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The Grand Government Debt Illusion

How Stupid Can Stupid Get?

Written by Greg McCoach
Posted February 4, 2013

As I read and study the daily parade of lies and disinformation that is being disseminated via the media, Internet, politicians, and so on, I can't help but come to the conclusion that governments and their respective societies have taken total leave of their senses.

The basis for trying to sustain any of this fraudulent activity is so far detached from reality, it boggles the mind.

What makes it even more distressing is that a majority of the population is seemingly willing to go along with it. They appear to be totally oblivious to the tsunami that is about to engulf them.

How can this be?

Don Coxe's 20th anniversary issue and final installment of Basic Points entitled, "The Final Problem," was a phenomenal read. Coxe views world markets with the understanding and appreciation of a tenured historian; he views trends from a multi-decade and century-long perspective.

With that said, he articulated very well a parallel between today's TV-and-couch generation of Americans and "the Lotus-eaters" described in Homer's seminal work, The Odyssey:

As the years pass, and the heroin and handouts keep flowing, we increasingly worry about the longer-term harm to the U.S. economy from zero interest rates, the extensions of the duration of unemployment benefits, and the dramatic increases in the numbers of recipients of food stamps and disability benefits. Could the cumulative effect of all that well-intended government assistance mean that too much of the population might be morphing into a new version of the lethargic Lotus-eaters Homer describes in The Odyssey?

Odysseus' ship was blown off course and landed on an island (supposedly near present-day Libya) where the residents, who dined on the lotus flowers, were peaceful, happy and sleepy. They willingly shared the flowers with crew members:

"Any crewman who ate the lotus, the honey-sweet fruit, lost all desire to send a message back, much less return, their only wish to linger there with the Lotus-eaters, grazing on lotus, all memory of the journey home dissolved forever. But I brought them back. I forced them, hauled them under the rowing benches, and lashed them fast."

This account of Odysseus's alarm at the effects on his battle-hardened crew from the opiate in the flowers, and his forcible roundup made us wonder whether years of government support and poverty programs at a time that manufacturing and heavy labor jobs have been disappearing might have a similar effect on millions of Americans — and on the seemingly dwindling élan vital of the American economy.

What can be done when people become Lotus-eaters and expect or demand others to take care of them? (If you want to see a shocking video of this type of thinking, look no further.)

On the financial side of the equation, the recent circus called the fiscal cliff ended up exactly as I expected, with a deal to kick the can down the road, avoid spending cuts, and increase taxes.

How stupid can stupid get is what we are witnessing. The fiscal cliff is just a sideshow to the main event of dealing with our debt. If you noticed, there was no discussion — from either Republicans or Democrats — on the most pressing issue for our country: THE DEBT!

So they punt and decide to make an issue out of the fiscal cliff in the media to keep people from understanding what is really going on with our true debt picture.

Have many of us have forgotten that the fiscal cliff came about as a result of the failure to come to an agreement on deficit reduction?

Have we likewise forgotten the official name of what came to be known as the super-committee? It was known formally as the Congressional Joint Select Committee on Deficit Reduction. The Budget Control Act of 2011 wasn't primarily about tax rates. It was about reducing the deficit.

So let's begin our New Year analysis of where we stand with a reexamination of the deficit that the act was supposed to address...

The deficit for fiscal 2013 is estimated by the Congressional Budget Office to exceed $1 trillion once again — for the fifth consecutive year.

Mr. Obama persuaded Congress to raise taxes to pre-2001 levels for every individual tax filer making more than $400,000 and joint filers making more than $450,000.

How much extra revenue will that produce? Roughly $60 billion. That's just 6% of the $1 trillion annual deficit, if that number is even believable. (In reality, it's probably much higher than that, but let's just keep it simple and say it's only $1 trillion a year.)

Making a 6% dent in a problem that threatens the future worldwide economic leadership of the United States is not much of a solution. It's pathetic.

How much would income tax rates need to rise to close the gap? The number is so large that, in a sense, we'd never get there.

It would require a tax increase on every taxpayer of more than 65%.

We'd never get there because such a tax increase would tank the economy and cause incomes and the taxes on them to fall far short of the levels necessary to produce the projected revenue increase. Note: This is an increase greater than 65% on ALL taxpayers — low-, middle- and upper-income earners, plus corporations and others.

Here's the rough calculation that leads to that 65% tax increase figure: The federal government borrows more than 40 cents out of every dollar. To get to a balanced budget without cutting expenditures and by raising taxes alone would thus require about a 67% increase to get from a 60% revenue level to a 100% revenue level.

We cannot get there — or even halfway there — by raising taxes. Rapid economic growth coupled with real, substantive expenditure cuts is the only practical route to reducing the deficit, thus the reason why politicians on both sides of the aisle avoid talking about it.

If you focus on the wrong problem, you're almost always going to wind up with the wrong solution... Revenues are not the problem, and focusing on revenues in the face of a trillion-dollar deficit will lead to the wrong solution.

The only way we could have gotten out of the unsustainable fiscal mess we've created is to focus on reducing spending and stimulating growth, and we now know with absolute certainty that is not going to happen. The economy will not grow when a massive tax increase is imposed.

Growth requires low taxes. Low taxes require smaller government.

We've forgotten the most basic principles in economics, and until we reembrace them, we should look at short-term fixes as worse than no fix, because they give a GRAND ILLUSION of progress that is the polar opposite of their real effect.

In a recent article in the Wall Street Journal entitled, "Why the $16 Trillion Only Hints at the True U.S. Debt," Chris Cox and Bill Archer explain "the cupboard is bare." If federal accounting were truthful, they said, we'd see that federal debt and spending are catastrophic. 

Even if the IRS confiscated all the income of all corporations and all persons earning more than $66,193 per year, the government would still come up short, to the tune of $1.3 trillion per year.

This is where the U.S. now goes into the death debt spiral. There is no avoiding this anymore.

Many are calling this the point of no return, but as I have maintained for several years now, we crossed that line a long time ago...

There is no fix for the federal government.

At best, the politicos and banksters can kick the can down the road a few more times before they flee as the country is totally engulfed in runaway inflation, civil unrest, riots, strikes, and a massive crime wave.

Richard Maybury, editor of the Early Warning Report, stated it this way:

The federal government has spent eight decades getting itself into terminal financial trouble. In the next several years, I believe the typical individual who does not understand what is happening in the economy and is not prepared, could experience a level of stress normally seen only on battlefields.

The only question is trying to guesstimate when the federal behemoth will finally go belly-up. In the west, the signs are already appearing. As the government tries to save itself, it is withdrawing from control of its territory. An ancient truism in geopolitics is, a government only owns a parcel of land if it has a soldier with a rifle standing on it.

Thousands of acres of Bureau of Land Management land are no longer patrolled or monitored by the bankrupt federal bureaucracy, and the BLM has told county sheriffs this land is now their responsibility. Typically a sheriff's reply to the BLM goes something like: you don't have jurisdiction over me; the land is your problem and your expense, good luck with that!

As the financial crisis worsens, we will see the federal leviathan withdrawing from its empire. This may be shades of the British Empire leaving India in 1947 or the Belgian government leaving the Congo in 1960.

This, in my opinion, brings us ever so closer to the end of "THE GRAND ILLUSION" period of the baby boomer generation.

Reality must soon be dealt with, and hopefully the pain and suffering that is coming will wake up the clueless masses so that real liberty and freedom are once again possible for all.

In the meantime, you know the drill: Own precious metals, the highest-quality junior mining shares, and get prepared for major civil and economic chaos.

And don't be surprised that those who would like total control and dominion over our lives will be looking to capitalize on the chaos they created by consolidating more power and control for themselves as they look to move their New World Order agenda forward. Here's hoping they fail miserably.

All the signs are pointing to something terrible happening in 2013.

Please check your last-minute preparations to make the coming debacle as comfortable and safe as possible for you and your loved ones. Even the smallest preparations can make a huge difference...

The time left before the SHTF looks very short.

Until next time,

Greg McCoach
Analyst, Wealth Daily
Investment Director, Mining Speculator

P.S. If you need help in locating a legitimate precious metals dealer who will take the time to educate you and answer all your questions without any sales pressure, please call AmeriGold.com at 1-800-574-0047 or 720-870-8021.

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