I am not an economist, but I do remember some of the teachings of my day in the classroom. In a post-World War II America, we learned the economic theory of guns and butter. You see, we essentially came out of WWII only to find ourselves entering into a Cold War with the Soviets—a war that would turn into an arms race on both sides of the fence. War and the ensuing arms race set the stage for the creation of the relatively simple guns and butter theory of economics. Given finite resources, one could buy either guns (symbolizing defense spending) or butter (symbolizing civilian spending) or a combination of both. The solution lay in finding the proper balance between buying guns and butter based on internal and external considerations including, importantly, the military capabilities of our adversaries. In other words, given limited resources, a budget should be devised and implemented to channel money where it was appropriate and necessary.
Fast forward to today. The guns and butter theory is as apt as ever, but the President and Congress are too busy squabbling to put the welfare of the American citizens first. Instead, the country has been running on Continuing Resolutions since at least 2009, in effect giving President Obama an open checkbook for his entire presidency. In the seven plus years of his tenure, our national debt has doubled to almost $20 trillion, a figure that does not take into account the government’s unfunded liabilities, which include the funds borrowed from Social Security and Medicare. And yet the deficit spending continues unabated as elected officials seek to expand the programs that will buy their re-elections.
The government’s irresponsibility has created generations of citizens who actually think that something can be had for nothing—that anything provided by the government is free. It is no longer a question of Do we have the money, but Do we borrow it from China or just print it? Those who are waiting for free stuff do not care how the government acquires the money as long as the free stuff keeps coming. To ensure that it does, they will go to the polls and vote for the party that promises to give them free tuition (including the forgiveness of past tuition debt), free child care, and paid family leave. As a consequence the national debt piles up and the prevalent attitude of our elected officials seems to be, We can’t fix this, so how about we just kick the can down the road again and leave it for someone else? That outlook, at least, represents a bit of common ground in our government today. No one wants to stop the gravy train. We have become a nation that believes that it can spend its way to out of debt and into prosperity. But nothing could be further from the truth. The reality is in fiscal year 2015 we paid $402.4 billion in interest alone on our debt.
Meanwhile, our younger generations have never heard of guns and butter and we see the selfish politics of Washington mirrored in their behavior. They immerse themselves in lifestyles their pocketbooks cannot afford and then kick the can down the road using credit cards. Deferral of gratification means nothing to them; they must have the new iPhone, BMW, house, and jumbo flat screen TV today. If the government can have guns and butter, so can they! Soon a cash flow that relies on borrowing from Peter to pay Paul results in debt and poor credit ratings, and they are up against the harsh reality of living beyond their means. Too bad for them they can’t print money in their basement or get China to bail them out.
Guns and butter isn’t a quaint concept, although you wouldn’t know it the way Obama has spent money, as if money is in never-ending supply. Unfortunately, we can only expect more of the same with a Clinton presidency. Prior to Bernie Sander’s departure from the race, Clinton and Sanders were locked in a dead heat concerning who could give away more stuff. And who was going to pay for all these freebies? As usual, the top 1%, as defined by Clinton as households earning more than $750,000. They will be footing over 75% of the new tax hikes, assuming they continue to churn along and do not flee the country.
What America needs now at the helm is a businessman instead of a lawyer. America needs someone in charge who understands how the supply chain works, that there is a cost associated with every process and every person who “touches” a product. We need a leader who will bring his business acumen to the fore, and run the country as an entity constrained by budgets and timelines. It won’t be easy and it won’t be quick, but at the very least we can begin the process by voting Mr. Trump into the Oval Office in November. If we don't, our financial disaster is all but assured.
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