Ben Franklin said, “When the people find they can vote themselves money that will herald the end of the Republic.” Our Congress and President have voted us $6 trillion this year and are preparing to vote us more, what did Ben Franklin mean?
About 25 years ago, there was an Op-ed in the Washington Post talking about an elementary school election of a class president. A 10-year-old boy was running against a 10-year-old girl for the privilege of the office.
The little boy spoke first. “We can not cut in line for lunch and we must remember to raise our hand before we talk in class and to go to the bathroom.”
Next the little girl spoke. “Vote for me and I will give you a free cupcake and ice-cream.” The little girl won the presidency by a landslide! Wonder why?
Thirty years ago, I had the honor of attending a political function with the Democratic Senator from Massachusetts, Mr. Paul Tsongas, who was running for president and at the time polling ahead of Bill Clinton.
Mr. Tsongas said his greatest fear for the future of the country was many people’s feeling of entitlement. That they were owed something by the government.
He was equally concerned by a political class that promising gifts from the country to gain political position and power. He signed my itinerary, unfortunately he withdrew from the election 60 days latter and died from brain cancer in 1992.
What a loss, Clinton went on to win.
Stephen Roach from the Yale School of Management talked about the predicament the economy is in last month and why he was so certain that the value of the dollar could not endure the 3 trillion of printed money and the 3 trillion of additional borrowings by government this past March.
“In the first quarter of 2020 our national savings rate was 1.4 percent, this compares to a 45-year average of 7 percent from 1960 through 2005.
The lack of savings has created an extreme current account deficit of (-6.3 percent).
Bringing jobs back to America is not a solution. It would be re-locating production at a higher cost, which is inflationary. The value of our dollar will have to move significantly lower to offset the current account deficit.”
Although a lower dollar will benefit exporters (12.2 percent in 2018) of goods as well as services, it will increase costs for all of us that are not exporters (-77.8 percent).
Also although the debt is payable with interest rates seen in coming quarters as near zero, what about in 2-3 years … will maintaining interest rates at near zero require continuing to print money and further lower the value of our U.S. dollar? Of course, it will.
Let’s defer to the wisdom of one of our founding fathers once more. “They who give up essential liberty to obtain a little temporary safety deserve neither Liberty nor Safety.” Ben Franklin.
The Washington Post never mentioned whether the little girl who won the class presidency ever gave her classmates the promised cupcakes and ice cream.
At 4 p.m. on July 31 Fitch just lowered the grade of our country’s debt from stable to negative.