Looking into the Future…

What will happen to the American people and their country in the next decade or so? The future is not very “bright” if we continue on the way that we are now going. We now have a national debt equal to about our yearly GNP. Our health care costs are by far the world’s highest and are expected to reach $3 trillion dollars ($3,000.000,000,000) by 2016. Because of our ultra high health care costs, Medicare is expected to be in “trouble” by about that date and will have to start drawing from “general revenues” when it does. Social Security on the other hand is apparently OK until about 2036 or there about… I believe we will eventually have to make “adjustments” in what Social Security pays out. Most likely it will become more like a “welfare” program, perhaps paying a “flat rate”.

We could of course reduce our health care costs considerably by stripping the medical industry of all of its government enforced monopolies that it now enjoys. Doing the same to all the rest of the professions and licensed occupations would greatly reduce the costs incurred when people have to deal with these professions and businesses. At the least we could reduce our health care costs by a trillion dollars a year, just by elimination of waste, fraud, and “overbilling”. There is also a lot of “waste” in the private health insurance industry. All of this contributes to the excessively high costs we experience. We also do a great deal of “rationing” as it is, but this is generally hidden from public view. The way it is done is through insurance companies refusing to pay for services.

When I started working in 1959, I was paid $1 an hour. Some of the things that I could buy then for a dime are now a dollar here in 2014, an indication of the fall in value of the US dollar to one tenth of its original value. For example, the Hershey candy bar that sold for a dime back then costs a dollar today. Gasoline was around $.27. Currently it is $3.70 today. Today’s minimum wage converted back to 1959 levels would be about $.75, not the dollar that I was actually paid back then. And here is where the problem is: Wages are not 10 times what they were back then. The proposed $10 minimum wage would bring us up to what I earned per hour back in 1959, even though the government has been downplaying the true rate of inflation. And this is “where” one of our problems is.

Effectively the average American is falling behind so far as the value of the dollar is concerned here. This also affects government revenues. Since people are in effect earning only about three fourths (3/4ths) of what they earned 55 years ago, our total federal revenue, including the money that pays for Social Security and Medicare is less by 25% of what we would have today had wages stayed up with the level of inflation… This is one reason “why” we can no longer afford to do what we used to be able to.

How did this happen? In 1981 the federal minimum wage was $3.35 an hour when Ronald Reagan was sworn in as President of the United States of America. It was still $3.35 an hour when he left office in January of 1989. However, the value of the dollar was now only three fourths at the best of what it had been in 1981. Effectively “labor” became progressively cheaper with time.  Ronald Reagan also set into operation the destruction of organized labor. Union membership fell. Business profits on the other hand were up. It was a good time to be an employer. Unemployment was high enough that you could get all the workers you wanted and they were glad to work for $3.35. Unfortunately their “buying power” had fallen over the decade and in turn they were paying less in taxes. Reagan made up the “difference” by borrowing money, increasing the national debt. President George Bush tried to govern without raising taxes or the minimum wage, but he eventually had to give in on both. Not that it did a lot of good.

The problem is really simple enough.  A country, like an individual, cannot continue to spend more than what it gets in revenue. Additionally, when a country imports goods, it also has to balance these out with also exporting an equal value of goods or whatever in return. Just as none of us for very long can spend more money than what we receive. Unfortunately, we haven’t been doing that.  We import about half a trillion dollars worth “more” than what we export. Long term, countries that do that go “bankrupt” like Greece has done.  We are of course a lot larger a country with a much bigger economy, so it takes longer, but in the long run, the results will still be the same. That half a trillion dollars trade imbalance is really effectively an export of jobs as someone still has to make the things that we buy. Depending upon the value of the job lost, we have lost between five and ten million jobs. Note that these are mostly “production” jobs, although we also do export some “services” in the form of computer software, medical technology, and so forth. Just not enough to make up for the value of what we import. We also import goods made by American owned businesses who exploit the low cost labor available in these low wage countries. However these businesses have learned that they can avoid paying taxes on their earnings as long as they don’t bring the money back here to the USA.*

* This is easy to solve.  Stop taxing business. Businesses only pass the tax on to the consumer anyway. As we only get about 1/8th of our current revenues from taxing business, it really doesn’t make sense to continue to do these non-productive acts.

The basic concept of free trade as developed back in the 18th Century applied to trade between European countries with relatively similar labor costs and living standards. When trade takes place between countries with large differences in labor costs and living standards, the consequence is that there is a flow of wealth from the more wealthy to the less wealthy. We have in effect created tens of millions of jobs outside the US, but at the cost of destroying jobs here in the US. Not as many as we created, of course, since the cost of creating a job here is far higher than the cost of creating a job elsewhere. Nor can we survive as a “service economy” since most services are not “exportable” as goods are. And while Russia can do quite well exporting oil and gas, this is not an option for us.*

*We may be able to exploit the trillions of cubic feet of natural gas now trapped in the form of methane hydrates, an energy source so large that it could met our needs for a very long time. Unlike coal and oil, methane (natural gas) is much “cleaner” and also releases less carbon into the atmosphere when burned than does coal and petroleum. There are “risks” in using this source of almost boundless energy, but it is there waiting to be tapped. Compressed natural gas automobiles are already on the market, and it is possible to convert natural gas to the liquid fuel methanol if so desired. Additionally natural gas is the source of much of the fertilizer we use in growing food today…

 

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About muskegonlibertarian

77 year old retired owner of a security guard agency. Member of the Libertarian Party.
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