The Dow passed to the good side of 10,000 last week, and celebration was widespread because it was heralded as a sign of better times ahead. As early as May 27, Treasury Secretary and Turbo Tax tyro Timothy Geithner said the US economy was in the early stages of recovery, and in late August announced “We are back from the brink.” Fed Chairman Ben Bernanke, the financial equivalent of the Magic 8 Ball, has been saying since March that “signs point to recovery.” Administration spokesmen point to improving home sales, rising stock prices, and make-work jobs programs and credit the stimulus spending for curing the economy from its ills. They conveniently overlook the virus of unemployment, the contagion of home foreclosures, or the consumptive decline of the dollar’s value.
Here in Idaho, one of our state’s favorite outdoor activities is white water rafting. The confidence of the various predictors of economic recovery reminds me of a raft full of people that has just gone through a particularly turbulent stretch of river. After overcoming the challenge of the rapids, they find that the white water subsides, the surface appears smooth, and all are thankful they prevailed over adversity.
Yet if this raft was full of economists, and the river was the American economy, they serenely overlook what’s waiting downriver–a waterfall of staggering height which will make the rapids they’ve passed seem insignificant. The waterfall cannot be passed safely–it is the dead end of a wild ride on the treacherous waters of financial tumult.
The waterfall is the staggering debt that has been amassed with the government bailouts and spending initiatives that began with the TARP bill under President Bush and grew geometrically with President Obama’s stimulus bill, and subsequent massive government programs. The spending that under Obama has eclipsed that of all previous administrations combined has multiplied the American debt to a level beyond possible repayment. To ignore this downstream hazard and speak of economic recovery is to blindfold oneself to reality.
The government cannot create wealth, a fact which will probably come as a great surprise to Obama supporters who believe in his ability to provide largesse at a whim. But all the money the government spends and distributes has to come from the American people and American business. Government consumes wealth, but it is up to us to produce it. The more the government spends, the more we must produce, and the more of it we must surrender to the government through taxes.
So the debt must some day be repaid by us, just as the economic raft must eventually reach the waterfall. But with each new trillion-dollar spending initiative–health care, cap and trade, or any other massive government program–the waterfall gets higher. Our deficit for this year alone–and the year isn’t over yet–is over a trillion dollars. As our economy floats downriver on a temporarily smooth current, there is no cause for complacency. In fact, our fate grows more dire with each addition to the debt.
Unfortunately, we have not yet had to pay the price for this debt. It will come with the sudden impact of higher taxes–the only way the government can take the wealth from those who produce it. And those taxes will fall upon all of us–income taxes, consumption taxes, property taxes, fees and licenses will all be raised, and all of us will pay them. At that point, the economic raft will be over the edge and plunging into the abyss of fiscal ruin. The damage to our economy, our industry, and our system of government will be too massive to reverse.
So when you hear happy prospects of a recovery that is just around the corner, listen more carefully. You’ll hear in the background the distant but growing rumble of the coming fall. As spending multiplies, as the debt continues to grow, as government persists in hobbling our private sector with takeovers and punishing regulation, the roar of the cataract will also grow. At some point it will be louder than those who are telling us not to worry. The question is, which sound will we listen to, and which will we believe?
