Saturday, March 28, 2009

The Great American Bribe: Statehood Lost

The Senate, Congress and President of the United States have recently passed a partisan spending bill, AKA “The Stimulus Package,” for the total amount of $787 BILLION dollars. To put that into perspective, if one dollar bills were lined up end to end, 787 billion dollar bills would go to the moon 312 times, with enough change left over to buy a yacht or two. Or, if you please, a five lane highway all the way to the moon covered completely with dollar bills. I use an astronomical analogy as to gain the astronomical perspective of the situation. That is a gob of money. Money we don’t have. Each State is to claim its portion of the loot; in the case of Idaho a rough calculation based upon population would be 2.6 BILLION, or one trip to the moon (if it were doled out based upon population).

Although a vast majority of productive Americans oppose this insane spending bill, it seems to be the soup of the day. Idaho Governor Butch Otter had some early reservations on claiming the money, on grounds of fiscal responsibility. More recently however, Governor Otter pointed (a paraphrase) out that failure to take the money would hurt Idahoans. Even if we refused we would still be responsible for paying our portion of the debt. Such an argument makes good sense, on the surface, but looking only at the surface was the genesis of this problem. Let’s go a bit deeper.

Since our dollar is not tied to the gold standard, its "calculable value" is quite ambiguous, it may seem. Even the gold standard was a simplistic approach as a currency, due to its limited uses. Today currency is simply an intermediary token of goods or services, a method of making tangible the value of ones labor or assets. In an economy- with a fixed amount of money in circulation- as productivity rises on labor or land, so then would the value of each dollar. A mans worth is entirely definable. However, we do not live in that world; the amount of currency in our system is no longer fixed. With the printing press and the credit market, a big monkey wrench is thrown into the mix.

If money is printed and circulated without regard to the connection to productivity, or more simply un-backed by a good or service, then all of the money in circulation, including the backed money, is worth less than it was before due to the indistinguishability of the backed and un-backed money; the money is counterfeit. In a sense and in actuality, every time money is printed and circulated, every working person is getting a pay cut. Even though your check may be the same, the dollars are worth less due to the diluted currency.

Credit is merely an agreement to receive a token of estimated productivity (currency), before actual productivity, with promise repayment with future productivity (principal) and increased productivity (interest), over time (term). Quite simply, in order for credit to work there must be a productivity increase, whether personal, business, state or nation. Of course this is a very brief description of financial matters.

Before I get entirely to the point, let’s take one more satellite spur on the American rail line. America was founded as a constitutional republic of united, constitutional, democratically-elected representative republics (states). States were not made states simply because they look cool on the map. Our founders knew, in order for peace, prosperity and freedom to endure, smaller governments, more connected to the people and geographic regions, should be the primary means of governance. However, in order to better fend off foreign invasion, improve trade relations with other countries, administer and a manage currency and insure intercourse between states, the states were to be united in those endeavors. Thus The United States of America, a government with distributed power and jurisdiction. This arrangement was quite ingenius. The power was close to the people, as our founders wished it.

On April 10, 1987, Idaho enacted a law that changed the drinking age from 19 to 21 years of age. Such a law was certainly within the authority of the State, as outlined in our founding documents. However, for whatever reason, Idaho did not wish to make such a law, yet they did. Why? Idaho was extorted by the Federal government. (Extortion: Illegal use of one's official position or powers to obtain property, funds, or patronage.) The Federal government threatened to withhold highway funds from the state of Idaho if the law was not changed; 21 means 21. Although I believe alcohol has no redeeming qualities, each state has the constitutional authority to rule in social matters such as the drinking age. Yet, whether considered bribery or extortion, the threat of withholding tax dollars previously generated in the state was an effective and apparently "legal" way for those at the top, nationally, to take power from where it belongs: at the state level. We are really only one step away from an oligarchy, but that is another story.

Stimulus 2009: $787,000,000,000 worth of printed and borrowed money, to be distributed, spent, given and loaned to states, business, government, and non-profits, with intent of growing the economy. Simply looking at the direction of the funds, one can see that a vast majority of the money will develop no growth in the economy past its first generation of spending. Quite the inverse, the value of the new dollar (which is bastardized by its origin and not backed by productivity) will be determined and used as it was born, with reckless ambiguity. Infusing this kind of “money” into the system will only breed confusion. What will a dollar be worth?
By now you might get the hint I am not in favor of the “Stimulus Plan.” However, I do not think the dilution and confusion of our currency system will be the “end of America” as we know it. The Devil is in the details, or lack thereof in this case. On February 20, 2009, President Obama, while addressing the United States Conference of Mayors, said regarding State oversight and direction of “Stimulus” funds that if state-level authorities propose a money-wasting project, he will "call them out on it and use the full power of my office and our administration to stop it [Emphasis added]." This little statement was left largely unexplored by the press. I think most Americans wrote it off as the President beating his chest, but I see it quite differently.

Again, I will go a bit off topic to wrap up the point. “The Pockets Rationalization” is a term I use to describe how people or governments fool themselves; let me explain. Say a man has four pockets and as a matter of discipline he uses his back two pockets for large bills and large monthly expenditures. He sets this money aside in his back pockets because it is less convenient to get a hold of and he has trained himself that the act of reaching to the back pocket is only to be done under strict and regimented conditions. His front two pockets are for food money and fun money. He has built himself a simple budget. As long as the man stays disciplined, his fun pocket or his two rear pockets will become fuller. However, if the man lapses on his discipline or has an unexpected expense, the man will draw from his back pocket to eat -- he must. When it comes right down to it all of the pockets are in the same pants and the pocket game is just that, a game.

Back to “Stimulus 2009.” The transfer of funds from the Federal Government to a State with the loose directive "to be used for stimulus" and with the warning from the President that if used improperly he will "call them out on it and use the full power of my office and our administration to stop it [Emphasis added]" is an invisible-strings-attached contract. The President at his discretion will determine what is right and what is wrong based upon his “judgment” and not based upon predetermined conditions.

Here is where it gets sticky and “The Pockets Rationalization” comes into play. As an example, let’s say a city had plans for a library and had some funds set aside for it. Rather than using the money set aside, they decide to use their “Stimulus” money for the library instead. The original library money goes back into the general fund. Then, as an alteration to the general budget in order to grow their economy, they allow for tax exemptions as bait to draw a prominent computer manufacturer into the area. It can hardly be said, with any logic expressed, that tax concessions in order to pull employment into an area is counter productive, if the net income gain to the jurisdiction increases. However, many not-so-clever minds would applaud the library as an act of unquestioned altruism yet damn the tax relief as “giving money to the greedy corporations,” using a form of the “The Pockets Rationalization” as argument of the intermingled funds. A conservative state such as Idaho may fall victim to this irrational thinking in many regards. By accepting the “Stimulus” money, we open the door to scrutiny, micromanagement and strong-arm tactics at the federal level, mostly Executive.

Some obvious ways for Idaho to increase its GDP is to cut trees, grow stuff, dig mines, and develop/re-develop the industries that feed off of these. The wealth of Idaho lies in its people, farms and forests, all renewable resources. In times like these, we must exploit these renewable, manageable riches. Such industries are hardly condoned by those in the party which control the Federal Government at this time. By accepting the “Stimulus money,” Idaho, or any other state, is inviting the vampire in the house. Due to the intermingling of funds, we are subject to Presidential oversight in all matters, enforceable by his full power, which includes withholding funding as in the 1987 drinking age extortion.

Wealth can not be created by a printing press nor borrowed from China; only an illusion of created wealth can be achieved by simply getting money moving around the country. We must make stuff, grow stuff, cut trees, and the like. All else is busy work. If Idaho decides to revive a forgotten industry such as timber, even in a small way via the pockets of the state, would we not be open to scrutiny by the puppet master with invisible strings? Matters of the state and its people must be administered by our state government, as the founders intended. Every state has its own unique dynamics and must be able to manage them in house, at the state level. This is not the view of many in power today. They seek a more centralized, more powerful government, and statehood contradicts this philosophy. I fully believe accepting “Stimulus” money is a nail in the coffin of Statehood. Please, Governor Otter, Send it back! As a closing note, the following numbers represent simple interest at 6 percent annually on 2.6 billion dollars (Idaho’s share of the debt based upon population).

2.6 billion
156,000,000 a year
13,000,000 a month
427,397.26 a day
17,808.219 per hour

Walt Holton