October 1 is the first day of the new fiscal year of the United States government. Little known to the general public, it is the supreme day of celebration for the American Establishment. Let me explain why. It has to do with government spending, specifically this: Who wins? Who pays?
The American welfare state is generally supported by the very rich. They clean up by means of the welfare state. Why? Because the welfare state is seen by political liberals as justifying the expansion of the federal government, and the federal government then protects the interests of the super rich. This has gone on for so long that it is astounding to me that the chattering class — mostly Leftists — does not understand it.
Leftist Democrats constantly lobby for more welfare state programs. They think the rich will pay for them. To see why this is silly, look at this pie chart on federal spending. Ask yourself: Who wins? Who pays?
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Look at defense spending. Who wins? A handful of large defense firms. This is fat city for the rich. It always has been.
Look at net interest payments. Do you think that money goes to the rich? What does the U.S. government pay? Under 3% a year. The super rich do not buy such low-paying investments. Who does? Retirement funds, insurance companies, money market funds, and banks. This rate of return is for the middle-class. The interest rate returns after taxes do not keep up with price inflation. Who pays? The rich pay a good chunk of it as taxpayers. They do not care. Why not? Because this level of federal debt guarantees a huge federal government. With the government-enforced restricted-access profits they make, it’s just a cost of doing business.
Now let’s look at the biggies: Social Security and Medicare/Medicaid. They constitute 45% of federal spending. Who pays? Working stiffs. The Social Security taxable salary cutoff is about $110,000 a year. So, the worker and his employer pay about $16,000 a year, max. For the super rich, this tax is irrelevant — invisible.
Do you see what the voters have done? They have created two gigantic, politically untouchable welfare programs that the working class finances. These programs are so huge that no new major spending program will be imposed. They have put a ceiling on the growth of the welfare state. The welfare state cannot touch them. They are now immune.
ObamaCare? The workers will pay. Small business owners will pay.
How about food stamps, called SNAP? This costs $75 billion a year. Who gets this money? Agribusiness. In short, food stamps are a subsidy to the super rich in the name of helping the poor.
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PLEASE, Dr. North, do NOT call it crony "capitalism!" It ain't "capitalism." It's cronyism, pure and simple. Call it what it is. Thank you.
I wouldn't say the people are all gullible clueless rubes. When Congress was debating TARP and bailouts, 9 out of 10 voters called their representatives and said, "Don't use taxpayer money to bail out the banks!", but Congress did anyway. The people don't want more war, but we're at war on at least 10 different fronts in the world (and trying to invade 2 more countries — Iran and Syria — as I write this).
It's fascism when big government and big business are in perfect alignment like they are today.
Actually “crony capitalism” and the word fascism means the same thing government and businesses working together.
Actually, I think we should give up "capitalism" as a positive word. It's already almost useless. The thing is, from the beginning it was intended to be a negative…it was coined by Karl Marx. Why would we want to call ourselves by a label coined by our no. 1 enemy?
I also think we should bring back mercantilism as a word. That's the system that we have right now…mercantilism or fascism, which seem to be the same thing just fascism has a slightly stronger connotation.
For ourselves, I don't know of anything better than "free market". It's a little clunky, but it hasn't been totally corrupted yet like capitalism has.
So what we need to do here is end the Social Security taxable income cap.
1. Defense is the only thing shown in that pie chart which is a government obligation under the Constitution. And, many a defense firm has bit the dust.
2. The point is missed regarding the interest. The govt needs low interest to keep from going bankrupt (faster). Plus, the owners of the Fed get it on the cheap, and loan it to the banks higher. In essence, easy no-risk (?) profits. But the creation of much easy money and debt is leading to an economic collapse.
The Plunge control team Ben Bernanke, Tim Gietner, Mary Shapiro, Gary Ginzler, Fishy Czar’s ? They have their fingerprints all over the buttons . Controls all monies used in financial contexts of the stock markets rendering monies worthless by printing money by bureaucratic fiat. It is a False economy has a apparent financial savings that in fact leads to greater expenditures. A false equivalence ?
Excellent commentary, Gary. A little repetitive, but that's the essence of teaching: repeat a concept several times in several ways until they get it. Basically only the libertarians have really "gotten" it to date.
Interesting commentary on Bryan, who killed the old Democrat party: "His candidacy killed the old Democracy, best represented by Grover Cleveland, a limited-government vision of politics, and firmly committed to low tariffs and the gold standard. It did not survive Bryan's three runs for the presidency." This is the same Bryan who, ironically, was called to testify on behalf of the Bible and creationism in the 1924 Scopes trial. When Clarence Darrow asked him "Where did Cain get his wife?", of course Bryan, being a liberal, and not really committed to the truth of Scripture, didn't know, and Darrow made him look like the silly old fool he was. Now the left uses the incompetence of one of their own, William Jennings Bryan, to make conservative Christians out to be ignoramuses.
You are spot on, Dr. North, just as I commented on your earlier ObamaCare colluum, the entrenched interests aren't harmed by the law, they are helped by it. You can't compete with mega hospitals and mega insurance companies by offering less expensive medical services, or insurance rates, You are forced to use what is IN PLACE! The system is regulated for those that are ESTABLISHED already. To fix it, you'd have to tear down the whole system,(which is not gonna happen!) and start anew with totally unregulated medical care, with no barriers to free entry, and free or low cost care provided by fraternal organizations and charities. I don't see that happening unless the ENTIRE system collapses. Depressing, isn't it?
Your suggestion is even more useless than putting a bandaid on a cancer tumor.