Sunday, July 17, 2011

USA Titanic Part 2 : " Iceberg Straight Ahead, Why Aren't They Turning?"

On April 10, 2011,   I  wrote a blog titled the "USA Titanic" (which sank on April 12, this was two days shy of the 99th anniversary of that fateful night...... didn't even notice that when I wrote it !).    In that blog I compared our economy to the doomed ocean liner  heading towards an iceberg with a crew at the helm unable to agree on what to do, and nervous passengers (international investors) eyeing the lifeboats warily. 

To reiterate..... here is the main part: 

"There aren't enough life boats and the ship is taking on water and it's only a matter of time before the passengers, better known as the world currency market run around in a circle looking for a safe haven lest they drown in the freezing waters of the United States federal deficit. This all because our government can't develop a realistic plan that includes cuts in some sacred cows such as medicare, medicaid, social security and the military along with an increase in tax revenues. We're still taking on water, and the Captain and his crew are walking around in a daze mumbling about nation building, health care for all, no new taxes and tea.  God help the USA Titanic as it heads towards an iceberg and all anybody can do is argue over which way it should swerve while they sip their tea. Dump the tea and just turn, damn it !"

Well, here we are three months later, and I'm afraid the iceberg has been spotted for some time now, but part of the crew has decided that the iceberg might not really hurt the USA Titanic after all.    Now we have some Republican Congressmen  (or Tea Party congressmen, not sure of the difference anymore) demanding everything they want or "no deal" on the raising of the debt ceiling.   "The iceberg is only a scare tactic of Captain Obama."  Huh?  The USA Titanic is unsinkable?    I am not an economist (and neither are any of these people), but considering what happened to the economy in 2008 with the default of so many banks, what the heck is going to happen when the federal government defaults?  Nothing?  Who's going to save the US Treasury?  This is a serious risk these people are taking.  A political game of "chicken" with no regard for the consequences.

But let's take a hard look at where this iceberg came from and consider what exactly is at the core of its cause.   What really grew the iceberg to such dramatic effect?   

 To be fair, I agree that President Obama has only just recently "come to Jesus" on the federal deficit.   But Obama has only been in office for 2 1/2 years., and he has demonstrated a willingness to make some pretty dramatic cuts to satisfy the Republicans.  Now, if  we go further back, I think it's logical that  a major part of this deficit is really due to the two wars we have been fighting.  The grand total so far is somewhere in the neighborhood of $3.7 Trillion since 2001, and climbing by the day.  Some peg it even higher than  $4 Trillion.  So, what did our government do to cover this cost?  They maintained a massive tax CUT !  We've all conveniently ignored  this little detail.   But, the wars still have to be paid for... and now it's time to pay.  It is only logical that we have higher taxes to pay for $3.7 Trillion dollars spent.   Where else is it going to come from but an increase in taxes?   Throughout history wars have been fought by taxing the population.   It's only here in America that we decided we could spend our way out of the expenses of war.  Let's call it  "Voo-doo" war payments.

The logical thing to do is close all the loopholes available now to everybody,  let the Bush tax cuts lapse and any deficit that is not covered would come from a flat tax for everybody.  Once the debts are satisfied, the taxes come down.  End of story.   This is the right thing to do.  We all benefit from the protection of our country,  never mind the details of the wars.  Everyone is looking at what should be cut, but am I the only one that thinks we need to also be paying for what we got?  We need to pay that money back. 

So, there it is.  Cut, cut, cut spending as much as possible, AND raise taxes for the war our government waged.  Such dramatic effort and aggressive action will calm the world's financial markets and we can all get back to the happy business of making money.  Economies should flourish without the uncertainty of the world's largest economy teetering on depression.  Teetering into depression because its government is ruled by two bickering babies known as the Republican and Democratic parties.   

The iceberg is very real, and even the lifeboats won't do much good if we ram right into the damn thing.  "This ship can't sink !"  "Aye, she's made of iron sir, I assure you.... she can sink".  Turn !

In My Humble Opinion,

Chuck Marshall

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