Independence Day 2020

Where can we go once progressives have raided, ravaged and ruined all the red states? 

Independence Day 2020

By: George Noga – July 4, 2020

           We have updated MLLG’s highly popular Fourth of July posting; it is inspired by the movie Independence Day, in which extraterrestrials, having despoiled their home planet, invade Earth with the objective of stripping it of all its resources, rendering it uninhabitable and then moving on to do the same to other worlds.

            An alien race plundering planets, leaving them dead, failing to learn from it and then replicating such behavior on other pristine worlds repulsed everyone who saw the movie. Yet, this same behavior pattern is being aped today by progressives.

         Progressives have pillaged and plundered blue states for over half a century. Their failed governance is characterized by sky-high taxes, mindless regulation, gun control, broken schools, senseless bureaucracy, mandatory unionization, high living cost, rampant crime, political corruption, massive debt, unfunded liabilities, sanctuary for criminal illegal aliens, crumbling infrastructure and homelessness including public drugs and filth. They even refuse to maintain law and order, elevate rioters and looters above law-abiding citizens, defund the police and release dangerous criminals without bail. They pit one group against another based on income, age, gender and race.

Will the last person out of Illinois please turn off the lights?

        When life becomes too toxic, people flee these dystopian wastelands for red states with lower taxes, less crime, fewer regulations, less bureaucracy, right-to-work laws, lower living costs, balanced budgets, modern infrastructure, better schools, gun rights, little homelessness, good public health, detention of criminal illegal aliens, law and order including bail for dangerous criminals. Life in red states is freer and more humanistic; citizens are treated as adults and are not pitted one against the other.

         Progressives, who move to red state America by the millions, love life in their new home; none ever return to their blue state snake pits. However, most transplanted liberals continue to vote for the same pernicious, destructive policies that laid waste to their home states, turning them into the hell holes they desperately fled. Inexplicably, most of them don’t make the connection between the policies that doomed their home states and the vastly different red state policies that attracted them.

        Progressives aren’t the only ones mimicking Earth-invading aliens. Muslims are deserting their home countries in droves to immigrate to western democracies. They flee their noxious homelands so they can speak, vote, live and worship in liberty and build a better life for their children. Incomprehensibly, they copy the plundering aliens and attempt to turn their new homes into replicas of the entropic rats’ nests they fled including Sharia law, genital mutilation, honor killings and subjugation of women.

          Puerto Ricans, mimicking space aliens, progressives and Muslims, also are bent on denuding their home world and then fleeing to Florida. There are 5 million Puerto Ricans living in the US while only 3 million remain in Puerto Rico. You guessed it; most continue to vote for the same failed policies that depredated their troubled island. The same is true of Mexico, El Salvador, Honduras, Guatemala and Nicaragua.

       It’s impossible to distinguish between planet-destroying, marauding aliens of Independence Day and progressives, Muslims and Puerto Ricans. They each have despoiled and gutted their own worlds and have moved on to loot new worlds.

       There is one critical distinction: the aliens of Independence Dayafter destroying Earth, moved on to other planets. Where do we go after progressives have raided, ravaged, robbed, razed, ravished, ransacked, rifled and ruined all the red states?

HAPPY INDEPENDENCE DAY 2020 – AMERICA’S 244TH BIRTHDAY!

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Next on July 12th, in a MLLG first, we publish a post by a guest blogger. 
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

Why Business Succeeds

Business succeeds because its risks, rewards and incentives are aligned with human nature.

 

Why Business Succeeds

By: George Noga – June 28, 2020

           This post is a companion to the one last week entitled “Why Government Fails“. If you missed it, go to our website www.mllg.us. In that post, we revealed seven reasons why government fails. This week we explain why business succeeds.

          Business succeeds because it excels at aligning risks, rewards and incentives with human nature – unchanged since men walked on two feet. The imperative to make a profit creates urgency, focuses attention and summons great exertion because success confers wealth and status while failure has immediate and unpleasant consequences. As a result, business attracts motivated, hard working, talented, non risk-averse people whose bias favors action over inertia. Business closely aligns personal incentives with the goals of the business such that they nearly are one and the same.

           Business is based on markets, in which knowledge flows from the bottom up and confers valuable information about consumer choices and preferences along with prices. All transactions are voluntary, non-coercive and mutually beneficial; that explains why both parties to a market-based transaction always say “thank you“.

          In business, one solitary person can literally improve the daily lives of billions of people as did Bill Gates, Steve Jobs, Sam Walton and Walt Disney to name a few. One driven entrepreneur can change the whole world. Moreover, businesses are able to tightly manage world-wide trillion dollar enterprises and prevent most waste, fraud, abuse and corruption through strong governance and independent audits.

Why Government Fails While Business Succeeds

       At all its levels, always and everywhere, government fails for many reasons; foremost among them is that its risks, rewards and incentives are misaligned with, and often even diametrically opposed to, human nature. Politicians and bureaucrats respond to incentives that reward them even when they are contrary to the public interest.

         Government is top down, command and control and coercive; it ignores consumer preferences. Rather than forming mutually beneficial relationships, it creates winners and losers. It divides people by race, age, income and gender.

        Government brings us TSA, Madoff, USPS, failed public schools, OSHA, Medicaid, IRS and public sector unions. People are fleeing as fast as they can from dysfunctional states like Illinois, New York, Connecticut, California and New Jersey and from cities such as Baltimore, Newark, Cleveland, Detroit and Chicago.

        Government failure is systemic, structural and incapable of reform; nonetheless,  some government is necessary because it is preferable to anarchy. The only possible remedy is to reduce its overall size and scope to the absolute minimum.


Our next post is on July 4th and celebrates Independence Day.
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

Why Government Always Fails

Government failure is structural and systemic; it is utterly incapable of reform.

 

Why Government Always Fails

By: George Noga – June 21, 2020

          This post explains why government at all levels invariably fails. Next week, our companion posting shows why business succeeds. Sentient people know government fails at everything it attempts, but they often don’t understand why.

          We provide many reasons infra for government failure, but first we must explain the nature of its failure. The causes of government failure are systemic and structural; they are deeply rooted and incapable of reform. Its most common symptoms, waste, fraud, abuse and corruption are organic and cannot be eliminated; it is futile to try.

         Changing political parties, appointing different bureaucrats, increasing oversight by Congress, forming elite study commissions or hiring more inspectors general will have no effect. Government failure can’t be eliminated, but there is one, and only one, way it can be reduced. That solution is revealed at the end of this post – stay tuned.

Reasons for Government Failure

Opposed to Human Nature: A principal reason for its failure is that government is unalterably opposed to human nature, which is unchanged since we lived in trees. Humans are hardwired to advance their self interest and to respond to incentives. All the incentives in government are misaligned and contrary to the public interest. This also explains why socialism never has worked outside of a family, clan or tribe.

Public Sector Economics: This is more an explanation than a reason. It explains, inter alia, why government prefers borrowing over taxation, why taxes are opaque and why failed government programs continue to exist – and even to expand. Politicians and bureaucrats are responding to incentives, but ones that reward them, not the public. And politicians’ biggest (and likely only) incentive is to get reelected.

Failure to Attract Talented, Motivated People: Risks and rewards of government work do not attract highly talented, motivated and hard-working people. Government work tends to attract those who are risk averse and prefer inertia over action. Why would being a bureaucrat appeal to anyone who is capable of succeeding in business?

Not Market Based: Markets gather knowledge from the bottom up based on consumer choices and preferences; all transactions are non-coercive and benefit both parties. Instead of mutually beneficial relationships created by markets, government is top down, highly coercive, ignores consumer preferences and creates winners and losers.

One Person Can’t Make a Difference: Try to name one bureaucrat who transformed government for the better. You can’t because none exists. There are no bureaucratic equivalents of Steve Jobs or Jeff Bezos and there never can be. Such people would never go into government and if they did, they would soon quit in frustration.

Lowest Common Denominator: Politicians succeed most often when they appeal to our basest instincts, or lowest common denominator – instead of to the better angels of our nature. That explains why they divide people by race, gender, age and income and pursue policies they know are detrimental to those whom they represent.

Too Big to Manage: There is no way 537 politicians can manage a $4 trillion budget. Few of them have the necessary private sector experience; most serve only a few years and they have wildly different ideas about what should be done. Moreover, they are not held accountable for their (mis)management of government spending.

         Government failure, with its embedded waste, fraud, abuse and corruption, has been with us since George Washington’s administration. It never can be eliminated. There is only one way it can be reduced and that is to shrink the overall size and scope of government. That’s one reason our mantra is: more liberty and less government!


Our next post on June 28th explains why business succeeds.
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

Conscientious Acquittal a/k/a Jury Nullification

A majority is one person with courage.

Conscientious Acquittal a/k/a Jury Nullification

By: George Noga – June 17, 2020

      In America, the right of a juror to vote conscience is enshrined in our founding documents. Jury trial is the only right mentioned in both the Constitution and Bill of Rights and more words are devoted to it than any other right. The founders intended to put citizens at the very heart of the criminal justice system. Plea bargains, unknown at our founding, now account for over 95% of all criminal cases. Following are but ten situations where a juror may choose to exercise conscientious acquittal.

  1. The accused never intended to commit a crime
  2. An honest citizen acting in good faith violated vague or unknown laws
  3. Victimless crimes
  4. Crimes where the probable or minimum sentence is out of proportion
  5. Laws that should not exist
  6. Disagreement with the way the law is being applied or selectively enforced
  7. Abuse by police or prosecutors or charges that are political in nature
  8. Overzealous enforcement, reliance on paid informants or profiling
  9. Instances where justice would not be served by a conviction
  10. Matters of morals or conscience

Closing Speech to the Jury in a Case Crying Out for Nullification 

       Ladies and gentlemen of the jury: Under our Constitution and common law you are sovereign. You can vote to acquit my client for any reason or for no reason and never be held to account or to explain. You have absolute power to ignore your juror’s oath and the judge’s instructions. This is a sacred right with a lengthy and honorable provenance and is intended for cases like this that cry out for conscientious acquittal.

      The Constitution provides 5 sources that have veto power before a law can punish an accused; you are familiar with 4 of them: (1) house of representatives; (2) senate; (3) president; and (4) judiciary. This jury is the fifth and final source of veto power. Even if a law is passed by both houses of congress, signed by the president and upheld by the judiciary, it will not stand if juries such as this one refuse to convict under it. This is consistent with our Constitution and repeated Supreme Court rulings and is as understood by our founding fathers. John Adams said, “It is not only a juror’s right, but his duty to find the verdict based on his own judgment and conscience.”

     The right to jury nullification goes back over 1,000 years. In 1670 William Penn was tried in London for preaching Quakerism. The judge wanted Penn convicted but the jury refused. The judge jailed the jury for four days without food or toilet facilities, but they still refused to convict. Ultimately, England’s highest court ruled that a juror’s right to reject law and vote conscience is traceable to Magna Carta signed in 1215 and even further back many centuries to Anglo-Saxon customs and practices.

     Conscientious acquittal has a long, glorious history in America. The Salem witch trials ended only after 52 straight acquittals or hung juries. Juries refused to enforce the Navigation Acts in the 1760s causing England to restrict jury trials. Northern juries in the 1850s acquitted abolitionists charged under the Fugitive Slave Laws. Nullification speeded the end of prohibition. Juries acquitted protesters during the Vietnam War and refused to convict those charged with consensual sex under sodomy laws. In 2012 an Iowa jury acquitted trespassing occupy members peacefully protesting at the statehouse. Immediately thereafter, 15 others similarly accused demanded jury trials.

     Your duty as jurors goes well beyond determining facts and includes a duty to prevent injustice. This case cries out for conscientious acquittal. Use your independent life experience, concept of justice, wisdom and beliefs; do not mindlessly follow the judge, other jurors or a flawed law. You can and must hang a jury, by yourself if necessary if your conscience so dictates. You must resist pressure from other jurors to compromise. Ignore the cost of a retrial; it is your right and your duty.

       Ladies and gentlemen of the jury, history shines on courageous juries. Remember what your valiant ancestors did for peaceable Quakers, accused witches, fugitive slaves, war protestors and persecuted gays and then do your duty as a sovereign jury. By doing so, other juries will follow suit; even one solitary American citizen voting his/her conscience can bring about justice for 325 million countrymen.

        Finally, always remember that a majority is one person with courage!


Next on June 21st, we explain why governments fail.  
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

Police Reform in America

MLLG’s plan for reforming the police in the wake of the George Floyd tragedy

 

Police Reform in America

By: George Noga – June 14, 2020

This is a special posting; the one originally scheduled has been moved to Wednesday. MLLG previously has written about policing; you may view these posts on our website: www.mllg.us. On 9/25/16 we posted Crisis of Confidence in Police and on 3/12/17 we posted Restoring Confidence in Police. Those posts still are valid.

There are cris de coeur to abolish or defund the police in the wake of the George Floyd tragedy. Major reform is indeed necessary; police have transmogrified into threatening figures, particularly to minorities, the underclass and the young. They wall themselves off from the communities they serve. They have an us-versus-them attitude, which is part of a culture that dictates they protect each other over serving the public.

MLLG Plan for Police Reform

Privatize the police: Communities can hire private for profit security firms. Such firms would hire the good officers from former police departments. The competition would increase the quality of law enforcement and it would be easy for the security firms to fire any officers who misbehave or who rack up citizen complaints.

Abolish qualified immunity: Currently police and government officials have qualified immunity and can’t be held legally accountable when they violate citizen rights – even in the most egregious manner. This must be ended.

Reform/Abolish LEOBOR: Many states have enacted a Law Enforcement Officer Bill of Rights which gives police many rights, privileges and protections not enjoyed by ordinary citizens. LEOBOR makes it incredibly difficult to hold police accountable.

Eliminate police unions: Unions make it virtually impossible to fire a rogue police officer. Even ones who are fired for gross misconduct usually are quietly reinstated months later with full back pay. Progressive politicians get princely contributions and backing from public unions. It is highly doubtful politicians’ social justice concerns will overcome their addiction to the torrent of union money and votes.

Self evaluation: Following Vietnam, the military was in shambles. Like police today, they were poorly perceived by the public. They did a critical self examination and transformed themselves into a highly trusted institution. Police need to do the same.

West Point for police: We should establish a national police academy to increase professionalism. Many states now require more training for beauticians than for police.

Embrace citizen review boards: All jurisdictions should have non political police review boards composed of a cross section of citizens. Police should embrace such boards and use them to learn from the community and to build trust.

Clean up their act: Police must stop conduct that undermines public confidence. They must end asset forfeitures and policing for profit. Use SWAT teams and military style equipment only when absolutely necessary. Quit telephone solicitations which are unprofessional and grate on the public. Stop the practice of testilying, i.e. police perjury. Don’t link advancement to money or arrests. Finally, improve the atmospherics by eliminating garish uniform decorations befitting the potentate of a banana republic.

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Implementation of the plan outlined above would go a long way to transforming the police into a trusted institution. It is all perfectly logical. But it would be wise not to expect too much in the way of reform as that is the nature of politics. Alas, there will be much sound and fury signifying nothing and, in the end, little will have changed.

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Watch for our next post on Wednesday about conscientious acquittal.

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More Liberty Less Government – mllg@cfl.rr.com – www.mllg.us

FDR Addresses the Nation – June 6, 1944

“Let Our Hearts Be Stout” – Original title of FDR speech on June 6, 1944

 

FDR Addresses the Nation – June 6, 1944
By: George Noga – June 6, 2020

      Today is the 76th anniversary of D-Day. Following, in its entirety, is President Roosevelt’s address to the nation on the evening of June 6, 1944. FDR also had spoken to the country on radio the previous evening announcing the fall of Rome.

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        “My fellow Americans: Last night when I spoke with you about the fall of Rome, I knew at that moment that troops of the United States and our allies were crossing the channel in another and greater operation. It has come to pass with success thus far. And so, in this poignant hour, I ask you to join with me in prayer.

      Almighty God: Our sons, pride of our nation, this day have set upon a mighty endeavor, a struggle to preserve our Republic, our religion and our civilization, and to set free a suffering humanity. Lead them straight and true, give strength to their arms, stoutness to their hearts, steadfastness in their faith. They will need Thy blessings. Their road will be long and hard for the enemy is strong. He may hurl back our forces. Success may not come with rushing speed, but we shall return again and again; and we know that by Thy grace, and the righteousness of our cause, our sons will triumph.

        They will be sore tried by night and by day, without rest – until the victory is won. The darkness will be rent by noise and flame. Men’s souls will be shaken with the violences of war. For these men are lately drawn from the ways of peace. They fight not for the lust of conquest. They fight to liberate. They fight to let justice arise, and tolerance and goodwill among all Thy people. They yearn but for the end of battle, for their return to the haven of home. Some will never return. Embrace these, Father and receive them, Thy heroic servants, into Thy kingdom.

      And for us at home – fathers, mothers, children, wives, sisters and brothers of brave men overseas, whose thoughts and prayers are ever with them – help us, Almighty God, to rededicate ourselves in renewed faith in Thee in this hour of great sacrifice.

     Many people have urged that I call the nation into a single day of special prayer. But because the road is so long and the desire is great, I ask that our people devote themselves in a continuance of prayer. As we rise to each new day, and again when each day is spent, let words of prayer be on our lips, invoking Thy help to our efforts.

      Give us strength too – strength in our daily tasks, to redouble the contributions we make in the physical and material support of our armed forces. And let our hearts be stout, to wait out the long travail, to bear sorrows that may come, to impart our courage unto our sons wheresoever they may be.

       And, O Lord, give us faith. Give us faith in Thee; faith in our sons; faith in each other; faith in our united crusade. Let not the keenness of our spirit ever be dulled. Let not the impacts of temporary events, of temporal matters of but fleeting moment – let not these deter us in our unconquerable purpose.

       With Thy blessing, we shall prevail over the unholy forces of our enemy. Help us to conquer the apostles of greed and racial arrogances. Lead us to the saving of our country, and with our sister nations into a world unity that will spell a sure peace – a peace invulnerable to the schemings of unworthy men. And a peace that will let all of men live in freedom, reaping the just rewards of their honest toil.

         Thy will be done, Almighty God. Amen.”


Next up is MLLG’s closing argument to a jury about conscientious acquittal.
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

The American Dream – Strangled by Government

Two worker households are a Faustian Bargain, the second income pays only for government. 

The American Dream – Strangled by Government

By: George Noga – May 31, 2020

        I graduated from high school in 1961 and went on to college. Most of my high school friends remained in Orlando, began work, married, had children and bought homes. The wives stayed home; a second income wasn’t necessary to buy a house and to raise a family. I kept in touch with many of my classmates. Following is the true story of two such people, Steve and Sandy – their real names.

       High school sweethearts, Steve and Sandy married soon after graduation. Steve started work in the paint shop of the Martin Company (today Lockheed Martin) at $2.00 per hour, soon increasing to $2.25. With a little overtime, their income was $5,000 per year. A year after their marriage, they bought a new home and were blessed with a daughter. Sandy did not work and stayed home to care for the baby.

         I visited Steve and Sandy often. They bought and furnished a median-price home, accumulating enough for a down payment and furniture in one year with both working. Once the baby was born, Sandy quit work as they could live solely on Steve’s income. Their home cost the equivalent of 2 years of Steve’s income and their monthly house payment including principal, interest, taxes and insurance (“PITI”) was under $100, or 22% of his income. Sandy never returned to work; it simply wasn’t necessary.

        Fast forward to 2020 and see how a modern day Steve and Sandy would fare. We begin with the generous assumption that a high school graduate earns $15 per hour, or $30,000 per year. The median home price in Orlando is $260,000; assuming a 10% down payment and low interest rate, the monthly PITI payment is $1,167, or $14,000 per year. The house costs 9 years of income and requires 47% of monthly income to pay PITI. Many years are needed to save for a down payment and furniture.

       What could account for such a sea change in the course of a few generations? Why did these changes happen? Why is it necessary today for a family to have two wage earners merely to live as well as their grandparents lived on one income? The answer in one word: government. The causes are many but all have a nexus to government.

     Housing costs skyrocketed due to government diktats including, zoning, growth management, building codes, greenbelts, bureaucracy, anti-leapfrogging, concurrency, infill and regulatory delay. All taxes were increased, especially the payroll tax and many new ones added. The Florida sales tax Steve and Sandy paid was 3%; today it is 7% – an increase of 133%. Steve and Sandy’s real estate tax was $100; today it would be $2,600, a 2,500% increase. Government drove up the cost of many other things such as health care, tuition and child care. The more government got involved, the more costs increased over time, less intervention meant lower prices.

       At first, as the second family wage earner entered the workforce, there was a sense of faux prosperity; they could afford an extra TV and some other accoutrements. But higher taxes and government-imposed costs devoured the second income. By the time they realized they were hoodwinked, it was too late for a volte-face. Two income families are a Faustian Bargain, the second income pays only for more government. Families doubled the number of workers but have nothing to show for it.

       A modern day Steve and Sandy can’t afford to buy a house or to start a family and they often live lives of quiet desperation. The American dream didn’t just die; it was murdered. The cause of death was strangulation by government!


Watch for our special D-Day posting on June 6th.
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

School Choice and the LGBTQ Controversy

Progressives would see all children drown rather than provide lifeboats for some. 

School Choice and the LGBTQ Controversy
By: George Noga – May 24, 2020

      Progressives in Florida have worked themselves into a lather because some families exercise their freedom of choice under the Florida Tax Credit Scholarship Program to send their children to religious schools that are not LGBTQ friendly. They would rather take away the freedom of over a hundred thousand families than permit a few families to use their liberty to make choices with which they disagree.

        The LGBTQ scare is a smokescreen; liberals always have hated school choice because they are enamored with big government and teachers unions. From the start of the school choice movement, at which I was present, opponents have demonized choice. At first, they claimed vouchers could be used to fund schools run by the KKK or witches covens. Their latest claim that religious schools are anti-LGBTQ is being used as a bludgeon against corporations participating in the scholarship program and, in these hyper-PC times, they have caused a few companies to quit the program.

        A key question is: “Whose money is it, anyway?” No one objects to families using their own money for their children to attend the school of their choice. So, to whom does tax credit scholarship money belong? Credits differ from vouchers, which are funded by government. Unlike vouchers, credits never were state funds. The tax credit program was built on the principle of funder choice to keep government out and to permit families to choose. Progressives treat scholarship families as inferior to those using their own funds to pay for their children to attend the same schools.

        That government schools discriminate against religion is obvious; less obvious is that public schools promote their own religion. They teach a vapid, politically correct, secular and valueless orthodoxy that, instead of reinforcing parental values, is antithetical to them. Tax credit scholarships permit the lucky recipients to escape failed government hell holes, which often are petri dishes for social dysfunction and breeding grounds for behavioral pathologies. Progressives oppose religious schools but force children to attend schools that indoctrinate them with the government religion.

        Critics of the Florida Tax Credit Scholarship Program are hard at work cudgelling companies with the club of political correctness if they don’t agree to quit participating. However, if companies quit the program, that means fewer scholarships inasmuch as  companies can’t pick and choose who receives the scholarships or which schools recipients choose. Thus, a family may not, for example, have a scholarship available to move their LGBTQ child from a public school where he/she is being bullied relentlessly into a private school that provides a safe, nurturing environment.

       Progressives are acolytes of the secular, valueless government religion; they hate it when even one person sends their children to a real religious school. They shamelessly have used the KKK and witches covens as scare tactics. Progressives would much rather see all children drown than to provide lifeboats, solely because they object to the choices a few people on the lifeboats may make.


Our next post on May 31st chronicles the death of the American dream.
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

The Spending Crisis: Monopoly Money

Americans are not accustomed to thinking about currency risk; this needs to change.

 

The Spending Crisis: Monopoly Money

By: George Noga – May 17, 2020

       My last post on May 10, 2020 established new all-time MLLG records for forwards and reader feedback. If you missed it, go to www.mllg.us to understand what all the hullabaloo is about. It was one of the most consequential posts in my 13 years of blogging – until this post. This post may be even more consequential!

           I now can see clearly how the spending crisis plays out and, as a corollary, how better to prepare for it. Due to an unforeseen confluence of events, the end game came into focus. More time at home due to coronavirus restrictions allowed for discernment. Second, mountains of new pandemic-related debt made the crisis imminent. Third, as shown in my May 10th post, we have passed the point-of-no-return and are nearing critical mass. Fourth, I read excerpts from a new, unpublished book by Ray Dalio, arguably the most astute investor of our era, that crystallized my thinking.

Possible Government Responses to the Spending Crisis

         There are five main ways government can respond to the crisis: (1) cut spending; (2) raise taxes; (3) default and/or restructure; (4) seize pension assets; and (5) print money. The first two options clearly are untenable. Spending cuts would need to be so deep and tax increases so huge the social cost would be unacceptable. Moreover, such actions would need to be sustained for decades – an impossibility. Default would be too painful as the defaulted debt represents someone’s assets. Seizure of pension assets (by converting them into government pensions) would be a hard sell. That leaves option five – print monopoly money. BINGO!  (See our 5/12/19 post for more on this.)

        Government will print money because it is expedient, poorly understood by most people and results in the least (apparent) pain. Printing money and inflating (basically the same thing) historically has been the go-to choice for governments with their backs against the wall. It is likely there also will be token spending cuts, tax increases and other actions, but they will be more symbolic than consequential. Congresswoman Rashida Tlaib’s proposal to issue trillion dollar coins may not be that far fetched.

        A few words about timing. The analysis in my May 10th post shows the debt ratio at 169% in 2025 and 264% in 2030. That makes the onset of the crisis no more than 5 to 10 years away – perhaps less. Ray Dalio has stated the US is in the seventh inning of its debt crisis – that means he believes we are 78% of the way to Gotterdammerung!

Preparing for the Crisis – Protecting Your Family and Your Assets

         Readers always ask what measures can be taken to prepare for the crisis and I am frequently asked what I am doing to prepare for the inevitable. At this juncture, I am taking the most obvious, commonsensical and lowest-risk actions described below. Note: My posts of 10/14/18 and 10/21/18 (on website) discuss these issues in depth.

1. Firearms: Although I strongly support the second amendment, I do not presently own firearms. The debt crisis will be accompanied by a high probability of civil unrest, breakdowns of law and order, interruptions of public services and financial chaos. Therefore, I am reevaluating and likely will acquire guns and ammo.

2. Gold: I will begin investing in gold, precious metals and hard assets. Initially, this will be 5% of my portfolio – perhaps increasing to 10% over time. It also is wise to keep a supply of small denomination gold and silver coins at home for use in a crisis.

3. Currency: Americans are not accustomed to thinking about currency risk. This needs to change. Per Ray Dalio, Americans need to think about currencies in the same way they think about holding any other asset. I am diversifying my currency risk with a foreign bank account denominated in a foreign currency and by buying bond funds that focus on highly rated bonds in currencies of countries with low debt ratios.

4. TIPS/Long Bonds: The hardest hit asset when the monopoly money starts flying off the printing presses will be long-dated bonds. I am divesting such assets. I also will take a position (5% to begin – more later) in TIPS to protect against hyperinflation.

       The above measures are only initial responses; there will be more to come. It  appears my analysis and writing about the spending crisis soon will be validated. I derive no pleasure whatsoever from this and wish I was wrong. I do take some small consolation however, if I am able to help readers better prepare for the inevitable.


Next Sunday: A memorable posting about school choice and the LGBTQ issue.
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

The Spending Crisis: Reductio ad Absurdum

Given current trends, the annual interest on our debt will exceed GDP; let that marinate!

The Spending Crisis: Reductio ad Absurdum

By: George Noga – May 10, 2020

OF THE 600 POSTS I HAVE AUTHORED DURING THE PAST 13 YEARS, NONE IS MORE CONSEQUENTIAL THAN THIS ONE! Usually I limit posts to 600-700 words but did not wish to break this one into two parts; hence, it is twice the normal length. I used my time at home due to coronavirus restrictions to research and to prepare an expanded, fresh and gripping analysis of the spending crisis.

       For the first time, I employ an apagogical argument that proves a contention by deriving an absurdity from its denial. Specifically, reductio ad absurdum disproves an argument by following its implications to an absurd conclusion. The fallacy lies in the argument that can be reduced to absurdity; reductio ad absurdum merely exposes the fallacy, in this case that the US can continue spending and borrowing.

       What makes this analysis so different and riveting? (1) I have taken a much deeper dive into the data; (2) Assumptions about the composition of the debt are changed; (3) Realistic assumptions are used instead of optimistic ones; (4) More recent data are available; (5) The reduction to absurdity argument is adduced; and (6) It explains why, at its beating heart, the spending crisis is moral rather than economic.

Assumptions About GDP

       GDP for 2019 was 21.4T (trillion); for 2020 I used the latest Goldman Sachs forecast – a 6.3% reduction from 2019. For the first time, I assume mild recessions (4% contractions) once a decade in 2026-27, 2036-37 and 2044-45. Other than recession years, I assume GDP grows at 2%, in line with the past decade, and then slowing to 1.5% in later years. These are middle-of-the-road, Goldilocks assumptions.

Assumptions About Debt

      Public debt at year-end 2019 was $17.2T. To that I add coronavirus spending Phases I, II and III of $2.3T (total) and my Phase IV (infrastructure, etc.) estimate of another $2.0T. I also must add the 2020 structural deficit of $1.0T and the additional operational deficit due to coronavirus of $0.8T. This results in a public debt of $23.8T at year-end 2020. For future years, I assume the debt grows at a rate in line with the trend of recent years – with appropriate adjustments for recession years.

“Before long, public debt and total debt will be one and the same.”
Public Debt Versus Total Debt

         Here I make a notable departure from the past. Previously I have counted only the public portion of the debt, which is $7T less than the total debt. The difference consists of intragovernmental debt owed to Social Security, FHA and other agencies. Before now I excluded such debt because it is non-marketable, accrues (but does not pay) interest and is notional in nature. Before long however, the government must begin issuing public debt to fund the intragovernmental debt for, inter alia, paying future Social Security benefits. Therefore, I now assume that intragovernmental debt of $1.0T is converted to public debt each year from 2021 through 2027. Thus, public debt and total debt will be one and the same by the end of 2027.

Government Sponsored Enterprises (“GSEs”)

        Fannie Mae (FNMA), Freddie Mac (FHLMC) and a few other GSEs are owned by the federal government. In a rational universe, they would be consolidated into the accounts of the federal government. Although the feds are not legally liable for the debts of Fannie and Freddie, there is an industrial-strength implicit guarantee based on precedent. Fannie and Freddie guarantee $7T of debt; in a crisis they would need trillions in bailouts. For this analysis, I have not included any debt for GSEs.

Unfunded Liabilities and Obligations

       The Treasury Department estimates federal unfunded liabilities are $122T; this means the government has made promises to pay that amount without providing any funding. Over time, these obligations come due and must be financed with – you guessed it – more debt. I have not counted any of this $122T in this analysis. I once studied unfunded liabilities and concluded that a more realistic estimate is double the Treasury number, or one-quarter of a quadrillion dollars. In even more cheery news, state and local governments have another $10T in unfunded pension liabilities.

Reduction To Absurdity

        Based on the assumptions described supra, following are the Debt/GDP ratios for select years. The GDP and debt are in trillions of dollars. Data for 2019 are actual.

Year             GDP              Debt             Ratio
2019             21.4               17.2                80%
2020             20.1               23.8              119%
2025             22.2               37.5              169%
2030             22.6               59.7              264%
2040             24.4             161.2              659%
2050             26.4             588.4           2,226%

       In five years the ratio is projected to be 169%; within a decade it is 264%. In twenty years the ratio skyrockets to an absurd 659%, while in 2050 it is a preposterous 2,226%. The US has passed the point-of no-return. The Titanic has hit the iceberg and there is no way to unhit it; now it is but a matter of time until the inevitable happens. Because of the humongous coronavirus spending, the advent of the crisis has been advanced by five to ten years – all in just the past few months.

       By reducing to absurdity the future spending and debt, this analysis proves it is impossible to sustain our spending and borrowing for much longer. It is risible that the US can have a ratio of 2,226%, or even 659%. Moreover, the 2030 ratio of 264% is tinctured with absurdity; even the 2025 ratio of 169% is problematic. Even with a powerful tailwind from MMT, it seems like we have fewer than 10 years left.

        While trafficking in the absurd, let’s peek at interest on the debt. At the current US composite rate on its debt (2.5%), annual interest on the debt will reach $1 trillion circa 2026 – in just over five years. If the interest rate to service our debt increases to 4.5% (a low number historically) interest payments would exceed GDP by 2050. Let that metric percolate for a while; our annual interest on the debt would exceed GDP!

“We always chose the easy path. As a nation, we failed morally.”

        It is impossible to look at the data and analysis presented herein and to imagine we have more than five or ten years left before the spending crisis reaches critical mass and discombobulates our lives for the next 20-25 years, i.e. a lost generation. It will be worse than the dot-com bubble, the great financial crisis and coronavirus combined. Great and sustained sacrifice will be required until all the excess debt is purged. The gargantuan spending cuts necessary (20% to 30%) will rend the social fabric of our nation; we will be lucky to avoid anarchy and to maintain the rule of law.

The Moral Root of the Crisis

        Ever since I began writing about the spending crisis, I have posited that, at bottom, it is a moral crisis, not an economic one. Historically, the US has borrowed heavily only to finance wars. Our national debt in 1980 was less than $1 trillion and our debt ratio was under 30%. Inexplicably, that’s when we began our debt binge.

       We gave some segments of the population huge tax cuts to beguile them into accepting massive spending on other segments of the population. We spent vast sums on certain cohorts of Americans to bewitch them into tolerating the tax cuts on other cohorts of Americans. We have repeated this pattern up to the present in a futile  attempt to avoid tough choices and to buy social peace via massive borrowing.

         The decades of the 1980s and 1990s were prosperous. There were no major wars, natural disasters, pandemics or financial meltdowns. The baby boom generation constituted 38% of the population and was in its peak productive years. There were few retirees and Social Security and Medicare generated massive fiscal surpluses. The Berlin Wall fell and the USSR collapsed, unleashing an enormous peace dividend.

         The period since 1980 should have been the easiest time in American history to balance the budget; instead, we kept borrowing feverishly and never stopped. We danced while the band played on. We must plumb the depths of our souls to understand why we became so addled and addicted to spending and borrowing. For whatever reasons, we always chose the easy path and, as a nation, we failed morally.

       We believed politicians who promised us the moon was Stilton, wishes were horses and pigs had wings. They promised abundance for all by robbing Peter (our children and grandchildren) to pay Paul. They promised social peace by avoiding the confrontations inherent in making choices. They promised no man must ever pay for his sins. But even in this brave new world, water will wet us and fire will burn, and the Gods of the Copybook Headings, with terror and slaughter, will return!


The final paragraph uses snippets from Kipling’s, The Gods of the Copybook Headings.
Next on May 17th, we blog about school choice and the LGBTQ issue.  
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us