In Jim Cook's Archive


I’ve condensed a recent article by Congressman Ron Paul. It’s called “The Coming Entitlement Meltdown.”

“David Walker, Comptroller General at the Government Accountability Office, appeared on the show ‘60 Minutes’ to discuss the federal budget outlook. Mr. Walker’s theme was simple: government entitlement spending is like a runaway freight train headed straight at American taxpayers. He singled out the Medicare prescription drug bill, passed by Congress at the end of 2003, as ‘probably the most fiscally irresponsible piece of legislation since the 1960s.’

When it comes to Social Security and Medicare, the federal government simply won’t be able to keep its promises in the future. Our entitlement system can’t be reformed – it’s too late. And the Medicare prescription drug bill is the final nail in the coffin.

The National Taxpayers Union reports that Medicare will consume nearly 40% of the nation’s GDP after several decades because of the new drug benefit. That’s not 40% of federal revenues, or 40% of federal spending, but rather 40% of the nation’s entire private sector output! The politicians who get reelected by passing such incredibly shortsighted legislation will never have to answer to future generations saddled with huge federal deficits.

The official national debt figure, now approaching $9 trillion, reflects only what the federal government owes in current debts on money already borrowed. It does not reflect what the federal government has promised to pay millions of Americans in entitlement benefits down the road. Those future obligations put our real debt figure at roughly fifty trillion dollars – a staggering sum that is about as large as the total household net worth of the entire United States. Your share of this fifty trillion amounts to about $175,000.”

Fifty years ago defense spending was 60% of the budget and entitlements were 20%. Today defense spending is 20%. Social programs are 60%. To pay for all this we are going to get tremendous pressure from liberals to raise taxes. They would never think of cutting benefits as long as they can soak the rich. This short-sighted policy has limits – tax shelters, tax cheating, offshore investing and switching citizenship can eventually cost the government more than they gain by raising taxes to intolerable heights.

A better way is with a hidden tax. This hidden tax procures billions for the government and nobody complains. Hardly anyone catches on. Some even like it. It’s called inflation. The government prints money and expands credit, creating billions of new purchasing media. It pays its bills with the new money. This waters down the current money stock making its purchasing power less. As the money goes down, there’s an offset. Assets increase in value and everyone rejoices over their gains. In reality, much of these so-called profits are simply the new money chasing assets and making them dear. The value going up is the same as money going down.

The government collects more from capital gains and also collects more money from the business boom created by the new money. But, most of all, its debt is reduced by inflating. I believe the inflation rate is far worse than anyone imagines. It’s a terrible threat to the financial health of every retired person. This funny money is the perfect system, enabling the government to dupe its citizens by depreciating their savings. Given the gargantuan spending excess, you can expect plenty more of the same.

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