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Friday, January 02, 2009

YET ANOTHER GOVERNMENT/INDUSTRIAL COMPLEX

Whether or not the average US Citizen knows it, the United States is creating the second-largest government/industrial complex in our nation's history. It is envisioned as a cocktail of bailouts to the financial industry, the automotive industry and others who show up with their hands out and their lobbyists in tow. It is also comprised of state governors who are poised to invent yet another form of pork with federal representatives and senators at their sides while raising local taxes for the citizen back home. This speculative panacea cannot survive.

HISTORY

The longest running and largest consortium of this type is the US Military Industrial Complex (MIC), funded each year at an amount many times the Wall Street and automotive bailouts combined. It is the elephant in the room in the burgeoning financial crisis, carrying the weight of wars, weapons systems and a pentagon/corporate financial relationship based on cost plus and time and material contracts since World War II:

http://rosecoveredglasses.blogspot.com/2008/09/two-collapsing-towers-wall-street-and.html


IMPORTS AND EXPORTS

We are importing goods and services and borrowing money from the Chinese, the European Union, Japan, Korea, India and other developing countries at a rate unmatched in our history. Loan proceeds are being used to fight wars and bail out our bankers, carmakers and state governors.

Our largest export today is our public debt and our credit rating is slipping.

THE ILLUSION

What shall the prospective, second-largest government/industrial complex be called, “The Department of Wishful Thinking”? It is being financed with money borrowed from entities future generations will owe as the US kicks the financing can down the road like it has for the last 60 years.

No doubt Washington will attempt to regulate the outlay, put in auditors and control mechanisms like the Federal Acquisition Regulation and Cost Accounting Standards that evolved over the years on a reactive basis dealing with the white elephant scandals in the Military Industrial Complex. But somehow those controls have never been able to stop the mammoth waste, fraud and abuse that occur in the MIC.

Big money attracts greedy people, not only in the MIC but also on Wall Street and in the corporate boardroom. It also buys influence and crooks in government.

FACTS

The natural order of economics is still out there. Washington's money-and-power-influenced, artificial reality cannot survive what historically has been the rise and fall of booms and busts in the last 100 years. Economics is now on steroids through high technology, the Internet, mass communications and frauds that cross national borders like cobwebs.

The MIC will be scaled down by collapse. The Russian MIC led to that country's financial demise. It is now apparent that we did not outspend the Russians at weaponry and interventions. We simply had a better credit rating that is now maxed out

The other government agencies will be re-scaled and downsized as well but not by any specific action taken by the pending or future federal establishment. The over 50 entities that make up the federal government, together with their corporate outsource services, will be shrunk dramatically because the US is broke. The feds will fight to preserve the artificial reality, but US financing and credibility on the world stage are drying up and the creditors are suffering.

No new administration can change the above facts by riding on the taxpayer's back with "Social Improvement", " Public Works" and "Creating Democracies in Other Countries" mantras. Such policies in the past have led to foreign interventions, thousands of young soldier’s deaths, bureaucratic growth in Washington and bloated corporations performing low quality service contacts.

Annual budget deficits and the national debt are at intolerable levels.

ECONOMIC REALITIES

The US will come home from military adventures abroad because it will no longer have the money to run them and it will cease bailing out failing commercial establishments because there will be no funding for that.

The US will re-align priorities at the state and the national level much like all the little "Joe the Plumbers" throughout the country, who are toting skinny 401K's without jobs. They represent the present and future tax base upon which this country will run. America will not spend its way out of this dilemma because there will be no cash or credit left to spend.

The US will demonstrate financial prudence out of necessity, align spending with available revenue, downsize the federal government and its corporate cadre, cultivate technology and the small business base and take care of its most important constituent here at home - the average tax payer.

The US will understand the above are not political objectives but economic realities that are here and now. World economics will not allow a new, financial, government/industrial complex to emulate or replace the MIC.

2 comments:

JDs Tavern said...

Ken,

Excellent analysis of what is truly going on in America. We discussed this often (when I lived a bit closer) and yet how often did we see evidence of fixing it?

I remember two years ago December, a credible deficit statistic was a mere $8.5 trillion and today, it stands over 10 times that amount.

Again, it is not a matter of IF the U.S. economic machine crashes...only a matter of WHEN. We are experiencing the birth pangs today, as you and others (to include Buffet) warn of continuously.

Keep sounding the alarm for all those who need to hear it.

JD

Eleanor said...

I totally agree with you Ken. I was hoping electing President Obama would change things, but it seems "policy as usual." I am very disappointed that we keep spending, and jobs aren't being created. This can't last. We are leaving debt for future generations that is overwhelming. I don't have the answer, but I wish someone in our government did. I won't even go into the direct risk our foreign debt poses.