Tuesday, August 09, 2011

Right but wrong

By Capt. Fogg

You could fault Ron Paul for stating the obvious, but hey, somebody has to do it. Should the country try to save it's triple A rating with Moody's? Why bother when those helium-filled bond ratings proved to be based on politics and greed and by giving investors false confidence, helped precipitate the market collapse of 2008?

“I always wonder about this ratings, the bond ratings before the crash three years ago wasn’t helpful, so sometimes I wonder if it’s political theater to build up the fear.”

said Dr. Paul on Bloomberg TV yesterday. Of course it is, but is he doing the same thing?

But I'm not sure that I agree with the rest of his assessment: that the country is insolvent and bankrupt and got that way by excessive spending on the health and welfare of Americans. It's a bit like telling your spouse that the family could go to Disneyland more often if they weren't saddled with life insurance and a retirement savings plan, but I don't think one can rightly compare the financial problems of an individual or a family with the problems of a country in such a simplistic fashion.

One becomes insolvent and enters bankruptcy because one's income is insufficient to be able to manage one's debt. An individual does not always have control over how much money he makes; can't always find a job, can't always be healthy enough to work, can't always pay medical bills.

That's not so with a government. Our revenue shortfall is in some large part voluntary; an effort to "starve the beast" by thwarting its ability to run programs that the electorate voted for. That attempt is also a bit of political theater with a lot of smokey pyrotechnics and a bit of dramatic hand waving involved so as to obscure the fact that very low taxes on large incomes do not raise revenue, by magic transfer from the people who put much of their incomes into hedge funds and equities to the people who spend most of their incomes on food and shelter.

So yes, Social Security, a government program that did much to create the Middle class and take tens of millions of older people out of abject poverty, is going to run out of funds eventually because they're going to make it run out of funds so that they can do away with it. So yes, it's also political theater designed to create fear and panic, but perhaps the word 'theater' isn't quite strong enough. I'd call it a scam.

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