With passage of the $410 billion "omnibus" spending bill coming hard on the heels of the $787 billion stimulus package and the $700 billion bailout of the financial sector along with the prospect of more bailouts, rescues, buy-ins and stimuli to come, it may be too late for Congress to consider the wisdom of Field Marshal Edmund Allenby in David Lean's epic, Lawrence of Arabia:
Colonel Brighton: Look, sir, we can't just do nothing.
General Allenby: Why not? It's usually best.
In some of the sticky wickets life throws at you, it is indeed best to "do nothing", just as the good field marshal said. The best scenario for handling the recession would be that Congress would "do nothing" and the economy would correct itself.
Some may think the "do nothing" plan of action unlikely to deliver us from the jaws of this recession. But of all the possible scenarios, surely the worst is: Congress throws trillions of dollars at the recession, but it serves to "do nothing" to heal the economy's underlying pathologies. We'd not only be much deeper in debt, the inflation unleashed by the borrowing and printing of money would have debased (if not ruined) the currency. And to top it off, we'd be in for another round of recession. We'd actually be far worse off than we are today. This is the nightmare scenario, and it is the possible nightmare to which Congress is exposing America.
In their first year back in power, 2007, the Democrat Congress was truly a "do nothing" Congress. Their major accomplishment was changing the light bulbs in the Capitol. But in 2008, the "do nothing" Democrat Congress became a regular bunch of "doers", seemingly hell-bent on racking up more debt. (The debt total so far.) In a recent article on our fraudulent national debt, I proposed that the official national debt should be the "publicly held debt", which would make the debt $6.3 Trillion, not the $10.5 Trillion bandied about. (These figures are from October 2008.) I figure a debt isn't a debt if you don't have to pay it back, and that's the case with the $4.2 Trillion in the "trust fund debt" portion of the official national debt. The "publicly held debt" is the real debt, the debt that the government is continually servicing -- the debt that must be repaid if the federal government is to avoid default and 3rd World status.
With this lower figure as our national debt, you might think that we're better off. Not so: If we use the "publicly held debt" as the official national debt, then the Trillions in new debt that Congress is bequeathing your grandkids actually has more of an impact than with the higher figure. For example, if you owe 2 dollars and you borrow another dollar, you've increased your debt by 50%. But if you owe only 1 dollar and you borrow another dollar, you've increased your debt by 100%.
So, keying off the lower honest figure rather than the higher fraudulent figure means that Congress' recent additions to the debt are really about two-thirds again more onerous. To put it another way, the burden of the new debt is 1.667 times larger in relationship to the real national debt than to the current official debt. (Of course, this evens out after you add $4.2 Trillion in new debt, which, at the rate Congress is going, might not be long.) But regardless of whether or not the official national debt is re-pegged as I proposed, all this new debt Congress is bestowing on us is "publicly held debt", and it must be serviced.
There was a time when even the thought of throwing future generations into debt would make any normal man ashamed. But it's worse than that, because the grandkids will be slaves: tax slaves. And if that doesn't shame you, think about yourself: The drag of mounting government debt makes it even harder for Congress to make good on the promises it's already made, such as your Social Security and Medicare. And now they're making the situation worse with a move for even more entitlement programs.
Could it be that what Congress is doing in response to the recession will be viewed by future generations the way we today view Smoot-Hawley?
NY Times columnist Paul Krugman recently opined: "Republicans are now firmly committed to the view that we should do nothing to respond to the economic crisis, except cut taxes." This is just not the case, but Democrats allege it ad nauseam. The Republican minority never advocated we "do nothing". That's a straw man argument Democrats used to ram through highly debatable legislation without debate. The GOP counter-proposals were timely, targeted and temporary, just as Larry Summers once advised. They were recession-specific, i.e. aimed at the recession. Despite an economy on its knees and with debt already up to our eyeballs, Democrats want to radically expand government. Charles Krauthammer has noted the irrelevance of the Democrats' Big Bang Agenda: "As a cure for rapidly growing joblessness, a massive destruction of wealth, a deepening worldwide recession, this is perhaps the greatest non sequitur ever foisted upon the American people."
Unwilling to "do nothing", Democrats tell America: Now is the time to "do everything". But isn't this the worst possible time for huge agenda?
One of the advantages of "doing nothing" is its cost. But not only would we not go deeper into debt, we would gain an awful lot of knowledge from a "natural recovery". The market has already told us we don't need Circuit City. It's also telling us we don't need 2 Starbuck's on every street corner. Perhaps we don't need Chrysler, either.
The American economy must go through a painful restructuring. Any attempt to spare us the pain, only kicks the pain down the road for others to experience, like the grandkids. And more importantly, it forestalls real recovery.
What Congress should be most focused on isn't keeping folks in homes they can't afford and in jobs in moribund businesses, but correcting the systemic problems that got us here. Only then will we have a durable economy. But Congress is propping up failures rather than letting the natural process of creative destruction do its work. (And here I thought we were supposed to be in a new era of CHANGE.)
What the Democrat Congress is really attempting to do is nothing less than to solidify their power, once and for all. They are not trying to save the system but supplant it. They are using this "crisis" as cover to do what they've always wanted to do, which is to change America utterly and forever.
What folks should fear most right now is Congress. If Congress ruins the American economy and the U.S. dollar by spending our grandkids' money, wealth not yet created, shouldn't the penalty be harsher than merely the loss of their Congressional seats? There may come a day when we'll mourn that this Democrat Congress lacked the wisdom to "do nothing" -- or, if not "nothing", then "anything" other than what they're doing.