ECONOMIC REALITIES TO PONDER

• Reality #1 -- The federal government has no money, none at all. 

Although most understand this reality, I'm not sure we have incorporated the concept into how we view government spending. Every dollar spent by government must be taken from some private citizen. When you receive your Social Security check (now or in the future) that money did not come from "government"--it was taken by government from someone else and given to you. (By now we should all know that there is no money in the Social Security "fund".) The same is true for any government subsidy or benefit (like Medicare), the benefit is not paid for by "the government," it is paid with your neighbor's money.

If we want more spending for defense or maybe we'd like to see a renewed space program or whatever, since it has no money, government cannot pay for it without increasing the amount of money it is already taking from private citizens (i.e., by raising taxes) or by borrowing (and adding to the federal debt). So we ought to be very mindful before we suggest more government spending for any program. All government spending must come from your bank account or that of your neighbor (the popular alternative).

• Reality #2 -- The federal government has absolutely no intention whatsoever of ever reducing it debt by even a singe dollar.

Our government borrows over $500 billion every year. It must do so just to pay for its promised benefits and programs already in place. Does the government honor its debts? Yes. How? When debts come due it simply borrows whatever more money is necessary to pay those debts. So when government repays any portion of debt, it replaces it with yet more debt. With a backlog of $18 trillion in debt which is growing by over $500 billion per year, there is absolutely no way, no how that government could possibly even consider decreasing its total debt by any amount. It is a political--and financial--impossibility. Even the notion of balancing the federal budget is laughable. And government is very, very aware of this (even if most citizens are not). So when I say that "government has absolutely no intention whatsoever of ever reducing its debt", I am only stating a reality that we should all ponder judiciously.

Have a nice day.

DWD