A Bigger Perspective on the Fiscal Cliff
January 6, 2013 in Finance, United States
I realize not everyone cares about big picture of the fiscal cliff.
Most only want to know how it will affect them individually.
I’ve had this conversation several times with clients:
“Did they continue the Social Security tax reduction?”
“No, that’s the one thing that expired.”
“Damn. Well, that will reduce my check by _______.”
Those who don’t want to appear selfish then say, “Well, hopefully this deal will solve the country’s debt problem.”
They don’t realize that, even in a perfect financial world, it only slightly reduces the deficit.
As I wrote yesterday, the deficit still remains. It is just a tiny bit smaller, until we factor in inflation.
While mainstream news stirs the staged drama of how the fiscal cliff legislation affects individuals, the real intrigue lies within other aspects of government finances.
One of my sources, the one I call “My Source,” was formerly involved in state government at the highest judicial level and in federal government at the congressional level. I can always expect to hear from him at times like these.
A recent email from him gave insight into government spending.
In 2011, the federal budget for the Supreme Court was $7,866,000,000, (7.8 billion dollars) which did not include the $122 million allocated for the Supreme Court Modernization Program.
That comes to $104,880,000 per case decided: about one hundred five million dollars per decision (per law).
Comparatively speaking, the federal legislative branch (House and Senate) budget was only $4,919,000,000 (4.9 billion dollars).
The 111th Congress passed 385 bills, although the President vetoed 2, so the cost per bill passed was $12,776,623.37. Twelve million and change per law.
That’s pretty expensive laws by anyone’s calculation.
Oh, and that’s just the productivity. It has nothing to do with the substance or quality of the new laws.
The numbers are so large that our dumbed down society often can’t follow them. Therefore, mainstream media doesn’t report them.
And, since we can’t follow the large numbers, mainstream media doesn’t ask the bigger questions that I raised yesterday.
No consideration is given regarding where government is getting the money to cover its expenses.
We can’t fathom debt growing at more than a trillion dollars per year. Therefore, we don’t ask why no one is doing anything about it.
I understand.
I’ve wrestled with these issues for more than eighteen months.
Every time I found an answer, my first response was to say, “NO, that can’t be true.”
However, when I looked deeper, the evidence was undeniable.
Once I accepted that information, its impact often overloaded my emotional capacity.
It would take me a while to accept it.
After a year and a half of this process, here is what I have accepted so far.
There is off-the-book money and on-the-book money.
Off-the-book money comes from two sources.
- Drugs – The CIA regulates, controls, and profits from cocaine and marijuana imported from Central America and South America and from heroin imported from the Middle East and Far East.
- Wars – The U.S. Military destroys an area and then, government contractors profit from rebuilding it.
On-the-book money comes from printing presses. While we have been panicking about the fiscal cliff and looking the other way at the Newtown Shooting (another staged drama), the Federal Reserve has moved from QE 3, which I detailed a few months ago, into QE 4.
Between QE 3 and QE 4, the Fed is now purchasing more than one hundred and twenty billion dollars of debt each month.
That amount, times twelve, more than covers the annual government deficit.
In my opinion, that is where we find the real financial drama of the United States.
And, it is where we will soon find the real financial drama for each individual.
To be continued…
