Sunday, June 7, 2009

A Billion Here, A Billion There

The late Senator Everett Dirksen of Illinois is credited with saying, "A billion here, a billion there, and pretty soon you're talking real money." There is some question as to whether Dirksen actually made the statement. A gentlemen who once sat by Dirksen on a flight asked him about the famous quote. Dirksen replied, "Oh, I never said that. A newspaper fella misquoted me once, and I thought it sounded so good that I never bothered to deny it."

Whether Senator Dirksen ever made the statement or not, it is clear that he was concerned about excessive public debt. Dirksen told the following story in response to a proposed bill before Congress:
"As I think of this bill, and the fact that the more progress we make the deeper we go into the hole, I am reminded of a group of men who were working on a street. They had dug quite a number of holes. When they got through, they failed to puddle or tamp the earth when it was returned to the hole, and they had a nice little mound, which was quite a traffic hazard.

"Not knowing what to do with it, they sat down on the curb and had a conference. After a while, one of the fellows snapped his fingers and said, ‘I have it. I know how we will get rid of that overriding earth and remove the hazard. We will just dig the hole deeper.'" (Congressional Record, June 16, 1965, p. 13884)

The founding fathers were concerned that public dept not exceed the country's ability to pay it off in a reasonable amount of time. Thomas Jefferson stated, "I, however, place economy among the first and most important of republican virtues, and public debt as the greatest of the dangers to be feared." George Washington advised, "No pecuniary consideration is more urgent than the regular redemption and discharge of the public debt; on none can delay be more injurious, or an economy of time more valuable."

Most reasonable thinking people are deeply concerned about the growth of public debt at the federal level. On top of the public debt is the future cost of entitlement programs such as Social Security, Medicare, and Medicaid. USA Today recently reported that federal obligations have increased to a record $546,668 per household. That is astounding.

As of March 2009, FoxBusiness reported that the government has made commitments of $9 trillion to support the struggling financial system. The New York Times reports that as of April, bailout commitments exceed $12 trillion. Most of us hear the word "trillion" and it does not have much meaning. Mark Levin, in his new book Liberty and Tyranny gives us some perspective as to how much money these financial bailouts amount to. The chart below is from Bianco Research:

(Source: Liberty & Tyranny, p72)

I'm no economist, and I'm not a numbers guy, but a comparison of significant government expenditures in the past with current spending and bailouts tells me that we are in deep trouble. Former Comptroller General of the U.S., David Walker, recently stated that if reforms don’t take place the country will face problems much greater than the current recession. I agree with Comptroller General Walker. Unfortunately, I do not see financial reform in the future. In fact, it looks even worse as the United States continues to support failing businesses and Congress proposes expensive programs such as health care reform.

No comments: