I was lunching yesterday with a guy in Manhattan who wants to do something about the deficit. He's an Irish kid from the Bronx that went to Fordham and had a successful career CFOing and COOing in the financial industry.
Yeah! What shall we do about the Deficit?
The short answer is Nothing. Not until the Mongols invade.
The reason is pretty simple. None of are willing to cut back on our government bennies. Not Social Security grandpas, nor Medicare grandmas. Not lifer public employees with their pensions. Not corporate America with their subsidies and carve-outs.
This is not just because we are all selfish and greedy. It is because we have all adjusted our lives and businesses to the current framework of government handouts, and if things changed it would cause, at very least, the inconvenience of adjusting our expectations and expenditures, and for many, real hardships and difficulties.
We humans usually only adjust to reverses in the face of disaster. When disaster strikes, then we all pull together and help each other out, and the Cajun Navy launches its flotilla of bass boats. But not until.
In other words, humans, the social animals, are pretty selfish creatures until disaster strikes. We reckon that people should stick to their own affairs. But when disaster strikes then we all pitch in to dig out of the rubble.
Obviously, the same thing applies to the Deficit. Nobody is going to agree to a cut in their take of government spending unless everybody else takes a cut also. And that ain't gonna happen, because we all have persuaded ourselves that we deserve our slice of the pie. Hey! I paid FICA taxes all my life! Hey, my business is vital to national security. Hey, we need well-paid teachers to teach Our Kids.
So no politician with half a brain proposes to cut the basic middle-class entitlements. Maybe that explains why Republicans could never get the white working class aboard until Trump ran and vowed not to touch Social Security and Medicare.
The fact is that governments find it almost impossible to cut spending programs, even in the face of economic disaster. Think Germany and Austria after World War I. The reason they went into hyperinflation was because they didn't have the guts to cut spending after the disaster of losing the war and all that lovely revenue. So they printed the money. Or Venezuela. You would think that Chávez's party, the party of the poor, would be able to persuade its supporters to take a cut in benefits when oil prices cratered in 2014 as a result of eevil fracking by eevil Yanqui frackers. But the Chávistas didn't dare.
Really, this is not surprising. The purpose of government is to protect its people. So it gives them bennies. But to reduce the bennies: you call that protection? Hey, pal. You reduce my bennies and I am going to go find another government to protect me.
Now, of course, government can be anything from a robber gang to an urban ethnic gang to a rebel insurgency to a genuine modern nation state. But the principle is the same. People put up with the taxation because they believe the government will protect them. And at the low end of the spectrum we call the taxation system of the urban gang "protection money."
Now to my definition of government:
When a normal government fails to protect its people it has to use terror to keep them from rebelling. That is what is going on in Venezuela right now. Since the Maduro government has utterly failed to protect the Venezuelan people from starvation and poverty it is reduced to beating up the opposition and jailing opposition leaders and anyone else who may object to the lack of protection from starvation and the elements.
But wait, you say. How does a government stop short of disaster, and pull back from financial disaster before it collapses in financial ruin and the president heads out of town to enjoy the loot conveniently stored offshore in a Swiss bank? Good question. We will investigate that in the next episode.
Yeah! What shall we do about the Deficit?
The short answer is Nothing. Not until the Mongols invade.
The reason is pretty simple. None of are willing to cut back on our government bennies. Not Social Security grandpas, nor Medicare grandmas. Not lifer public employees with their pensions. Not corporate America with their subsidies and carve-outs.
This is not just because we are all selfish and greedy. It is because we have all adjusted our lives and businesses to the current framework of government handouts, and if things changed it would cause, at very least, the inconvenience of adjusting our expectations and expenditures, and for many, real hardships and difficulties.
We humans usually only adjust to reverses in the face of disaster. When disaster strikes, then we all pull together and help each other out, and the Cajun Navy launches its flotilla of bass boats. But not until.
In other words, humans, the social animals, are pretty selfish creatures until disaster strikes. We reckon that people should stick to their own affairs. But when disaster strikes then we all pitch in to dig out of the rubble.
Obviously, the same thing applies to the Deficit. Nobody is going to agree to a cut in their take of government spending unless everybody else takes a cut also. And that ain't gonna happen, because we all have persuaded ourselves that we deserve our slice of the pie. Hey! I paid FICA taxes all my life! Hey, my business is vital to national security. Hey, we need well-paid teachers to teach Our Kids.
So no politician with half a brain proposes to cut the basic middle-class entitlements. Maybe that explains why Republicans could never get the white working class aboard until Trump ran and vowed not to touch Social Security and Medicare.
The fact is that governments find it almost impossible to cut spending programs, even in the face of economic disaster. Think Germany and Austria after World War I. The reason they went into hyperinflation was because they didn't have the guts to cut spending after the disaster of losing the war and all that lovely revenue. So they printed the money. Or Venezuela. You would think that Chávez's party, the party of the poor, would be able to persuade its supporters to take a cut in benefits when oil prices cratered in 2014 as a result of eevil fracking by eevil Yanqui frackers. But the Chávistas didn't dare.
Really, this is not surprising. The purpose of government is to protect its people. So it gives them bennies. But to reduce the bennies: you call that protection? Hey, pal. You reduce my bennies and I am going to go find another government to protect me.
Now, of course, government can be anything from a robber gang to an urban ethnic gang to a rebel insurgency to a genuine modern nation state. But the principle is the same. People put up with the taxation because they believe the government will protect them. And at the low end of the spectrum we call the taxation system of the urban gang "protection money."
Now to my definition of government:
An armed minority, occupying territory and taxing the inhabitants to reward its supporters.Do you see what is missing? Protection. That is why Mao and Cho found they had to maintain their Red Base in southeastern China with terror. All that Mao did was loot and enslave the people in his Red Base to fund his Red Army. When you aren't protecting the people, and just taxing them and enslaving them you have to use force to keep them in line. Otherwise they will rebel.
When a normal government fails to protect its people it has to use terror to keep them from rebelling. That is what is going on in Venezuela right now. Since the Maduro government has utterly failed to protect the Venezuelan people from starvation and poverty it is reduced to beating up the opposition and jailing opposition leaders and anyone else who may object to the lack of protection from starvation and the elements.
But wait, you say. How does a government stop short of disaster, and pull back from financial disaster before it collapses in financial ruin and the president heads out of town to enjoy the loot conveniently stored offshore in a Swiss bank? Good question. We will investigate that in the next episode.
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