Funny Money
By Travis Baugh

Hi friends! Thought you were rid of me? Not a chance. Even though we are spending a lot more time in Texas, our hearts are still in Ellicottville. Lynn has been after me to write some more articles. I have remained quiet on several topics due to my schedule of late, but this one I cannot pass up.

The U.S. House of Representatives this week largely passed President Obama’s historic $3.6 trillion budget, by a vote of 233-196, not unexpectedly along party lines. The Senate is also expected to pass it this week, although not without the Democrats resorting to using a process which circumvents the Senate’s normal rules requiring 60 votes to prevent a filibuster. This is big news that should be pretty important to the average American, although you would have a tough time knowing that based on the mainstream media obsession with whether Michelle Obama insulted Queen Elizabeth or got along well with Carla Bruni-Sarkozy, the wife of the French President. We should all be stunned that this proposed budget has not been met with outrage by the American people.

Let’s put this in perspective. 3.6 trillion dollars. Forget about the ridiculous analogies about how far the stack of dollar bills would go (it would stretch past the moon). The interest alone on that amount is over $100 billion per year.

Where is this money going to come from? There are only two ways to finance this reckless spending spree. First, we can appropriate it from the American taxpayers. Second, we can just print more money. That’s it folks, there is no other source. So let’s look at the implications of both.

Consider this: The entire population of the U.S. is now 306 million men, women and children. $3.6 trillion represents about $12,000 each. More importantly, there are about 90.6 million taxpayers, or $40,000 each. However, as we all know, this will inevitably fall on the top quarter of that group, so you can do the math. If you are unlucky enough to be in the top 5% of earners (who pay 60% of all income taxes), get ready for this bill: $477,000 each. This is for one year folks! The Congressional Budget Office, not known as a haven of conservative thought, recently estimated that President Obama’s multi-year budget plans will produce $9.3 trillion in deficits over the next decade (over $100,000 per taxpayer), more than four times the deficits of Republican George W. Bush’s presidency. The reaction to the CBO report was swift. “This report should serve as the wake-up call this administration needs,” said House Minority Leader John Boehner, R-Ohio. “We simply cannot continue to mortgage our children and grandchildren’s future to pay for bigger and more costly government.”

Expropriating $3.6 trillion from the American taxpayers is not without more fundamental risks. Approximately half of businesses fail in the first year and 95 percent fail within five years. Although that statistic has probably worsened of late, I would assume (hope) that we will get back to normalcy at some point. But do we really think entrepreneurs who have created most of the jobs in the last twenty years are going to go through the pain and suffering of creating and nurturing a business, facing this kind of failure rate, only to have the fruits of their labors taken away by the government? Expropriation in taxation means saying goodbye to our primary source of jobs.

Printing more money might seem like an easy answer, but it has its own set of serious setbacks. Money is just like any other commodity: the more there is, the less it is worth. Many people are too young to remember the hyper-inflationary environment we had in the late seventies under the Carter Administration. I remember it well: my first mortgage was during those times and it had an interest rate of 13%. There have been many examples of economies whose currencies have been wrecked by fiscal policies run amok Those people The point is, if we print more money to cover this spending spree, the value of the dollar will likely drop precipitously. The dollar has already dropped as a result of the financial crisis. The dollar logged its biggest daily fall against a basket of currencies in more than two decades last month after the U.S. Federal Reserve said it would buy long-term Treasuries. See New York Board of Trade dollar index (value of the US Dollar in terms of a basket of six major foreign currencies) below:

Bank of China Governor Zhou Xiaochuan had called for a replacement of the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund. Initially, our clueless Secretary of Treasury Timothy Geithner (you remember him- the guy who forgot to pay $40,000 of taxes due on consulting income he forgot to report) was quoted as saying the administration would be open to discussing such an idea. After the dollar plunged further in reaction to this comment, President Obama corrected him, saying investors considered the United States “the strongest economy in the world with the most stable political system in the world.” The reason any of this is important is the fact that the Chinese government currently holds over $1 trillion of US Treasury Notes (i.e. our debts). What do you think will happen when the Chinese and other people around the world start trading in their dollars for a more stable currency? Our money won’t be worth the paper it is printed on. Anyone on a fixed income is going to be in a lot of trouble. No more low prices at Wal-Mart or anywhere else.

I don’t know about you folks, but when I am having trouble making ends meet, I don’t recklessly increase my spending. The budget that President Obama has proposed has some noble ambitions: universal healthcare, global warming, education initiatives and middle class tax cuts. But the simple truth is that we can’t afford to do all of this. What do we do? If you agree with me, I implore you to join me in voicing opposition to this insane budget proposal. Contact our senators and congressman (Sen. Charles Schumer 202-224-6542; Sen. Kirsten Gillibrand 202-224-4451; Rep. Eric Massa 202-225-3161). We may end up with this mortgage on our children’s and grandchildren’s futures anyway, but at least we will know that we tried. One more thing: there is an email making the rounds on the internet requesting that everyone send a tea bag to the White House in protest on April 15th. Although I am not certain of the legalities of recommending such “conspiracies”, I am pretty sure it is not illegal for me to give you the address: The White House, 1600 Pennsylvania Avenue, NW, Washington, DC 20500. (you can email me at travis@travisbaugh.com)