Its hard to ignore the $14.5 trillion deficit. What is even more difficult to block out is the constant yammering by the politicos. The Washington political classes, both elephants and donkeys (burros to us 4 Corners types), constantly talk, talk, talk, trying to convince us of the seriousness of the situation. OK, it is serious; even the International Monetary Fund (IMF), World Bank and the global credit rating companies have warned us of the consequences of defaulting on our debt. It is apparent that all this bombastic haranguing has had the desired effect.
A while back I used the terms Ruling Class and Country class to describe the inside-the-Beltway elites, elephants and burros, and those of us out here who work, pay taxes and keep the country running. The Ruling Class is using the specter of the country defaulting on our debts and thus destroying not only our economy but the worlds.
That is unadulterated B.S.
Lets look at where we are today. Our government borrows 40 cents of every dollar it spends. We are running a trillion-dollar deficit this year and most economists predict at least that amount for 2012 and 2013. These figures dont take into account the Baby Boomers that will be retiring and drawing Social Security checks before the predicted economic collapse. However, that $14.5 trillion figure doesnt tell the whole story. There are the unfunded mandates to be dealt with: Social Security, Medicaid and Medicare and the government workers health care and pensions that need resources! If these programs are added to the deficit column, we now are in the neighborhood of $50 trillion to $60 trillion.
This is a pretty frightening neighborhood. Even more terrifying is the realization that our elected leaders have known these facts and have been kicking the can down the road for a long time. Its like the factory worker finding a problem but opting to let the night shift handle it.
So back to the Ruling Class propagandizing to raise the debt ceiling or else face the end of the world.
Lets assume you and I run a business making electric scooters. Weve done pretty well over the past 10 years but the business has fallen off and weve been forced to borrow operating capital. Our overhead has been pegged at 40 percent of gross. Material costs are 50 percent of gross. Salaries are 30 percent of gross. This state of affairs has been in play for the past five years and we have been borrowing money from our electric scooter competitor. Historically, gross receipts have been $1 million annually. With the drop in sales, were down 10 percent, and since we havent cut back on salaries or overhead, weve been borrowing about $300,000 annually for the past five years. Our lenders have been anxiously waiting for us to start retrenching and economizing.
No soap. We are proceeding merrily along, either unaware or unwilling to recognize our problem. We now owe $1,500,000 Thats more than the historical gross.
We are still selling scooters, just not as many.
So in this scenario how do we extricate ourselves without bankruptcy?
1) Quit borrowing money!
2) Cut out all unnecessary expenses.
3) Pay interest first and principal as profits allow.
4) Sell unnecessary equipment to raise capital.
5) Cut the workforce to essential people, that means trim the managers.
Our little company is a fairly simple problem, but what about the USA?
Our revenue from taxes, fees and tariffs is about $2 trillion annually. The debt service is about $600 billion annually. Right away it is obvious we can avoid defaulting on debt. The question is, why do we need to continue borrowing?
The Ruling Class, elephants and burros, say we need to raise the debt ceiling in order to continue borrowing. If our business was failing due to the enormous debt load, how can it be argued that the USA can borrow its way out of debt?
I realize that this is the government we are talking about and they dont need to make sense.
The steps I outlined will work for scooters or for government; it only requires the will to do it. We the people must make them do it!
Larry Tradlener lives down McElmo Canyon.