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U.S. Federal Debt on the Elevator to Hell

Politics / US Debt Jun 19, 2011 - 06:26 PM GMT

By: Gary_North

Politics

Diamond Rated - Best Financial Markets Analysis ArticleIf you think the Federal debt ceiling is anything but an elevator, I've got news for you.

Maybe you saw the story about the Air Force airlift of $12 billion in unmarked bills that landed in Iraq sometime between 2003 and 2004 – no one seems sure just when. The story was written by a Los Angeles Times reporter and published on January 13.


Pentagon officials determined that one giant C-130 Hercules cargo plane could carry $2.4 billion in shrink-wrapped bricks of $100 bills. They sent an initial full planeload of cash, followed by 20 other flights to Iraq by May 2004 in a $12-billion haul that U.S. officials believe to be the biggest international cash airlift of all time.

There was a slight glitch in the execution of the plan. Some $6.6 billion of this – three fully loaded planes full – has gone missing.

The story was picked up by the Web, but got little play in the mainstream media. The Huffington Post and Fox News reported it, but not the other major media. The fact that several plane loads of shrink-wrapped $100 bills are unaccounted for is not big news in the minds of America's mainstream editors. A search on Google reveals how little mainstream media interest there was.

There was a modification published by Fox. The auditor in charge said that he never used the figure $6.6 billion. He claimed that only $2.8 billion are unaccounted for. This story was also not picked up by the media.

My point is not that the Pentagon cannot account for either $6.6 billion in missing currency or only $2.8 billion. That is hardly news. My point is that the conflicting sums are so miniscule in comparison with what the U.S. government wastes every day that the story is not considered media worthy when any agency loses this much. The public is so used to stories of wasted billions that this story is a curiosity at best. I suppose that it would make a good Bruce Willis "Die Hard V: Payback!" script, with Bruce going over to the dark side and leading a team that flies the tax-free money to Switzerland. Yippee-ki-yay.

Yes, the Pentagon flew $12 billion in currency to Iraq. But why? The reporter did not ask why Iraq needed American currency. Why not just digits?

Why was the dollar the needed currency?

Who picked up the cash? There were not enough receipts.

The follow-up story in which the auditor provided the $2.8 billion figure indicates that he thinks the Iraq government got the money. He doesn't really know. No one has asked what the Iraqi government intended to do with U.S. currency, as compared with digits that agencies normally use.

Who in the U.S. government authorized this transfer of funds? We do not know. Whose plan was being executed? We do not know.

This happened at least six years ago. Who in the U.S. government has been researching this? The money is long gone.

I could go on with other questions, to no avail. The facts are these: an unknown someone for no written official reason withdrew $12 billion in currency, loaded it onto 21 Air Force planes, flew the money to Iraq, where it was turned over to someone or other, with either $2.8 billion or $6.6 billion unaccounted for, sometime (no one seems sure) between 2003 and 2004. Explanation:

But U.S. officials often didn't have time or staff to keep strict financial controls. Millions of dollars were stuffed in gunnysacks and hauled on pickups to Iraqi agencies or contractors, officials have testified.

Buried in the story is this tidbit: the U.S. government has spent $61 billion on reconstructing Iraq's economy. This is in addition to the vastly large sums that the U.S. government spent on destroying the Iraq economy. Why? For these three words: "We got him."

Yippee-ki-yay.

WASHINGTON'S FREE RIDE

The lunacy is not the missing $2.8 billion or $6.6 billion in shrink-wrapped bills. The lunacy is the entire endeavor in Iraq. But this lunacy has not penetrated the thinking of the majority of American voters. There are no protestors in the streets. There are no well-organized campaigns of letter-writing. Basically, nobody cares.

The Republican debates held this week did briefly touch on the issue, but Ron Paul was the only candidate who said emphatically that our troops should be brought home immediately. That was easy for him to say: he publicly voted against the Iraq war.

We are halfway through Obama's third year, yet 45,000 U.S. troops are still there, plus however many mercenaries are on the payroll, a figure estimated in the past at 100,000. No one knows, any more than they know whether $2.8 billion or $6.6 billion in currency went missing. The point is, the voters do not really care that no one knows.

The public does not feel any pain from the war in Iraq. The Iraq war is still going on. We don't need 45,000 troops plus mercenaries where there is no war. The World War II refrain – "Don't you know there's a war on?" – is applicable today. Hardly anyone knows. It's no longer news.

Whenever the public feels no pain, the public does not care what the government does. The public is oblivious. The missing currency was not a big story, not merely because editors decided not to run it, but because they figured that it would not increase ratings or subscriptions to feature it. It was non-news. They perceive that the public is interested in other things, such as Congressman Weiner.

This lack of interest gives the politicians a free ride. They need not confront the issue of specific Federal spending. The deficit in general is of some interest, intermittently, but not the specific issues of the budget. Because Congress is unwilling to cut specific programs' budgets, the general deficit is heading higher. Congress knows that the public does not care.

In a June 15 article, a MarketWatch columnist dismissed the Republican candidates' debate with these words:

The half-minute answers forced the candidates to use Beltway shorthand in their answers that must have been indecipherable to any viewer who does not follow politics for a living. Texas congressman Ron Paul, for instance, babbled on about his fixation with the dollar as a reserve currency – a concern that is extremely remote for most voters.

Notice his dismissive adjective: "babbled." This is the rhetoric of contempt. The author of the article is clearly uninterested in something so remote as the issue of the dollar's reserve currency status. He has not spent 40 years, as Paul has, studying the Federal Reserve and monetary policy. In any case, 30-second sound bites do not allow time for babbling. But that did not faze the columnist's choice of a word.

He, like most of his peers, is in the obfuscation business. "Pay no attention to the make-up of the Federal Open Market Committee, where the New York Federal Reserve Bank – a private corporation – alone among the regional FED banks, always has a voting member. Move along. There is nothing to see here."

But his point regarding the public was well-taken. The concern of the mass of voters is not with the world reserve currency status of the dollar. They are concerned with unemployment. They are concerned with falling real estate prices, the possibility of the bankruptcy of Social Security and Medicare, and the disappearance of their dreams of a comfortable retirement. They are unaware of the tight connections among all of these concerns and Federal Reserve policy. Their ignorance benefits politicians, the Board of Governors of the Federal Reserve System, and the senior managers of the four or five largest U.S. banks. It gives these high-level decision-makers a free ride.

TRANSFERRING RESPONSIBILITY UPWARD

The total size of civil government in the modern world is immense. Not counting the economic burden of regulation and monetary inflation, the tax burden in the United States is in the range of 40% – Federal, state, and local. It is higher in most other Western democracies.

There is no way to monitor most of what civil governments do. We know that it is impossible to monitor the purchasing decisions of over 300 million Americans. Consider the number of transactions per day. One estimate of the total number of bar coded SKUs (stock keeping units) of products – not services – in the New York City region is nine billion. The immensity of the amount of information that goes into all of these decisions, month after month, is beyond the power of human comprehension. Yet the size of the various civil governments is close to the size of the private sector.

We do not try to monitor the decisions of 300 million Americans. We know it would be futile. It would require an immense government bureaucracy to do this. We do not want such a bureaucracy.

The logic of this attitude of humility regarding the monitoring of the private sector should not stop with the private sector. We should recognize the inherent limits on monitoring most of the decisions of most government bureaucrats. If we think that we can in some way monitor, evaluate, and direct these decisions, we are deluding ourselves.

Yet the logic of all civil government is that voters can somehow set up a coherent administrative system of central budgeting and management that enables salaried committees to monitor all of the expenditures of all of the bureaucrats, seeing to it that waste is minimal, freedom is maintained for the masses, and the public's will is implemented. In other words, the implicit assumption underlying modern civil government is inherently preposterous, i.e., lunatic.

All theories of democratic civil government rest on the assumption that the voters somehow can monitor the decisions of tax-funded government agencies. These theories assume that voters and their elected politicians can maintain control over what is done with the state-confiscated wealth of the voters. These theories are preposterous. Waste is inherent in civil government. So is graft. There is no way to monitor billions of transactions. The possibilities for theft are enormous and continuous. So are the possibilities for misuse of funds to suppress our liberties.

Occasionally, a story of some enormous siphoning off of public wealth surfaces. The story of the 21 plane loads of shrink-wrapped $100 bills sent to Iraq is such a story. The media rarely pick up these stories or emphasize them. Why not? Because the media are part of the overall system of control by the bureaucrats. The mass media are not interested in shrinking the state. They are interested in expanding it. This has been true in the United States ever since the Civil War.

WHY THE RACHET OF SPENDING RISES

Until voters perceive that they are being hurt by the transfer of 40% to 50% of their productivity to civil government, the system is immune to reform. Until voters feel real pain as a result of this confiscation, there will be no change. Until voters can identify the cause of their pain – wealth transfer by state coercion – there will be no change.

The politicians and the beneficiaries of their policies have an incentive to keep the pain level of the voters at a minimum. When politicians can use the voters' fear, envy, or guilt to persuade voters to transfer more responsibility and greater wealth to the state, they will do whatever they can to fan the flames of fear, envy, and guilt.

The story of the shrink-wrapped bills was itself shrink-wrapped by the media. A story like this has to be buried by the authorities. It testifies to the inherent absurdity of the democratic logic of the welfare-warfare state. It points to the impossibility of monitoring the siphoning off of our wealth.

The reporter did not press the official accountant with questions about the justification of the $12 billion transfer. Instead, he focused on the $6.6 billion in lost money. The relevant questions relate to the war in Iraq itself. But that question has caused no incumbent politician any pain.

In every war, there are a few politicians who oppose it from day one. In American history, Jeannette Rankin is the towering figure. She was the first woman elected to Congress, in 1916. You might think that this would give her an automatic paragraph in every U.S. history textbook. It hasn't. That was because she voted against World War I (one of 50 who did), and then literally alone voted against a declaration of war against Japan, and then voted "present" four days later in response to the declaration of war on the U.S. by Germany and Italy. The historians never forgave her.

The politicians who vote "no" are never proclaimed retroactively as heroes by voters after the war turns sour. Always, voters prefer to forget that they were sucked in by the politicians who fanned the war flames. This analysis applies to bad political policies in general. Opponents of highly popular bad policies are not rewarded later for their initial wisdom and courage in opposing the policies. Voters prefer to believe that they had been right when they supported the programs. To think otherwise is to condemn themselves as short-sighted fools. The result is obvious: reduced opposition to bad policies.

So, we rarely find any revocation of bad policies. They remain on the books. The bureaucracies that the laws created remain open for anti-business. There is an occasional exception, such as the Civil Aeronautics Board (price floors) and the Interstate Commerce Commission (price floors), but this is extremely rare.

CONCLUSION

Anyone who thinks the Federal debt ceiling is now or ever has been a ceiling has not come to grips with the political reality of the free ride. Until there is widespread political pain, there will be no debt ceiling. It's an elevator, and it keeps going higher.

There is not yet widespread pain. There is no widespread identification of the ever-expanding Federal government and the reduction of economic growth and the increase in Federal debt. The debt ceiling is not taken seriously by Congress and never has been. It never goes down.

The bills will come due. The can will grow too large to kick. But until then, the voters will continue to imagine that there are free lunches in life. They will continue to grant the politicians a free ride.

When the can is finally too large to kick, the defaults will begin. If you hold IOUs from the government, you will find that you, not the can, will get kicked. Hard.

Gary North [send him mail ] is the author of Mises on Money . Visit http://www.garynorth.com . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .

http://www.lewrockwell.com

© 2011 Copyright Gary North / LewRockwell.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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