There’s Always Free Cheese in a Mousetrap
Recently, a wealthy customer of mine came into my office chortling about how he was able to sign up for VA disability.
“Are you disabled?” I asked. “You seem healthy, aren't you a tennis player?”
“Yes,” he replied, “but back when I was in the military I had a very hard landing (wink, wink), and now I’m starting to feel some of those aches and pains.”
To this I replied, “You’re a wealthy man. You’re worth millions. Why would you need to sign up for VA disability benefits and collect $1,400 a month from the government when you don’t need the money?”
“You are right. I don’t need the money, but why not?” was his reply. “Everyone is doing it. The government is giving it out. It’s easy and it’s free.”
I know this gentleman well, and this attitude wouldn't seem to fit with his conservative, libertarian views, but whether conservative or liberal, the willingness to accept free government dollars has become the prevailing attitude in our society today.
We mint a coin based on an old saying: there's always free cheese in a mouse trap. Whether by design or happenstance, our society has fallen into “free cheese mode.” Some might call it the European, or Canadian model.
As I investigated my perception, the statistics told the truth.
Food Stamps. A record number of people are receiving food stamps today – according to the US Department of Agriculture, an average of 44 million received assistance in 2011. That’s not just a record number (one would presume it would increase with population), but it’s a record percentage of the population – more than 14% of us are receiving some amount of free government cheese. There’s more of it, too – while there are 58% more food stamp recipients today than in 2008, total spending has doubled since 2008.
“Disability.” The last figures from the Social Security Administration list 7.7 million Americans receiving some form of disability from the federal government. In 2000, that figure was 5.9 million. That’s a 30% increase at a time our population grew only by a little under 11%. If the government’s giving it away, why not take it – and keep playing tennis?
Paying No Tax. According to the Tax Policy Center, 46% of 2009 federal tax returns were filed with no obligation. That is, zero federal tax was paid. In 2010, that percentage grew to 51% according to analysis from the Joint Committee on Taxation in a letter to the Republicans on the Senate Finance Committee.
The main concern is that this is not only bankrupting our country – 40 cents of every federal dollar is borrowed – (source: Sen. Kent Conrad, ND) but the government’s spending has climbed to 24% of GDP. This puts our economy in a bind. First, if the government is roughly 24% of GDP, if the budget were merely balanced we would have to cut 40% off of the government’s 24% of all domestic spending.
That would instantly reduce our GDP by 9.6%, which would further hurt our economy, increase unemployment, and decrease the income taxes going back to the government. And, by the way, one definition (there is no official definition) of a depression (yes, depression with a “d”) is a 10% decline in real GDP in a year.
The second major problem is that no politician is going to come clean about this because it simply doesn’t pay to be honest with the American public. There is such a large expectant public, and the demographics with each new generation continue to get worse. No politician is going to tell Grandma or a retiree that they are not getting their benefits. If they did this they would immediately be voted out of office and replaced with someone who promises that the benefits will continue to flow. The path of least resistance is to borrow or print money. The result of that is to continue to inflate the currency. And so our politicians can tell us that Grandma got her social security check, but oh-so-sorry and it’s not their fault that it just doesn’t go very far with the inflation and all.
I contend that our people – and through extension, our politicians – have painted themselves into a corner. Like any addict, they won’t institute any kind of reform until they hit bottom.
The theme of my commentaries in these pages has always been fundamentals. Right now, our economy is fundamentally based on debt; our tax structure is fundamentally based on overspending. Both are wrong. Our tax-and-spend ways are exploding the national debt, debasing the nation’s credit and therefore, the soundness of the dollar.
These social schemes have been tried for many years and in many countries, always with the same poor results. There has been one constant and that is precious metals.