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The Welfare-War State’s Monetary Crises
by Jacob G. Hornberger  Yesterday, the Washington Post carried a front-page article about how President Bush, guided by his political advisor Karl Rove, have had a long-term political strategy is which they would target important electoral districts with announcements on federal aid to such districts.
The idea was akin to bribery — sending federal money into a district in the hope and expectation that the voters would be so grateful for the “free” money that they would reward Republican candidates with votes. Of course, the Democrats play this same game, as does the CIA in political campaigns in foreign countries. The sad part is that the strategy is so successful. Voters eat it up, even though they must know deep down that the money is coming from themselves or being taken from other voters around the country, compliments of the IRS. It’s a political game in which Americans do their best to plunder the wealth and savings of everyone else while at the same time doing their best to protect their own pocketbooks. At some point, however, the game gets too expensive, with expenditures and taxes getting too high. That’s when the feds start resorting to massive borrowing. That’s how Bush and his cohorts have financed their military adventurism in Iraq and Afghanistan — by borrowing the money. And no one can deny that ever since 9/11, the Bush administration has been spending money as if there were no tomorrow — on both domestic and foreign programs. As we have repeatedly pointed out here at FFF for the past several years, this out-of-control federal spending will inevitably lead to a major financial crisis. Just as a family that consistently spends more than it earns will end up in bankruptcy court, so it is with a nation. After all, don’t forget how conservatives used to brag about how they brought down the Soviet empire — by making the Soviet government spend the nation into bankruptcy. Since Americans no longer save large portions of their income (they’ve been taught that consumption is the key to wealth), U.S. officials have increasingly turned to foreigners to finance their spending binge, especially the Chinese communists, who now hold an enormous amount of U.S. securities in their reserves (and who recently threatened to dump their entire holdings onto the market). Last week Americans got a taste of the price of domestic socialism and foreign imperialism, when financial markets began gyrating wildly because of an enormous worldwide credit squeeze. Something big and scary in the banking system was obviously happening because not only did the Federal Reserve step in to provide emergency liquidity to the banking system, so did several foreign central banks. Then, the Fed suddenly lowered the discount rate by half-a-percent, violating the Fed’s recently announced policy of combating inflation. It had to happen. Given the Bush administration’s profligacy for the past several years, something had to give. A government, like a family, cannot continue to spend more than it takes in. Ultimately, the Fed buckled by accommodating the ever-increasing debt — and in my opinion, will continue to do so to accommodate the administration’s pro-socialism, pro-empire spending policies. That means more debasement of the dollar, as I have long been predicting. Welcome to Welfare-Warfare State 101. And my hunch is that we ain’t seen nothing yet! Prepare yourself for some precarious financial times ahead, as the welfare-warfare expenditures continue to soar out of control. As the dollar crisis magnifies over the next couple of years, you can thank the federal official or your congressman the next time he’s in your community talking about “rebuilding” Iraq or announcing the latest “free” federal grant for your community. Mr. Hornberger is founder and president of The Future of Freedom Foundation.
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