Dear Mr. President,
I am not the sharpest arrow in the quiver, but I’d like to put the “Budget Deal” y’all are so proud of, in a prospective the average American can understand…even those in Washington. To do so I asked Mr. Reed Donelli, a sophisticated investor who knows how to speak in layman’s terms, to give me a hand. He sums up all the shenanigans that are going on in Washington these days with a simple analogous to your budget deal so ordinary households can get the picture:
2011 Federal Budget “Deal” in actual government-speak that gets lost in translation
Federal Budget: $ 3,820,000,000,000 (3.82 Trillion)
Income: $ 2,170,000,000,000 (2.17 Trillion)New Debt: $ 1,650,000,000,000 (1.65 Trillion)
Amount Cut: $ 38,500,000,000 ( 38.5 Billion) – about 1% of the total budget.
National Debt Total: $ 14,271,000,000,000 before this year’s budget.
Harry Reid is calling this an “historic amount“. The President said it is an “historic deal”. John Boehner simply said, “We’ve come to an agreement”.
Let’s remove eight zeroes from those numbers and pretend this is a household budget for the fictitious Jones family:
Amount of money the “Jones’ family spent this Year: $ 38,200
Total income for the “Jones’ family this Year: $ 21,700
Amount of new debt added to the credit card this Year: $ 16,500
Outstanding balance on the credit card: $142,710
New outstanding balance on credit card: $159,210
So last week, the Jones’ sat down at the kitchen table and agreed to cut $385 from their annual budget. Would anyone in their right mind call this an historic amount??!! With Mr. Donelli’s help, this charade is no longer complicated and hopefully been made understandable to everyone.
As I mentioned in my first letter, your administration seems hell-bent on molding this country into a Western European style socialist democracy, despite the warnings from those trapped inside such systems.
The financial crisis that hit the U.S. and the fallout has made its way across the Atlantic to Europe and is sparking an even greater credit crisis with its sights set on Central and Eastern Europe as well. In this part of the world we are not talking about sub-prime assets or toxic sophisticated financial instruments that are causing headaches across the region. Instead, the more traditional problem of currency instability has reared its head. The solution should come from the countries of Western Europe-the EU, but that’s not going to be an easy task.
IMF chief, Dominque Strauss-Kahn at the European Banking Congress in Germany, states that Europe is facing its greatest economic challenges since World War II. The European Union faces low growth, high unemployment, and growing economic situations whereby countries are growing apart, and a banking crisis unparalleled in modern times. It is threatening Europe’s prosperity, social cohesion, and even the very belief in democracy itself.
“Socialism is a misconception whereby labor market institutions tend to reward privileged insiders at the expense of excluded outsiders,” said Strauss-Kahn. “As a result, a large portion of the population is distanced from the labor market and marginalized from society”
Mr. President, as an FYI, the concept of European style socialism is eerily similar to communism which attempts to reduce differentials in economic development and human well-being of its citizenry, to level the playing field for its social classes. The problems caused by any socialistic system, by any name you want to call it, has not done anything but hurt those it was designed to help in the countries in which it was employed, cancelling any chance for progress and growth, paving the way to less freedom, innovation, and prosperity, as the tax base eventually runs out of money. Today in the old Iron Curtain countries there is even a growing movement among some to returning to the past, when everyone suffered equally under totalitarianism.
Even before the start of the global crisis brought on by Ireland, Iceland and Greece, which has affected the global banking institutions, Europe’s financial sector, like those in the U.S., have focused more on “sophisticated innovation” ( i.e. Keynesian economics) rather than on tried and proven factors that drive economic growth. One problem is that small-and medium-sized businesses have difficulty obtaining financing that is needed for expansion, new business development, and are the first to be cut off when pressures arise from the government using all the available finances.
Many of the citizens of Western Europe understand Europe suffers from imbalances within some countries that run persistent trade surpluses while others run persistent trade deficits. They need to focus more on domestic consumption instead of exports. Additionally, too many viewing the problem believe Europe is “fighting a losing demographic battle” as it stares into the face of a lethargic labor force trapped in a unionized structure unable to cope with change, and assured of cradle-to-grave security.
As you are aware Mr. President, an urgent call from Hungary for a large bailout for the newer Eastern European members was bluntly rejected by Europe’s strongest economy, Germany, and received little support from other countries. “The situation is the same for all Central and Eastern European states” Mrs. Merkel told reporters. This followed a warning by Prime Minister Ferenc Gyurcsany of Hungary who stated, “We should not allow that a new Iron Curtain should be set up and divide Europe”, but the EU looks to remain resolute (From NY Times).
The traditional concept of “solidarity” is being undermined by protectionist pressures in some Western European countries and the challenge of maintaining a common currency, the Euro, for a region that has diverse economic needs. The economic problems in some newer members that once were part of the Soviet bloc will only makes matters worse.
German newspaper Süddeutsche Zeitung stated, “We always said you can’t really have a currency union without a political union, and we don’t have one. There is no joint fiscal policy, no joint tax policy, and no joint policy on which industries to subsidize or not. None of the leaders is strong enough to pull the others out of the mud.” (NY Times) German leaders are now faced with the unpalatable prospect of having to put German money at risk to bail out less responsible partners (Ireland, Spain, Italy, Greece, and others in Eastern and Central Europe) that do not adhere to European fiscal rules. It’s also deadly for Washington, which wants the European Union to promote common interests in places like Afghanistan and the Middle East with financial and military help.
Governments of the countries of the European Union have already invested a total of $380 billion in bank recapitalization in the troubled countries and put up $3.17 trillion to guarantee banks’ loans to try and get credit moving again. Additionally, the European Bank of Reconstruction and Development said they would provide $31.1 billion to support Eastern European nations, but much more will be needed. In Europe as in the US, the troubles are due to excessive debt and that the electorates have allowed such excessive debt levels to accumulate. Mr. President, no country can borrow its way out of debt.
As Europe is beginning to take a “tough love attitude” about their financial crisis, it stands in sharp contrast to Washington’s announcement regarding America’s budget woes last week that will send the United States more deeply into debt.
Mr. President, your leadership’s effort to redistribute income, nationalize health care, reduce energy production, print more money inflating the value of the dollar, promote the false concept of “global warming” with job-killing rhetoric, engineering class warfare against your detractors, and wanting even more federal spending on failed policies, is not befitting the leader of the free world.
Following his service in the Marine Corps Ed Mattson built a diverse career in business in both sales/marketing and management. He is a medical research specialist and published author. His latest book is Down on Main Street: Searching for American Exceptionalism
Ed is currently Development Director of the National Guard Bureau of International Affairs-State Partnership Program, Fundraising Coordinator for the Warrior2Citizen Project, and Managing Partner of Center-Point Consultants in North Carolina.
Mr. Mattson is a noted speaker and has addressed more than 3000 audiences in 42 states and 5 foreign countries. He has been awarded the Order of the Sword by American Cancer Society, is a Rotarian Paul Harris Fellow and appeared on more than 15 radio and television talk-shows.