$1.8 Trillion Annual Deficit – The Problems with Biden’s Budget

Angry Grizzly BearWith gratitude to the National Conference of State Legislatures (NCSL), their analysis of the proposed budget was broken down, and some sense was made.  Not that the news is logical, acceptable, or palatable, just that the budget documents were broken down, which was helpful.  We start with the most bass-ackwards aspect of the budget by asking one question, “Where is the money supposed to come from?”

The 2022 Budget Proposal left President Biden’s desk requesting Congress to spend $6 Trillion and add $1.8 Trillion in new deficit spending to the bloated debt the government already owes.  “Who is going to buy the bonds and make money on this debt?”  When a person employs a search engine, asking this exact question, many answers come forward, and some do not make any sense.

Peter Schiff stated:

The government doesn’t have money that it doesn’t take. Any dollar that the government spends is a dollar that the private sector can’t spend or can’t invest. The government has to take money out of the economy before it can put it back in. Nobody seems to understand this basic point because they see the Fed creating money, and they think, well, we just print money. They don’t realize that when they print money, they destroy the value of the money that’s already there. So, they’re not adding new purchasing power. They’re just redistributing it” [emphasis mine].

Thus the first problem with America’s debt and proposed budget transparent; there is no money that government can spend unless it first forcefully removes it from the owner.  That is theft, or as we recently discussed, legalized theft.  The Supreme Court of the United States (SCOTUS) has ruled that legalized plunder, legal theft, or forced taxation are the price we pay for civilization, thus making legal the government’s actions to steal money.Government Largess

Let me be clear; I am not an economist.  I select several very bright and experienced people to help explain things to me.  However, I can help others with less interest in economics understand what is happening in America right now to answer the question put forward, “Who is buying America’s debt instruments?”  The simple answer is that the Federal Treasury is buying the debt instruments, as the whole world sells their bonds and other American debt instruments.  What the Federal Reserve is doing is called “monetizing debt.”

Monetizing Debt

Gravy Train 3The definition of monetized debt is as follows. “Debt monetization or monetary financing is the practice of a government borrowing money from the central bank to finance public spending instead of selling bonds to the private sector or raising taxes. It is often informally and pejoratively called printing money or money creation.”  Money can only be created in two ways: selling products and services and lending money where the borrower pays interest.  While there are many different debt instruments, i.e., credit card, home loan, student loan, bonds, Treasury Notes, etc., the principle remains the same: you either sell goods and services to make money or lend money and make money on the interest.

Why does monetizing debt matter?

Two simple reasons the government allows debt to be monetized.  To hide debt, it doesn’t want the public to know about, and to absorb cash on the market as a tool to fight inflation.  Here’s the problem, there is too much debt on the government’s books to hide it from the public any longer.  Add to that the sheer volumes of cash in the marketplace after handing out money during COVID, and the Federal Reserve will monetize debt.  Even if the chair of the Federal Reserve denies monetizing debt, debt is being monetized.Burning money - THE JOSIAH BARTLETT CENTER FOR PUBLIC POLICY

In short terms, your pocketbook is going to take another hit on the chin, and possibly two.  First, your interest rate on privately held debt, credit cards, student loans, homes, etc., is going to go up, all while making lenders nervous and refuse to lend money.  Second, inflation is already making the dollars held less valuable.

Inflation first; inflation is the devaluation of dollars.  The government floods the marketplace with cash, and the currency you hold will drop in value.  For example, recently the inflation was reported to have been 4.6% higher year-over-year.  This announcement was made in April 2021, so all the money you earned last year suddenly became 4.6% less valuable this year, all before the interest rate increases affected those dollars.Inflation - 8 Things Everyone Ought To Know.

Case in point, the US Government sent me $1000 in January; I held onto those funds due to a move that was coming and spent the money in June.  However, between January and June, inflation moved up at a steady pace, and when I went to spend that $1000, it was only worth $850.  That is the power of inflation in your pocket.

Have you asked for a credit increase recently and been denied?  What about your credit limits on your credit cards, have they shrunk?  Both are indicators that the lenders refuse to lend due to the tremendous risks caused by fiscal insanity in the Federal Government.  What about home loans, have you had to produce more documentation, prove more income, and work harder to qualify for a loan?  What about student debt?  The government controls the lending of student debt.  Even here, the Federal Government cannot demand a lender loan money to student’s and many students have found their college expenses grow, and their ability to borrow shrunk.Inflation pickpocket | Cayman Compass

In a simple fact of life, every household in America understands perfectly. When your credit scores go down, your ability to borrow reduces, and it becomes harder to meet all your bills every month.  Every city, county, state, and even the Federal Government should know this lesson, but they refuse to believe problems arise when credit scores go down.  All because those elected believe they can tax some more, and the money magically appears.

Does money magically appear in your pocket; of course not!  It must be earned through working, selling goods and services, or trading your time for employment with an employer for a paycheck.  Does the law allow you to write blank checks, kite checks, backdate checks, or simply float a check waiting for a future payday; of course not!  Yet, this is what the government is doing right now with your money.  The government is spending money, promising the lenders that a future payday will be theirs, but the government has to spend money to get money.  Does that excuse work for you when the electric company, gas company, cellphone, and other bills arrive?A Helpful Chart : How Inflation Changes Mortgage Rates

The most heartbreaking statement I have heard in a long time was recently made by a physician’s assistant, who claimed, “Aren’t we all just one paycheck from disaster?”  The simple truth, mostly, yes!  Studies exist that talk about financial resiliency in America.  Financial resiliency is all about being able to weather a patch of trouble without losing your possessions in bankruptcy.  The conclusions were all but unanimous. Along with most industrial nations, America has no financial resiliency due to government fiscal policies that hinder saving money and the need to live on credit cards to keep the basics of life paid for each month.

When inflation is stealing the value of your money, no wage can compete with government theft, all before taxes.  Add in tax laws that are counter-productive, job-killing, and increase the cost of doing business, and the job you have becomes tenuous at best.  Add in the hidden debts the government is trying to hide, and nobody in America is making money.

QuestionWhat about those who consider themselves “Rich?”

The same problems you are having with inflation are the same problems everyone is having with inflation.  Let’s go back to my $1000 that became $850 through six months of inflation.  We all spend the same money, and inflation is killing everyone’s dollar equally!  Hence, I beg you, do not allow the media hype about rich versus poor to derail the point.  Inflation and monetized debt are killing the US Dollar, which is why so many foreign investors have dumped their US Debt instruments for safer financial shores.

While some people have more financial resiliency than others, everyone’s dollar is dropping in value.  Inflation and low financial resiliency mean making budget cuts to charities, hiring someone to maintain a lawn, and a host of other ways and means American’s share our money.  It can mean turning off services, weighing how much fuel can be used, and a host of other belt-tightening decisions.  All things the government should first be doing, and they refuse.24+ Inspirational Quotes For Unemployed - Audi Quote

Yours and my liberty and freedoms depend upon stable economic policy, firm fiscal policies, and elected officials scrutinizing the government for waste, fraud, and abuse.  Yet, what do we regularly find; fraud, waste, and abuse!  The Department of Defense has lost multiple trillions of dollars; not a single politician is asking for an audit and an explanation or is willing to withhold additional appropriations until the lost money is accounted for.  The Department of Veterans Affairs continues to mismanage funds, misappropriate funds, and waste money like overripe fruit; yet, still, we have zero interest from the politicians elected to scrutinize government.

I repeat Peter Schiff, only for emphasis:

The government doesn’t have money that it doesn’t take. Any dollar that the government spends is a dollar that the private sector can’t spend or can’t invest. The government has to take money out of the economy before it can put it back in. Nobody seems to understand this basic point because they see the Fed creating money, and they think, well, we just print money. They don’t realize that when they print money, they destroy the value of the money that’s already there. So, they’re not adding new purchasing power. They’re just redistributing it” [emphasis mine].

Inflation Quotes | Inflation Sayings | Inflation Picture Quotes - Page 2In redistributing your money, the government has proven they are the problem, and the solution begins locally!  Change your mayor, city council, county board, school boards, and every other elected official.  Getting the local governments in fiscal shape allows state governments to begin practicing fiscal health and sanity.  Then, we put people into the Federal Office more interested in scrutinizing the government than in writing endless laws and abdicating their legislative role to the executive bureaucrats and the judicial branch.

Knowledge Check!The budget put forth by President Biden is the height of insane, and I have only covered less than 1/10th of the budget problems in this article.  Granted, I covered the most egregious problem, but the fact that the legislative branch is even negotiating a compromise is beyond insanity and borders on criminal negligence!  We, each citizen of a representative government, must stand and tell our representatives NO MORE!  No more fiscal insanity, borrowing to buy votes, entering into debt obligations that make captives of unborn millions of other people.  No more will we allow them to buy votes to maintain power.  End the financial abuse of the taxpayer; your wallet will thank you!

© 2021 M. Dave Salisbury
All Rights Reserved
The images used herein were obtained in the public domain; this author holds no copyright to the images displayed.

NO MORE BS: Let’s Talk About Root Cause Analysis

Flying BuffaloSome of you are thinking, “I will skip this article because the title does not sound interesting.”  I beg your forbearance, just please keep reading.  I laughed today, long and loud, over the incompetence of the current elected leaders in America, fully supporting public mocking, public shaming, and public humiliation over the following piece of news.

You cannot make headlines like this up:

Kamala Harris Emphasizes “Root Causes’” of Border Surge, Says the Problem is “Complex” while blaming climate change for the border crisis.

Let that sink in for a minute; the person who cannot hold a press conference, cannot even get VP added to her title, and cannot do root cause analysis!  I have been working since I was twelve; I was taught root cause analysis as a shade-tree mechanic; you have to be able to diagnose the correct problem to fix the engine.  This article looks like VP Harris is fixing the tires on a car without an engine, claiming this will get the vehicle running real good.  Here is VP Harris’ actual quote:

We are looking at extensive storm damage because of extreme climate, we’re looking at drought in an area in a region where agriculture is one of the most traditionally important basis for their economy, we’re looking at what’s happening in terms of food scarcity as a result of that and in fact, incredible food insecurity, which we used to call hunger food insecurity.”

Detective 4Let me see if I understand this statement correctly.  Political instability, Venezuela’s continuing meltdown politically, and the invitation from many politicians with (D) after their names have nothing to do with the “border surge.”  Just like a stricter stance on illegal immigration by President Trump (R) didn’t slow down illegal immigration on the southern border; do I have that correct?  Let’s talk about incentives, mainly welfare, housing, education, and a political base that refuses to enforce immigration law, do these not influence a southern border crisis, and buffalo wings come from flying buffalo.

What is Root Cause Analysis?Root Cause Analysis

Root Cause Analysis (RCA) is a process of logically working through a problem as a solution is developed.  I know some of you have other definitions for RCA, and that’s okay.  I am just trying to be real simple here, for if VP Harris sees this article, I do not want her confused with big words.  There are three goals to simple RCA, discover the root of the problem, understand how to fix the problem, apply what is learned to prevent future issues.  VP Harris’s comment above has already failed the goals of RCA; hence we can conclude that RCA was not accomplished!Fishbone Diagram

Effective RCA processes possess core principles that are apolitical and easily understood:

      • Focus on fixing the problems, not band-aid solutions
      • Symptoms relief is a short-term answer to buy time for long-term solutions.
      • Multiple root causes are possible; however, each root cause requires factual justification and logical discussion.
      • Who is never part of RCA, just HOW and WHY.
      • Methodical cause and effect evidence is required for each root cause.
      • Future prevention requires increasing learning and understanding.
      • Corrective action requires information and ACTION.

I am not here to hurt VP Harris’s feelings, but her comment about the southern border crisis being climate-related still does not pass the smell test on the core principles of RCA.  Let alone any logical test for veracity.  Thus, again, we can conclude that RCA was never followed to justify her commentary!

The easiest and simplest RCA is the 5-Whys Approach.  Here is the 5-Whys Approach in a simple analogy:

      1. Why? – The car battery is dead. (First why)
      2. Why? – The alternator is not functioning. (Second why)
      3. Why? – The alternator belt has broken. (Third why)
      4. Why? – The alternator belt was well beyond its useful service life and not replaced in a timely manner to save the battery. (Fourth why)
      5. Why? – The vehicle was not maintained according to the recommended service schedule. (Fifth why, a root cause)

Using the 5-Whys Approach, one can also work backward from a completed RCA to double-check integrity in the process.

5 – I am holding the maintenance records showing timely maintenance was conducted.
4 – The alternator belt is broken, but so are the other belts in the engine. Are we sure the root cause is the alternator?
3 – The alternator is missing.
2 – The battery is missing.
1 – The car is not working; why?

Using VP Harris’s comment above, we can back check the climate-change excuse to the erroneous assumption using the same technique.

5 – How many illegals at the southern border are only from the three countries being blamed for illegal immigration?
4 – Guatemala, El Salvador, and Honduras, suffered from El Niño and El Niña in 2017 and 2018, but there was no increased immigration during those tumultuous years of extreme weather.
3 – Since 2015, food security has been an ongoing problem in Guatemala, El Salvador, and Honduras. Again, we do not find a surge in citizens from these countries immigrating illegally to the US Southern Border.
2 – According to the World Bank, regardless of the weather issues and the global financial crisis, Guatemala, El Salvador, and Honduras are still being favorably looked upon as places to invest in for good returns on investment.
1 – What is causing a southern border crisis immediately after a presidential election year?

Please note, I only researched to 2015 for the weather, economy, and food security issues, as obviously President Trump (R) never had a positive influence on the Southern Border Crisis.  President Biden just inherited President Obama’s mess.  Does the RCA backward and forwards process make sense?  I ask solely because we have had migration issues on the southern border before today.  The politicians in America never seem to find the root causes and act to protect America’s defensible borders!  Blaming the weather, which has been changing in cycles since recorded history, for recent events, is akin to blaming the position of the planet Mars for burning one’s hand on a hot stove.

ApathyYet, let’s give VP Harris the benefit of the doubt; maybe her staff did complete an RCA process to reach this conclusion, while she has been sequestered and unavailable since the election.  If so, it would be easier than stepping off a curb to produce the RCA in detail and allow us, the electorate, to see how and why she is blaming the weather for a migration crisis.  This is a reasonable request, produce the proof an RCA was completed, where climate change is the only root cause in a “complex problem.”  Want to raise the stakes a little; if you cannot produce the RCA and accompanying evidence, along with the plans of action, you leave American politics forever.  If you produce the evidence and RCA, I will issue a sizeable public apology and never write about politics again.  I am waiting!

© 2021 M. Dave Salisbury
All Rights Reserved
The images used herein were obtained in the public domain; this author holds no copyright to the images displayed.