How to Empty the National Treasury

A personal Opinion of R. T. Hayes


As I write this essay our nation is in is the throws of a national financial crisis. A crisis of such magnitude that our best economist and national leaders are unable to begin even thinking of a way to bring our nation back into the once prosperous place in the world that we once occupied. Wringing their hands, shaking their heads, and blaming each other for the failure of our economy. Asking themselves: what caused this disaster to happen? Unable to see the cause, because they seek a simple answer that they can explain away and blame someone else for their inability to protect the citizens from financial melt down.

Kerplunk theory: Like a slow drip from a leaky faucet, those small drips ultimately fill a bucket. The longer the leak goes untended the buckets will fill a pool. Ultimately, it becomes a river washing away any thing in its path. As, it is with our current financial crisis. Changes in our laws, regulations, and decisions made over a long period have come home to the roost. Each change meant to provide some kind of positive response ultimately having instead unintended consequences. We must go back more than 40 years to some of the events that lead us to our present problem.

In the 1960s’ a tax loophole was created for American Corporations that allowed corporations not to be taxed on profits generated in foreign countries until those profits were brought back into the United States. Meant as an incentive for corporations to spread capitalism around the world and thus prevent the spread of Communism. Seemed to work for a while. However, there were unintended consequences: Rather than bring the money back into the United States to be taxed on, it encouraged companies to reinvest those profits, in new and expanded plants and factories in the foreign countries that had lower tax rates. Thus creating jobs in foreign lands and avoiding contributing to the tax burden of the American people. As of writing, that untaxed profits currently are estimated to be $500 billion dollars that lay in foreign banks. A small leak in the whole scheme of things, but nonetheless a leak, costing lost taxes, and American jobs. As you will see a small leak in our National Treasury.

Fiat Money: After years of Americans, buying goods from Japan and other nations of the world the demand on our gold and silver reserves were being taxed to the limit. The then President Richard Nixon pushed to remove the requirement of having precious metals as backing for our national currency. Asking instead that the American dollar be accepted as value in trade for the goods and services our nation could provide. The creations of this “Fiat Money” that is money that lacks any form of precious metal as backing allowed the U.S. Treasury to print as much money as they wished without regard to the need to have reserves to back its’ value. History has shown that no government has survived for more than 50 years after adopting Fiat Money plan. Now it is not to say Fiat Money is all bad. There is probably not enough gold on the planet to back all the money that the Treasury has printed. And in a economy that has expanded to include all the nations of the world we need the liquidly that it provides. However, we needed to guard against the destruction of the industries that provided the creation of our nations’ wealth.

This change in financial policy opened the door to run away inflation. Inflation that took off like a rocket and forced President Nixon to ask American Industry to freeze wages and prices. Under the next President, President Carter interest rates hit an all time high reaching 21%. And the recession of the 1970’s ensued

The Seventies brought another act meant to help the working man: ERISA The Employees Retirement Income Security Act. This bill changed forever the way industry would provide retirement benefits. The defined Benefit plans that our fathers and grand parents enjoyed went by the way side and 401ks’ replaced them. This allowed corporations to relieve themselves of having to put aside large sums of money to meet their future obligations to future retiring employees. Corporations loved it because it limited their future payouts and the stock brokers loved to get the investments in stocks, bonds and mutual funds. But the demographics meant that as 70 million baby boomers started to retire they would have to begin to sell those stocks in order to have income to live on. Should the market have a sever decline panic would set in and the danger of selling all their stocks would drive the market further down. The same problem facing social security of more retires than new employees would insure a deficit in funding.

A Nations Wealth Lies in it Ability to Create Goods and Services that people Need and Want: With the change to Fiat Money, it effectively turned the keys to the National Treasury turned over to that part of our nation that manufactures the products that mankind needs and wants. Our National Treasury became American Industry, and the American workers became the ones responsible to enhance that wealth. It was up Congress and the Senate to protect our National Treasury. Unfortunately, they saw the success of the Corporations as the source of our wealth. Not realizing that it was the American Worker in this country that was the creator of our wealth. So in an effort to make the greatest profits companies shifted more of our nation’s treasury to foreign shores. Turning the keys to our treasury over to foreign nations. As long as American Industry was healthy and growing, the Treasury could print as many dollars as they wished. Assuming that the amount they printed was balanced with the output of growth in exports. But as our treasury was moving out of the United States to other countries there was less and less to export and more and more to import.

Free Trade: The tax loophole of the 1960s’ was but a small leak in our treasury. It wasn’t until we unlocked the doors to our treasury with NAFTA and other free trade agreements that the doors to our National Treasury were thrown open for the entire world to help themselves to our wealth that the real drain began. Free Trade is one thing, Fair Trade quite another. Believing that we could continue to manufacture and sell billions of dollars of goods to the people in other nations would enhance the value of American Corporations was a fallacy. Goods made by workers with livable salaries and reasonable benefits were too expensive for the poorer citizens of these countries. But goods manufactured by people willing to work for a few pennies per hour would be much cheaper here in the United States. Therefore it made sense to move American manufacturing facilities to these foreign nations. Increasing profits for American corporations and shareholders, but destroying the lively hood of the American worker. The real people responsible for the keys to our National Treasury were slowly loosing then to foreign workers.

Kerkplunk, kerplunk , the leak continues. During the Clinton Admistration, Senator Phil Gramm pushed legislation that favored the financiers of our country; the Gramm-Leach-Bliley Act. This bill removed the regulations that had kept banks, insurance companies and brokerage firms from owing one another. Meant as a safety net to protect the citizen’s assets and accounts by the failure of one firm would not take down another firm. The Gramm bill removed this restriction and Banks rapidly bought other firms. Within weeks Citicorp acquired the Travelers Insurance Co. Investment Banks, Brokerage Firms and Insurance companies consolidated into larger and larger firms. Creating firms with more and more influence on the elected leaders of our nation. At the same time creating a situation that the failure of any could have catastrophic consequences should it fail. The belief that they were to big to fail. But they Failed. They Failed Big time.

There was some hope as late as 2005 that their failures could have been limited to a smaller amount. But in 2005, the five largest Investment Banks in our nation. Petitioned the Security Exchange Commission to lower their reserve requirements, allowing a 30 to 1, from 8 to 1. This allowed these firms to take on three times as much risk than previously permitted. Too big to fail? They were able to lose three times as much money than before. Costing the American taxpayer three times as much debt..

Big does not mean Better. The bigger a company gets the more complex it becomes. The more people that need to be supervised, the more cracks to fall into, the more people scrambling for power and the more greed that can take root. Big is not better, Better is Better. It’s not to say that there are not some great large companies, There are. But when your responsible for other peoples money in a fiduciary capacity its easier to spend other peoples money. Especially that if win you make more money, and If you fail you make more money. But we lose, when they lose.

We haven’t touched on the national debt or the cost of the war in Iraq. But the nation debt plays a major role in the drain on our nations wealth. In January 1981, our national debt was $930 billion . That included unpaid debt from World War 2, and Viet Nam. By the time Ronald Reagan left office he had created more debt during his eight years in office then any of the presidents that had preceded him had in more than 200 years. Leaving office with a$2.60 trillion debt. Bush Sr. left office after 4 years leaving behind a debt of $4 trillion. Eight years of Bill Clinton left behind a debt of $5.78 trillion. That brings us to “W” . It is expected that the current president will leave us with a $12 to $13 trillion debt. Just the interest on the debt alone is approximately a billion dollars a day. It was George Washington that said, ”WE cannot pay off our nations debt with borrowed money.” Too bad he’s not alive today to tell our current leaders. It is a simple Econ 101. But apparently too hard for Presidents, Senators and Congressmen to understand.

There are too many reasons that led to the path of a economic meltdown. Lack of an energy policy that leaks $600 billion a year from our nations wealth. If our national treasury (American Industry,) is to be restored, it will need an abundant supply of cheap energy. And jobs for the men and women that creates our wealth.

What do you suppose would have happened if we had taken care of America’s working class? Protecting the real Wealth of our Nation. Protecting their jobs, providing them with wages that kept up with the cost of living. Providing health care so that a catastrophic illness would not wipe out all their assets. Perhaps there would have made enough money to pay their mortgage. Perhaps the would have been fewer bad loans; perhaps there would have been fewer bankruptcies. Perhaps we would have less crime, fewer abortions and healthier nations as a whole. Who knows? But it’s sure we will need more than “Joe the Plumber” to fix the leaks in our National Treasury and repair this economic meltdown. We may not have had a tax increase, but what do you call a trillion dollar bail our at taxpayers expense. The United States is Bankrupt and in deep debt. And we go hat in hand to China, Saudi Arabia, and other foreign nations begging for some our own wealth back. Shame on us. We elected these Bozos.

So now we transfer the failures of the past administrations forward once more to a new President. Hoping beyond Hope that our new President will save us from ourselves. He will need all the support we can give him. However, we must be prepared to sacrifice like never since World War 2, if we are payoff the debts of our nation, our industries and our personal households. We cannot afford to fail, our Nations Sovereignty is at stake. That challenge is before us. The question is are we up to it? Letʼs pray that we are.