Governments Spend Wealth Instead of Building It
by Bill Bonner: The
American War Racket
France The US seems to have gotten the worst of
it, said a French friend this morning. We were taken aback.
Everyone knows Europe is in a state of permanent crisis. The US
seems solid by comparison, no?
the Supreme Court has approved Obamacare, you have the same problems
we have in Europe, social welfare spending with no limits
you have your colossal military spending. You have both bread
and circuses, just like the ancient Romans. You are doomed.
Yes, dear reader,
we came to the fork in the road after the 9/11 attack. And the government
And now the
feds can fork over whoever and whatever they want. No kidding. They
just have to think of it as a tax. Heres the APs report
on yesterdays decision:
care law survives with Roberts help
(AP) Americas historic health care overhaul, certain
now to touch virtually every citizens life, narrowly survived
an election-year battle at the Supreme Court Thursday with the
improbable help of conservative Chief Justice John Roberts.
But the ruling,
by a 5-4 vote, also gave Republicans unexpected ammunition to
energize supporters for the fall campaign against President Barack
Obama, the bills champion and for next years vigorous
efforts to repeal the law as a new federal tax.
vote, along with those of the courts four liberal justices,
preserved the largest expansion of the nations social safety
net in more than 45 years, including the hotly debated core requirement
that nearly everyone have health insurance or pay a penalty. The
aim is to extend coverage to more than 30 million people who now
on the table was whether or not the feds could force people to buy
health insurance. The supremes decided that yes they could.
It was just like a tax, they said. And the constitution gives the
legislators the right to impose taxes, as they see fit.
how about forcing all blue-eyed people to go outside, take
off all their clothes, and give them to homeless people? That would
be a tax too. Guess its okay.
While the social-welfare
state is expanding, so is the police state. Another measure being
discussed in Congress would declare the US itself a battlefield
or a war zone. This would give the military the right to do what
it does without going overseas
and it would give the president
the power to direct his kill list towards his domestic enemies.
can fly over Kansas or Ohio
and whack whomever the feds want.
But who are
they gonna take out? No one
or almost no one
military agenda in the US. There are no serious terrorists
no serious challenge to the spending machine. The two candidates
for president agree on the essentials keep the money flowing
to the zombie industries
finance. Oh yes, and occasionally toss a few bucks at an industrial
business like GM if it has enough unionized employees.
US has no serious enemies overseas either. And that doesnt
make the racket any less effective. On the contrary, it helps. With
no serious enemies to worry about the military industry can spend
its money on any damned thing it wants. Lots of boondoggles. Wide
profit margins. Low casualties. Whats not to like?
But where were
We were talking
about economists. Specifically, we left off yesterday describing
how GDP figures are almost completely worthless. They tell you something;
but do they tell you anything important? Apparently not.
You cut our
lawn. We pay you. We cut your lawn. You pay us. We both have jobs.
And we each pay a portion of our earnings to the government. The
GDP goes up. Government revenues increase. And economists tell us
we are growing.
week, Paul Krugman cited the experience of the US economy in the
early 40s. A burst of federal spending between 40 and
42 produced a 20% big lift in output, he says, approvingly.
according to the economists measures,
things were getting better and better.
Were they really?
Of course not. Government was spending money on the military. An
economist cant tell the difference between a Tiger tank and
a BMW. But a passenger can. It doesnt take him long to realize
that a tank is no way to travel.
There are times
you need to build tanks. But those are not times when you are building
wealth and prosperity. Instead, youre spending wealth in order
to protect yourself (theoretically, in practice most wars are rackets
both sides). Thats what the US was doing in the early 40s
spending wealth, not building it.
illustrates our point:
If even Nobel
prize winning economists cannot tell the difference between building
wealth and spending it, what hope is there for the whole profession?
Bonner is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21st
The New Empire of Debt: The Rise Of An Epic Financial Crisis
and the co-author with Lila Rajiva of Mobs,
Messiahs and Markets (Wiley, 2007). His
latest book is Dice
Have No Memory.
Since 1999, Bill has been a daily contributor and the driving force
behind The Daily Reckoning.
© 2012 Daily Reckoning
Best of Bill Bonner