Economics 101 for America: The Lessons the US Refuses to Learn


The often repeated quote from Santayana comes to mind more frequently than ever these days: “Those who fail to learn from history are doomed to repeat it.” That the American government is forgetting the lessons of history is true in our foreign policy, in our domestic policy, in our immigration policy, and, especially, in our economic policy.

Over the last fifteen years, we have watched the economies of European nations slowly erode and collapse – Greece, Spain, Italy, Portugal, and now France – are all succumbing to the economic malaise brought on by massive government spending for entitlement programs supported by massive tax burdens on the citizens that have all but destroyed the free markets of Europe. In their place they have left massive unemployment, defaulted loans, devastated credit, broken entitlement programs, and a bleak future for the people of Europe, where a shocking “27% of children aged less than 18 [are] at risk of poverty or social exclusion”.

In a 2010 report, European Economic Statistics, from the European Commission, the lofty goals of the Union were set down, drawing conclusions that are diametrically opposed to what history has taught us for generations:  “The recent financial and economic crisis has shown that the instruments for the coordination of the economic policy in the EU have not been fully used and gaps in the current system of governance still exist.”

Refusing to see clearly the mistakes they have made or admit the dire consequences resulting from their policies, they concluded – not that they had erred in their massive spending policies, but that their policies “had not been fully used”. It was disaster in the re-making. Instead of recognizing the failure of European socialism, the report called for “a more rigorous implementation of the rules we have adopted, with dissuasive sanctions to prevent slippage and regain confidence”.

Perhaps the European Union can be forgiven for getting lost in the midst of the devolving economic chaos, and missing the “forest for the trees”. But the US does not have that excuse. We have watched from afar and failed to learn.

The Sequester:  A False Flag Crisis    

Now America also stands on an economic precipice, with a looming debt closing in on $16 trillion, a national deficit of $1.327 trillion, and a false-flag crisis called “sequestration”, an across-the-board program of spending cuts first proposed by President Obama and now blamed by him for impending doom.

The worst thing that can be said about the cuts, which amount to $85 billion across all government agencies, is that they are across-the-board. In other words, according to the President’s version of sequestration, individual agencies are given no discretion about where to make the most strategically sound cuts, but must apply them to every program, regardless of its merit. The end result will be, according to the administration, massive suffering by Americans throughout the country.

In order to underscore the doomsday scenario he has created, the President has led his administration through weeks of political theater, consisting of dramatic speeches and shocking actions. During the last few days, the President and the leaders of key agencies have gone beyond the pale. His exaggerations about the impact of economic Armageddon went far beyond what Americans should reasonably expect from their President.

The plain fact is that the President is lying to the American people. Economic catastrophe is not at hand. Ironically, while it is a felony for Americans to lie to the government, the government lies to us on a regular basis. It lied over Eric Holder’s “Fast and Furious” gun running operation, it lied to us about what really happened in Benghazi on September 11, 2012, and it is lying to us now about the disaster that “sequestration” will bring tomorrow.

For example, earlier this week during a speech in Newport News, VA, the President said that as a result of the sequester, “about 90,000 Virginians who work for the Department of Defense would be forced to take unpaid leave from their jobs”. Earlier, the Pentagon warned that nearly 800,000 civilian workers would be furloughed one day a week. It turns out that none of this is true.

At a White House presentation last week, the President surrounded himself with first responders, and told us that criminals would go free, FBI agents would be furloughed, and police officers and teachers would be laid off. Other administration spokespeople warned that 70,000 children would be shut out from Head Start programs, Homeland Security would suffer, and the lines at airport security would be 90 minute long for passengers because of TSA personnel cuts. And on and on.

Then the department of Homeland Security took real action, enhancing the fear factor and blaming the sequestration (which still hadn’t happened yet) as an excuse for releasing hundreds of illegal immigrant detainees (500 in one in one Arizona county alone), and warning that up to 10,000 might be released into the general population. DHS Secretary Janet Napoletano further warned that the DHS would also be forced to furlough 5,000 border agents, compounding the problem and making our borders even less secure than they are today.

This is political theater at its worst, using human props to support a message that is patently false on its face. The truth is that none of this is likely to happen as a result of the sequester. The cuts contained in the sequester represent such a small part of the national budget that most Americans will hardly feel them. Will some people lose their jobs? Certainly, but most would have lost them anyway, and not because of the sequester, but because of an already tightening economy. The plain truth is that our economy is bad, and people are already suffering.  The slow economy is discouraging new job creation and leading to layoffs. New taxes on the middle class that went into effect in January have already made themselves felt by the very people the President promised would not receive any new taxes.

In reality, the sequestration will probably have very little effect in a government which has been gearing up to spend $1.3 trillion more than it will take in during this fiscal year alone. The amount of the sequestration is barely 6% of the deficit, and less than 2% of actual government spending on-line for 2013.

The Greeking of America

Unlike the American people, who know that life does not give us a limit-free credit card with which to charge the needs and luxuries of our lives, the administration seems to think it can spend without constraints. Blindly following the example of Europe, whose huge entitlement spending programs have driven many of its member nations into bankruptcy, the Obama administration is driving us down the very same road, adding trillions to our debt, and spending our nation into poverty.

The spending crisis is not new. It has been going on for years. What is really scary is that if the administration continues to spend and borrow at the rate it has been doing, raising revenues by taxing American workers and business owners, unemployment will rise, inflation will accelerate, people will be forced to default on their mortgages and credit cards, and the United States will join the ranks of Greece, Spain, Portugal, and much of the rest of Eurozone. We will drown in our own entitlements.

In the end, the sequestration will happen. Some workers will be furloughed, some services will be cut, there will be some level of pain, which – like the cuts themselves – will be “across-the-board”. But it should be very clear that this is the outcome of our government’s massive and irresponsible spending.

Americans have always been strong and ready to face adversity when it cannot be avoided. It is time to tighten our belts and get back to a society that gives a hand up, not just a hand out. It’s time for our Congressional representatives to start representing us, the American people who hired them. Cuts in spending are unavoidable if we are to recover, and they need to happen now. The nightmare that we call the federal tax code needs to be totally reformed, and a hard look at Steve Forbes’ ‘flat tax’ would be a very good place to start. The accompanying pain of serious spending cuts will be softened by the new growth of energy in the American economy.

It is time for Congress to grab the moment and cut our national spending responsibly and effectively. In fact, it is long overdue. Our national purse strings have to be tied tighter and our taste for endless entitlements curtailed. Our programs for the poor need to be retooled, not as eternal entitlements, but as a stairway to personal independence. America was never meant to be a socialist country, but a free society, based on free market principles, an independent spirit, and a people who are responsible and accountable.

————  Ilana Freedman, Editor

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Posted in Economy, US

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