[Bret L]

((Democracy is a system that can work well under the right conditions.
Unfortunately, those conditions are gone in the United states today.
Bret.))


Fatal Flaw of Democracies

By Patrick J. Buchanan

""We just can't afford it!"

Not long ago, every America child heard that, at one time or another,
in the home in which he or she was raised.

"We just can't afford it!" It may have been a new car, or two weeks at
the beach, or the new flat-panel TV screen.

Every family knew there were times you had to do without. Every father
and mother has had to disappoint their kids with those words. Why is
it that what parents do many times a year politicians seem incapable
of doing: saying no.

How many times in the last decade have the political leaders of either
party stood up and declared, "No, we cannot afford this."

Consider. Friday, the White House conceded that the deficits over the
next 10 years will total $2 trillion more than they had reported just
months ago. Instead of $7.1 trillion, we will run $9 trillion in
deficits.

Meanwhile, the White House demands a new entitlement—health care
coverage for 47 million uninsured who can't afford it or refuse to buy
it—that will cost at least $1 trillion over 10 years. Can we afford
this—now?

"We can't afford not to," comes the retort. This is "a core ethical
and moral obligation," says Barack Obama.

But is it not a core ethical and moral obligation not to debauch the
currency in which most of the hard-earned wealth of the American
people is invested? Yet, as Warren Buffett writes in The New York
Times, collapse of the dollar and the end of its days as the world's
reserve currency is what we are risking.

Government expenditures are running at 185 percent of revenue, which
is like the lone family breadwinner earning $50,000 a year, while the
family spends $92,500 a year. With families that do that, it is not
too long before the credit cards are cut off, the mortgage is called
in and the family Chevy is repossessed.

According to those same White House figures, this year's deficit will
be closer to $1.6 trillion than the $1.8 trillion previously
projected. Now, there are only three basic ways to finance that
deficit.

The first is by borrowing the savings of one's own citizens, thus
consuming the seed corn of the private economy. The second is by
borrowing from abroad. The third is by having the Fed, "through a
roundabout process," writes Buffett, "printing money." [The Greenback
Effect , August 18, 2009]

Assume the Treasury borrows most of the savings of the American people
this year, say, $500 billion. Then Uncle Sam is able to persuade
Beijing to buy another $500 billion in Treasury bonds. The Fed must
still run the printing presses to create another $600 billion.

How long before our Chinese, Japanese and OPEC creditors conclude that
the Americans are depreciating their currency, and dump their U.S.
Treasury bonds, or demand a higher rate of interest to cover the risks
of their dollar-denominated assets sinking in value?

Can anyone believe the dollar can even retain its present diminished
purchasing power if we run $9 trillion in deficits over 10 years? How
long before producers conclude the same and start to demand more
dollars for their goods—and inflation takes off?

As Buffett argues, even when the U.S. economy returns to full
employment, the new tax revenue it would throw off cannot close a
deficit of that size. One must either slash spending or raise taxes to
balance a budget where the feds are spending a fourth of gross
domestic product.

But how do we cut spending when the five largest items in the budget—
Social Security, Medicare, Medicaid, interest on the debt and national
defense—are untouchables and growing faster than the 3 percent to 4
percent a year a full-employment economy can manage?

Are we going to cut veterans benefits, spending on our crumbling
infrastructure or education, when Obama is promising every kid a
college degree? Are we going to cut funds for Afghanistan and Iraq,
and risk losing both wars? Are we going to cut foreign aid after
Hillary Clinton has been touring Africa telling one and all America is
here to stay?

How about cutting funds for food stamps and the Earned Income Tax
Credit? Good luck. How about PBS and the National Endowment for the
Arts? Just try it.

Does either party have any plan to cut federal spending from today's
near 28 percent of GDP to the more traditional 21 percent?

George W. Bush didn't even try, and Obama is making that Great Society
Republican president look like Ron Paul.

When a democracy reaches a point where the politicians cannot say no
to the people, and both parties are competing for votes by promising
even more spending or even lower taxes, or both, the experiment is
about over.

"Remember," said John Adams, "democracy never lasts long. It soon
wastes, exhausts and murders itself. There never was a democracy yet
that did not commit suicide."


http://www.vdare.com/buchanan/090824_democracies.htm