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Do you finally realize that you’ve been reading all the wrong stuff?

By Craig J. Cantoni | May 5, 2010

craig cantoniMillions of Americans have come to the realization that the nation’s spending, debts, and unfunded liabilities are unsustainable, and that the country will end up like Argentina, Greece, Portugal, Spain, Italy, Ireland, France, Great Britain, or other has-been or declining countries if the financial bleeding isn’t staunched, if entitlements aren’t cut, if the military-industrial complex isn’t restrained, and if the welfare state isn’t killed, embalmed, put in a coffin, and shipped back to Europe where it was born.

Many also know the sobering statistics, such as the $100 trillion that the federal government owes to creditors or has promised to pay to retirees.  That comes to approximately $900,000 for each American under the age of 18.  Memo to the older generation:  Despite the statist gruel from both political parties that is force-fed in government schools to your minor children and grandchildren, the younger generation might come to the conclusion someday that it would be better for them in the long run if the U.S. declares insolvency and defaults than it would be for them to be serfs for all of their working lives.  After all, unlike you, they have time to start anew.

Here’s an important question for the older generation, including myself:  Why are you just now learning about the nation’s dire straits and responding with tea parties and other efforts?

Yes, that sounds judgmental.  But the fact is that there have been warning signs for decades.  We’ve been like the speeding driver in the passing lane who ignores a series of warning signs on the highway about his lane ending and swerves into the other lane at the last second when he is surprised that the passing lane is ending and he is heading for a cliff.  It’s great that we now see that the lane is ending, but unless we figure out why we missed the warning signs, we’ll miss the next ones.

I posit that older generations have missed the warning signs because they’ve been reading all the wrong stuff, or, in other words, relying on the wrong sources for news, information, and analysis.  I’ll come back to that premise momentarily, but let’s first go back and look at several of the hundreds of warning signs of the past.

Warning Sign:  In his farewell address of 1961, President Dwight Eisenhower warned about the military-industrial complex.  As the former Supreme Allied Commander in the Second World War, he had a lot of firsthand experience with the political influence of the defense industry, and he certainly wasn’t a pacifist, isolationist, peacenik, or any of the names that neoconservatives call those who question the level of military spending.  If he were alive today, it wouldn’t surprise him to find that the United States accounts for 48% of worldwide military spending, versus about 5% for Russia and 9% for China.

Have you read Eisenhower’s comments?

Warning Sign:  Four years after Eisenhower’s warning, the future U.S. Senator from New York, Daniel Patrick Moynihan, issued his controversial Labor Department report, “The Negro Family:  The Case for National Action.”  Although he was a Democrat in the Lyndon Johnson administration, he presciently warned in the report that the War on Poverty would have dire consequences for black families, because it would incentivize black women to have children out of wedlock and raise them without fathers.  Today, the rate of out-of-wedlock births is nearly 80% in black inner cities.  This dire statistic, more than any other, explains black crime, poverty, learning and behavioral problems in school, and a dropout rate of 50%, an appalling rate that reveals the lie behind public education’s stated purpose of universal education.

Have you read Moynihan’s report?

Warning Sign:  At about the same time that Moynihan published his report, James M. Buchanan and Gordon Tullock published their book, The Calculus of Consent:  Logical Foundations of Constitutional Democracy.  Expanding on the earlier work of Duncan Black, they developed the field of economics called “Public Choice Theory.”  They later joined the faculty of George Mason University, where they wrote many papers on the theory.  The theory explains the behavior of politicians and deconstructs the pap taught in high school civics about politicians working for the common good.  Actually, they work for their own self-interest, just like all of us do.  That’s why they shouldn’t be trusted, why their power should be limited, and why they shouldn’t have easy access to the public treasury. 

Have you read Buchanan’s and Tullock’s work?

Warning Sign:  In 1966, Alan Greenspan warned in The Objectivist about the danger of the nation being off the gold standard and letting the Federal Reserve print money to cover up the deficit spending of politicians.  When he later became Federal Reserve Chairman, he conveniently forgot his earlier warning (and principles), thus demonstrating the wisdom of Buchanan’s and Tullock’s theory about political self-interest. 

Have you read Greenspan’s earlier writings?

In addition to the foregoing warning signs, there have been scores of warning signs of the economic consequences of unbridled government spending and printing of money, including warnings from such luminaries as Ludwig von Mises, F.A. Hayek, Henry Hazlitt, Murray Rothbard, and Milton Friedman.  And long before they came on the scene, Charles Mackay wrote his 1841 book, Extraordinary Popular Delusions and the Madness of Crowds, which was about economic bubbles throughout history.  The recent real estate bubble shows that few Americans have read the book or learned from it.    
Let’s look at more recent warning signs.

Recent Warning Signs:  Several years before the current financial meltdown and populist playacting of Congress, many exposes were written about the questionable ethics of investment banks and hedge funds, and the dangers of exotic financial instruments, including mortgage tranches.  Three books of this genre were F.I.A.S.C.O., Liar’s Poker, and When Genius Failed--all best sellers.  Yet Congress, Federal Reserve Chairman Ben Bernanke, Treasury Secretary Timothy Geithner, and various regulators--many of whom worked on Wall Street before entering government through the revolving doors of crony capitalism and the banking cartel – feigned surprise at the meltdown.  Worse, many Americans have fallen for the amateurish acting of their overlords.

Another warning sign was Irrational Exuberance, by Robert J. Shiller.  First published in 2000 and republished in 2006, the book warned about an impending real estate bubble.  I don’t know what’s worse:  that the geniuses at the head of our government didn’t read the book or that they read it and ignored it out of self-interest, cynically deciding that their careers were more important than the nation’s future.

Have you read any of these books?

Then there is one of my favorite warning signs:  “The Grandfather Government Growth Report,” which is a website of Michael Hodges, who deserves a Medal of Honor.  For years, he has been selflessly publishing statistics, graphs, charts, and analyses, showing alarming trends in government spending, regulations, and debt. 

Have you been to the site?

Other favorite warning signs can be found at the Cato Institute, the Reason Foundation and magazine, the Café Hayek website, City Journal magazine, the American Institute for Economic Research, and Mish’s Global Economic Trend Analysis--all of which are nonpartisan and criticize statists of both parties with equal ferocity and intelligence.
Have you been to these sources?

Chances are, your answer is no to this question and to most of the other questions.  If so, don’t feel badly, for you have a legitimate excuse for missing these and other warning signs--namely, that the statists in charge of schools, universities, the government, and the news media haven’t wanted you to know what their statism has wrought.
Take your local newspaper.  If it’s like mine, editorials in favor of new government programs have run ten times more often than editorials recommending cuts in programs.  Now they’re shocked that states and municipalities are bankrupt and facing draconian cuts in such legitimate services as law enforcement and the judiciary.  Of course, they don’t admit the folly of their past editorials or even see the connection between their statism and today’s mess.  Newspapers are dying, but cognitive dissonance and denial are alive and well in newsrooms and editorial boards.

In closing, thank you for riding with me on my review of some of the hundreds of warning signs.  Maybe next time we’ll heed the first warning sign instead of waiting until the last moment to switch lanes in a frantic and possibly futile attempt to not drive off the cliff.