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The Fiscal Cliff and the Five Whys

December 24, 2012

Why is there now a fiscal cliff?

The “fiscal cliff” could be about our nation’s ability to pay its debts.  It could be about our political leanings and our propensity to spend.  It is all that and more.  There is a minor panic in Washington today because the political class can’t buy power as usual with other people’s money.  Let me mark the path we’ve taken to this fiscal cliff.  Industry calls this a “root cause analysis”.  Companies often want to understand the fundamental cause when a project fails, and the investigation is codified as the “Five Whys”, or asking why five times.  In the case of the fiscal cliff, there are reasons wrapped in custom hidden by myth.

 Which reason is the real reason?

The current crisis is political because the politicians can no longer pay off their special interests.  As a mere citizen, we expect our politicians to promise us ever larger benefits.  We expect these political presents because we could afford them once in the past, though not any longer.  We deny that things have changed because we would rather place blame and lay claim to government spoils than take responsibility and expect less in the future.  We ultimately face a fiscal cliff because we can not enslave the next generation.   Yeah, in the end it always comes down to people and their problems.

 What happened to our money?

The US government spends a lot.  We spend 3.5 trillion dollars a year.  That is a million dollars every 9 seconds.  I use a million dollars as a benchmark because that is the debt that each citizen owes in order to pay the promises our government has made.  Every man woman and child bears a million dollar debt at birth.

 What is wrong with us?

Today we spend more on benefits than we pay in taxes.  We now borrow 40 cents for every dollar the government spends.  We say we will pay our debts later.  Politicians promise to someday tax more than we spend in benefits, but not now.  Someday when they are not in office the excess taxes will go to pay our old debts.  Someday we will have to spend 25 cents of each dollar we tax so the rest can be used to pay our debts.  For now, we borrow from Chinese children.  They doubt that our children will someday be willing to pay a lot more in taxes and take much less in benefits.  Their skepticism seems reasonable.  Not only is it immoral to tax our children to pay for our pleasures, it is also unbelievable that they will pay it rather than repudiate it.

 Why do we spend so much?

Politicians get political profit from handing out benefits but politicians also benefit from regulation.  Each regulation has a special interest lobbying for it.  Believe it.  Most countries have far fewer laws and fewer regulations.  The US is not the most honest country, and the massive amount of regulation is part of the problem.  The more laws, regulation and fees, the greater the level of corruption.  We pay for these regulations just as surely as if they were a yearly tax on businesses and consumers.

Why do we expect so much?

We expect the government benefits we were promised even though we never paid for them.  Perhaps our country could afford them.. maybe.  The US was once an economic giant.  We once produced the world’s cars, the world’s airplanes and the world’s drugs.  We don’t any longer.  We were the world’s producer after World War Two and we could have our own way in the marketplace.  We gave benefits to all; to unions, to the needy, to immigrants and to foreign countries.  US industry was preeminent.  Industry profits drove our standard of living and provided a broad base of jobs.  There were jobs for PhD and for painters, for engineers and cooks.  The size of government exploded with the fat tax base that industry provided.  That was then.

 Why doesn’t that work any longer?

Now we are one of many producers who compete in a global marketplace.  The US fell to the 12 most prosperous economy and will continue to fall.  We continue to build innovative and competitive industries.  On the other hand, our government is from the middle ages.  Our regulatory costs are non-competitive with the rest of the world.  Now we are stuck with huge government spending, high taxes and high unemployment.  Some members of congress won’t allow the government to put more debt on our kids credit card.  Man, that has got to sting when a politician has to say no to the lobbyists who have been funding his campaign and also making him rich.

We were lied to, and we wanted to believe the politicians’ lies.  They said we could have something for nothing.  We won’t elect a politician who tells us to expect less from the government and to do more for ourselves.  The advocacy news media would brand him as uncaring.  Politics is now a game of placing blame in the news media.  As voters, we have deliberately ignored that we spent more than we paid in taxes and crushed industry with regulation.  We ignore it until it is our turn to receive benefits.  Do you think the Chinese lenders care about what you were promised?fiscal-cliff-congress

Why don’t we fix this?

The truth can set you free.. but so can a good fantasy.. for a while.  The average voter would rather live in their sound-bite fantasy world than study their government and hold politicians accountable.  I hold the recent Tea Party political movement as a prominent exception.  The fiscal cliff is at hand because voters care about receiving today’s government checks and don’t care about the government ever paying its future bills.  The fiscal cliff is about a government class buying political power with the next generations’ debts.  The fiscal cliff is finally running out of other people’s money.

These simple facts about our economic and political history should liberate us.  Now we can make the decisions that will improve our future.  If, instead, these facts bother you, then don’t worry.  We have blinders for you to wear.  I think American Idol is on television.



I decided to skip the references since your browser works as well as mine.  Some readers have argued with my references by finding a counter example.  I offer you references to guide your investigation, not as proof.  One report does not constitute proof.

Please Rate, Share, Like and Comment.. or Santa will bring us a lump of coal.  Merry Christmas to you and yours.

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