Corruptissima Republica Plurimae Leges

Reposted in honor of St. Patrick’s day and the color of money – green.

From November 28th of last year:

Or in plain English, the more numerous the laws, the more corrupt the state. The Roman senator and historian, Gaius Tacitus, wrote that in 69 A.D.

How little has changed since the peak of the Roman Empire, some 2,000 years ago – yet there are those who would have us believe that a leopard can truly change his spots.

In 1848, Frédéric Bastiat wrote:

As it is certain, on the one hand, that we are all making some similar request to the Government; and as, on the other, it is proved that Government cannot satisfy one party without adding to the labor of the others, until I can obtain another definition of the word Government I feel authorized to give it my own. Who knows but it may obtain the prize? Here it is:

“Government is the great fiction through which everybody endeavors to live at the expense of everybody else.

Bastiat is correct; however he likely understates the true gravity of the situation. I would suggest that government is perhaps the single greatest fiction vested on free men. In contemporary America, it has become a horror story as it has devolved from being  a servant of the people as intended by the Founders, to being our master via “progressivism”. It has become so in the hands of politicians who believe that it is a both a tool of their ideology and a piggy bank to pay for it. Using it in this manner allows them to continually create tempests in a teapot so as to distract the public as to the seriousness of the true long term political and financial issues and their consequences.

Both parties decry the “low information voter” even as they court these people with sleight of hand speeches, tortured rhetoric and slick advertising campaigns. Far from trying to eliminate them, the political class in America actually cultivates them by dishonestly creating themes and memes that avoid the facts and have a very loose association with the truth.

At the top of my list are two major themes that are not being highlighted by the elitists in our political and media classes – or if they are discussed in polite society, they are being treated in such a disdainful and superficial manner as to render them virtually invisible. In the last election, they were treated like Lord Voldemort of Harry Potter fame, for they were the subjects that shall not be named – but we shall deign to speak of them.

The first is the true national debt, the second is inflation.

The national public debt is widely reported and chronicled at websites like USDebtClock.org at roughly $16,300,000,000,000. That’s 16.3 trillion – I think it is important to use the numerical notation because the word “trillion” reduces the impact of just how enormous the number is.

While this is true, it barely scratches the surface of the true liabilities. This would be the equivalent of a business only booking direct bank loans and leaving all accounts payable, trade credit, lease liabilities and any equipment financing done with equipment dealers off the books. It only shows part of the picture. To truly assess the things that we need cash to keep the accounts current and eventually pay off the total liabilities, we have to look at all of them.

Yesterday, Chris Cox and Bill Archer, former members of the House of Representatives, tackled this issue in the Wall Street Journal:

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

The government does not follow the same accounting rules as is demanded of business, so this number is not presented in one place but if you read the WSJ article, you can see that it is pretty easy to get to using publicly available government data. It takes no calculation or interpolation other than simple addition to bring it together.

When you look at this $86,800,000,000,000 number (some have calculated a number up to $211,000,000,000,000 – $211 trillion), it becomes clear how this “tax the rich” mantra of Obama and his “progressive” followers is nothing but class envy claptrap. Understanding how truly gargantuan this issue is clearly shows that his plan to raise $1.6 trillion by “soaking the rich” over the next 10 years is ludicrous. It doesn’t take a real man of genius to understand that bringing in only 160 billion a year while running an annual budget deficit of over $1.3 trillion a year is nothing but a false bourgeois vs. proletariat smokescreen believable by only the weakest of minds.

Of course, there will be those who say that this means that Obama just isn’t taxing enough, that the “rich” just aren’t paying their fair share. To this moronic assertion I will point out that even if the total wealth (not just income) of all of the people on the Forbes 400 list in the US ( it is around $1.39 trillion), was outright confiscated, we would barely close the deficit for a grand total of one year. The meme that the “rich” are to blame – or taxing them is the solution – is perhaps the most dishonest of all memes that has gained traction over the past several years.

So let’s say that you go full Marxist and confiscate it – then what? Confiscation only works once because they ain’t going to raise you another $1.39 trillion next year just so you can take it. Now you’ve killed the geese that laid the golden eggs…hope you enjoyed the pâté, ’cause when the confiscation party is over, that’s it.

Even the slowest of intellects would have to look at this and conclude that Obama’s plan is not designed to resolve a looming financial disaster and is targeted to punish the successful. It has little effect on the deficit or the unfunded liabilities and a disproportionate impact on the individual taxpayer. If it doesn’t address the problem and it hurts the individual (no matter if they are rich), one must conclude that it is designed solely to punish “the rich” and as such, is is not an economic argument – it is a class warfare, ideological one. If the economic simpletons can’t see this, they are simply blinded by ideology – this is simple math and deductive reasoning.

The other issue is inflation – there is no doubt that we are in an inflationary cycle. The only reason that we can’t actually see it is that the Federal Reserve has the printing presses running overtime to swallow it up. From the UK, Peter Twigg at the Adam Smith Institute explains why this just postpones disaster while increasing its devastation:

Inflation keeps people trapped on a perpetually moving hamster wheel and you cannot get off. Inflation constantly erodes the value of your savings and creates the illusion that you are getting wealthier because the money value of your assets is getting higher. This is illusion. If you sell your asset, your cash proceeds are soon depreciated away. It forces you to keep purchasing – to not purchase means your money loses purchasing power. This causes people to make wrong purchasing decisions, just as business people make wrong investment decisions because false pricing, including interest rates, create a distorted sense of an economy’s prospects. Whether it’s an investment property, or some consumer good, the hidden need drives you to divest your money because it has no store of value. Ironically this is good for economic growth. Buying things you don’t really need is wasteful for you when your resources are better employed in some other way.

Inflation encourages debt. If you know something is going to cost more in the future because inflation will drive up the price of your purchase then, it makes sense to buy it now. If you need a little credit to help you with your purchase, that’s ok! Inflation helps by eroding the value of the money owing on your credit contract and IF your earnings keep pace with inflation, you are the winner.

You see, this is how governments benefit. They borrow massive amounts of money to pay for schemes and promises, made by politicians to win your vote and ensure your loyalty. They pay interest on the loans they take out on your behalf and inflation erodes the value of the debt over the life of the debt. But you are the one that ultimately pays the price and this is why inflation is the ultimate corruption and abuse of the people. As I said, the government gives nothing that it does not take from you first.

For government this has been such a good scheme. Left unchecked, government has made many promises and borrowed more and more to meet those promises so that now we have reached the stage where the jig is up! Examine the UK debt situation below. You can see government has a problem which means you have problem. After all you are the one that will be left to pay.

We are not too many steps away from the situation where government defaults on its obligations to you. Unthinkable before – a realistic proposition now! Not only in the UK, but European countries, USA, China. We have all passed the point of no return.

Inflation also contributes to unhappiness and lack of wellbeing. Being trapped on the hamster wheel and having your standard of living perpetually eroding does not build confidence for the future nor does it build future, real prosperity. The sense is – enjoy the party now! At best it creates manipulated booms, doomed to failure. And the numbers don’t lie when they say ‘the jig is up!’

Inflation promotes corruption by showing people that they too can game the system. It becomes a feeding frenzy of ‘grab what you can’ whether you are in business or receiving benefits. Rent-seeking, subsidies, moral hazard, market distortion, lobbying, regulation, government license and unintended consequences are the behaviors of people playing the government game.

Increasing taxes on the “rich” is not the answer; in fact, it is not answer at all. It is pure political campaign hyperbole. The only answer is a growing economy and an expanding tax base coupled with honest spending reductions. We can’t tax our way out of debt but we can grow out of it.

It is clear that the slim majority of America who voted to continue the Obamanation will not understand this logic. Maybe it is because we have successive generations who have grown up in households where large credit card and mortgage balances with no expectation of ever paying them off is the norm. Maybe we have a under-30 demographic who never expect to be held accountable for student loan debt and they believe that as long as their cash flow allows them to make the minimum payments, a disproportionate debt load is just peachy. Maybe they have abdicated their personal responsibility by rationalizing their situation through thinking that if they couldn’t handle the debt, the credit card company wouldn’t keep sending them the cards – but a day of reckoning will eventually arrive. Even if you do manage to cash flow your way through life, the debt survives the debtor and your children or your estate will have to settle up.

The exact same fact is applicable to our true national liabilities – this debt will survive any of the current politicians and several generations of Americans…and it will come due.

Simply stated, one cannot spend more than one makes in perpetuity. That’s really the only economic truism that one needs to know to avoid and/or correct our situation.

Based on Obama’s performance, they don’t address economics at Columbia or Harvard – if they do it is only Keynesian theory and they sure don’t in liberal arts curricula but this isn’t hard. A barrista at Starbucks can understand this – even if he does have a Ph.D. in Bolshevik Poetry of the 18th Century.

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4 thoughts on “Corruptissima Republica Plurimae Leges

  1. Ha! I knew I could use this info……. (My procrastination in clothes shopping knows no bounds.) I love to shamelessly steal from you. I look like I’m wearing my Clark Kent glasses…. ;)

  2. Utah!

    Well written and explained.

    When I earned my undergrad in finance, the dean of the school of finance made sure we understood the effects of inflation on the value of currencies.

    Bastiat’s “window panes” example exemplified concisely what governments are doing and how government policies programs truly damage everyone not spcifically benefitted by individual programs.

    The programs are so numerous, consequently everyone is damaged by government !

    Which our erudite Roman emperor senator illuminated with his observation.

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