDP. It's down by 19% over the span of a generation.
The red line is bad news. It shows how much Uncle Sam pays for Medicare and Social Security as a percent of GDP. As the baby boomers age, the figure naturally gets larger. It's up by 118% in 42 years.
Getting old is not cheap.
The reason the black line is falling and the red line is rising leads us to the root of our national disease. Politics.
Left on its own, our aging society would sort itself out naturally. Prices would fall. Economic growth would slow. But eventually, it'd reach an equilibrium and start growing again.
But politicians hate to wait. They fear they'll lose their cushy jobs and all the perks that come with them if Americans are not continuously promised better things. So they cut our taxes and keep on spending (and we keep electing them).
Our politicians boost the welfare rolls, make it easier to get food stamps, give us “free” health care and even hand us prepaid cell phones. But it's all hush money. The handouts are supposed to keep us quiet while our leaders try to devise a solution.
But there is no solution. We can't fix broken numbers.
The raging economy propelled forward by the baby boomers is dead. The greatest Ponzi scheme in history has fallen apart. Unless every American of childbearing age goes out and has three babies by tomorrow, there is no quick fix. The numbers don't add up.
But, again, the politicians will never admit defeat.
And why should they? They, too, are baby boomers.
In a government of the people, by the people and for the people, we can't expect our leaders to act any differently than they have. It'd be political cannibalism.
Again, the math is the problem. It's not the people. Our population is lopsided, and the people are merely trying to ease the pain.
We all agree trying to squeeze more from Americans in the name of taxes is a bad idea. It will break what's left of our economy. But we can't stop spending, either. There are too many folks dependent on that money... like lobbyists.
The only other option is a magic trick known as quantitative easing. We'll artificially inflate that GDP figure with funny money and make the net of the government's 15.4% share that much higher.
It will work nicely for a few years. But the numbers will turn again. Once all of that funny money gets where it's going, the red line will spike higher. If history is any indicator, it will do it with little fanfare.
Eventually, it will spike so high the government will be forced to admit defeat. And if it doesn't, our sovereign competitors will do it for it.
Either way, the math will win. The natural economy never loses.
Editor's Note: You won't believe Obama's last-ditch campaign plan. Using his power and influence throughout the federal bureaucracy, Obama has green-lighted three "VIP stocks" for immediate gains. These three stocks were chosen for their impact on deep-pocketed Wall Street donors. He needs their money to help him win a second term -- and he'll do anything to get it. No matter your political beliefs, as an investor, you have to take advantage of any opportunity the market gives you. Quite a few people will get rich as a result of President Obama's desperate ploy -- even if he ultimately loses. And you could get a cut of the action too -- if you act quickly.
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