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Hooray! We’re Saved! Or Maybe Not.

The revenue generated by the Fiscal cliff legislation represents roughly 6% of the annual deficit.

According to the Obama Administration, the revenues generated by the newly passed legislation will generate $600 billion over 10 years. Given that the average deficit is $920 billion PER Year, we’ve now addressed less than 7% of our deficit problem.

Congress has passed the super dooper anti-fiscal cliff measure and Obama has signed it, so we can all breathe a sigh of relief. Our children are saved from facing the consequences of out-of-control government spending, right?

Right?

Well, take a look at this chart.  The area in blue represents our average annual deficit under President Obama according to the U.S. government accountants at the Office of Management and Budget. I used Table 1.3 and the years 2010 through 2017 since those are the budget years controlled by President Obama. I debated including 2009 since his bailouts of the auto industry and his stimulus bill should be attached to him, but even without that, the picture is gloomy enough. The area in red represents the projected increase in annual revenue based on the legislation signed Wednesday. By the projections of the government, over the next 4 years, we will add another $3.1 trillion to our debt.

And that is if the accountants are correct and not being overly optimistic. According to the Congressional Budget Office, we can expect previous deficit estimates to be roughly $300 billion too low as the new law takes effect. Carry that our over the next 4 years, and our debt could increase by as much as $4.3 trillion instead of $3.1 trillion.

Still feel like celebrating?

I hate to start the New Year bringing bad news, but we have to understand what is going on in Washington and take action before it is too late.

Just out of curiosity, does anybody remember how we got here?

In August of 2011, President Obama signed the Budget Control Act which had been passed by Congress as a reaction to the U.S. approaching the debt ceiling and to the failure in the Senate to pass a budget. The Act created a committee which had the task of attempting to restore fiscal responsibility to Washington. The Act had teeth to it; should the committee fail to come up with a plan, then as of January 2013, automatic spending cuts, known as sequestration, would be implemented, striking both domestic and defense spending. These cuts would not be deep enough to eliminate the deficit, but would slow the growth of the debt by slowing spending.

In short, the BCA was designed to force Congress to act responsibly. Of course, it failed miserably.

The committee disbanded without proposing any legislation, and just a couple of days ago, Congress and President Obama pulled the teeth of the BCA by passing the American Taxpayer Relief Act, which, as discussed above, implemented higher taxes while postponing the automatic cuts.

Instead of reducing the deficit, Congress acted to increase it further.

So why does this matter to us? This is a parenting blog; why the political stuff?

Our kids are going to deal with this mess. Their kids will still be dealing with it. And their kids as well. It’s easy to run up a mountain of debt; paying it off, as we all know, is far more difficult. And our kids are going to have to do it because we lack the political will to do so ourselves. Our children will not have the same advantages we had; they will face a future of reduced opportunity, of slow growth and shallow expectations; that is a simple fact we must all adjust to. Our job as parents is to prepare them to do the job we failed to do. We need to teach them responsibility, both to themselves, and to each other. We need to teach them thrift, and the value of hard work. We need to teach them skills long abandoned by our modern society. Things like hunting, fishing, gardening, and canning and preserving food.

I can here some of you now. “Oh Lord, he’s another one of those preppers from the Discovery Channel!”

Let me ask you a question; since when has it become laughable to be prepared for hard times? We’ve had it so good for so long that it seems we’ve forgotten how unique the last several decades have been in the history of the world.

Being prepared used to be the standard; now people look at you like you’re a nut job.

Don’t get me wrong; I don’t have three years of food stored in my basement in vacuum-sealed 5 gallon buckets, nor do I have an arsenal of weapons along with enough ammunition to keep the DHS happy for 6 months. On the other hand, I have been learning skills to make sure that I am ready for hard times when they come.

My wife and I have started a garden and we’re slowly learning how to maximize its output. I’ve started growing grapes and we’ve planted a few fruit and nut trees. I’ve got water stored for a short term emergency and a plan for longer term emergencies.

We have a well-stocked first aid kit, extending far beyond a few Band-Aids and a tube of Neosporin. I’m trained in CPR and first aid, and my wife is a former paramedic.

We plan on keeping some chickens this year, and maybe a few goats for eggs, cheese, and milk. We both knit, so we might even get some Angora goats for their wool.

Fortunately, I live in an area where being prepared never went out of fashion, and there are plenty of people willing to help me learn new skills.

Am I going overboard with this? I don’t think so. I’m just looking ahead and seeing a future where a good garden makes the difference between going to bed hungry and going to bed with a full belly and waking up ready for another day.

In 1987, I was a sailor on board the USS Nimitz and we pulled into Rio de Janiero, Brazil. Brazil had just devalued their currency due to hyperinflation, replacing the cruzeiro with the cruzado at a ratio of 1000 cruzeiros to 1 cruzado. For comparison, a similar devaluation in the U.S. would turn $1000 into $1. Just a few years before, Brazil had undergone another 1000-1 devaluation, and there was another one a few years ahead of that.

The devastation was incredible. As we rode a bus from the port to the beaches of Ipanema, we traveled through a mountain pass. Coming out of the pass, the bay was spread before us, but the sides of the hills surrounding the bay were covered with a cardboard shantytown. Thousands of people lived in the shantytown, building shelters out of discarded refuse because they had nowhere else to go. No plumbing, no power, no sanitation facilities of any kind, and no hope. The government was powerless to help the people. Crime was a major problem, even in the areas closer to the beaches, which, being tourist areas, were highly patrolled by police.

Prices were incredibly varied. Some things simply could not be purchased with cruzados, and you couldn’t carry enough cruzairos to pay for a Big Mac. On the other hand, $10 in American currency could fill your needs for an entire night on the town.

Why am I telling you this story? Because the Brazilian currency crisis is still affecting Brazil today, had its origins in loose fiscal policy, i.e. running up massive debt and printing currency to pay it down. Today, we call it quantitative easing, and in case you missed it, the Fed has announced it has become a semi-permanent policy of the US, and that it will no longer hold itself to predetermined amounts, but will add currency at their sole discretion.

I’ve seen first hand the results of this kind of fiscal policy, and I think it is only prudent to prepare myself and my family for what very well may be decades of hard times in America.

Again, I hate to start the new year with such bad news, but better that then allowing our children to face this unprepared and unaware.

Related Posts

Guns in the House:Risk vs Reward
Gun Safety: Part 2 Safe Storage
An Endless Moment of Silence

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Read more of Rich Hailey’s writing about everything at Shotsacrossthebow.com

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