Chapter 17 Washington DC-A Coming Ghost Town
November 22, 2015
The Ponzi scheme fiscal policy of the U.S. Government has created several critical issues for and distortions to the U.S. and global economy:
It has appeared to make a lot of people wealthy (see Creating Counterfeit Wealth).
It has appeared to make a lot of businesses very profitable and valuable (see Creating Counterfeit Prosperity).
It has appeared to make it possible for the Government to provide pensions and social security to a large portion of the U.S. population.
It has appeared to make it possible for the Government to provide healthcare services to a large portion of the U.S. population.
It has appeared to make it possible for a lot of people to drop out of the work force because they feel they can be supported by the promises being made out of Washington.
It has caused asset prices to inflate (see The American Housing Bubble).
It has appeared to make it possible for us to finance the most powerful military on the planet.
But the fact is that by using fraudulent accounting the Government has been able to conceal the massive GAAP basis deficit spending we have been incurring and as a result this has created a lot more jobs (and high paying jobs at that) for Government employees and employees of companies that contract to the Government. While I have concentrated much of my concern in this book on the fact that now nearly 50% of the U.S. population is receiving social benefits of one type or another from the Government for which Government does not have the money to pay these benefits (see Cheating the Common Man) there is another segment of the population that is also at risk because they are also being supported by this massive deficit spending by the U.S. Government.
Many of these direct and indirect Government employees live in or around Washington DC. When your livelihood is dependent on deficit spending by the U.S. Government it is not a good thing.
In a few decades portions of the Washington DC area could start looking like Detroit does today.
The U.S. Government has accrued this massive liability (our public liabilities as of Nov 22, 2015 were $99.8 Trillion and growing at a rate of $5.9 Trillion for FY2016) over the last 5 decades and has made the United States appear to be a highly successful and productive country. No where in the country has this illusion of success been more visibly apparent than the area in and around Washington D.C. The use of this fraudulent accounting and the overall lack of fiscal responsibility by the leadership in Washington has created the opportunity for massive funding of economic activity that we can not possibly afford.
USAPonzi has created jobs that are not affordable. USAPonzi has created businesses that are not affordable. Many of these direct and indirect employees of the U.S. Government are living lifestyles that are not affordable. As a result, many of these direct and indirect employees of the U.S. Government have bought houses, cars, and boats that are not affordable. Many of these direct and indirect employees of the U.S. Government have sent their kids to colleges that are not affordable.
While I am focusing on the DC area this problem exists throughout the United States but it will be most prevalent in areas where economic activity is supported by the flow of funds from Washington like military bases and major corporations whose major customer is the U.S. Government.
We should be able to learn something as a country by the way the Bankruptcy court handles the situation in Detroit. The only problem is that our country level problem is now more than 10 times as acute (as measured by public liability per citizen) as that of the city of Detroit and it is 5000 times as large on a total dollars basis.
We cannot afford to be paying these employees and these businesses at the current rate because we do not have the money. But USAPonzi conceals 80% or more of our deficit spending, by using improper accounting, which clearly must stop and stop soon or we will have to start printing money like it is going out of style.
When Washington comes to the realization of just how out of control they really are, many of these jobs will have to disappear (it could be half to three quarters of the jobs in the DC area). It will be just like what happened in Detroit when the jobs go away, the income goes away, the house payments cannot be paid, the car payments cannot be paid, the boat payments cannot be paid, the tuition bills cannot be paid etc. etc. Businesses will go out of business. House prices will drop like a rock. Neighborhoods will fall into decay. Since almost everything that happens in Washington DC is ultimately paid for by the U.S. taxpayers and the U.S. taxpayers are $99.8 Trillion (GAAP basis) in "virtual debt", the livelihoods of these direct and indirect Government employees are highly at risk.
Detroit was the capital of the automotive industry until the economic model that made it successful over extended itself with excessive pay, excessive benefit plans, excessive pensions, and excessive retirement benefit plans.
Washington has done the same thing by making massive commitments (on many dimensions) that cannot possibly be kept and much of this over commitment has been concealed from both the Government officials and the U.S. citizenry by the use of fraudulent accounting.
That is why I feel that much of the Washington DC area could look like Detroit is today in only a few decades.
$99.8 Trillion (and $5.9 Trillion more a year) will buy a lot of stuff but when we finally realize that this liability has to be paid back (or written off by defaulting on our debt and our social benefit commitments) a lot of people and a lot of businesses will suffer.
The actual result is of course highly dependent on how the U.S. Government chooses to or is forced to deal with the coming national bankruptcy. Who will it be that gets short changed? How much money do we print?
Financial data sourced from usdebtclock.org Nov 22, 2015.
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