WHY DEMOCRACIES FAIL
Source: David Stockman
Democracies are founded on the principle that supreme political power is vested in the public who elects people to represent the public's interests in the functioning of the government. While that is how democracies begin, they evolve into something else. Those who run for national public office quickly discover they must raise huge sums of money for publicity to get elected. They may receive small donations from family, friends and members of the public, but the "serious money" always comes from special interest groups, lobbyists, and businesses who will have "favors" to ask post election.
Current office holders need to get re-elected. They look to their big donor group, again and again. That means having to vote for subsidies, handouts, bailouts, favorable legislation and other bills that pass tax revenues collected from "the people" to their big donor base. Cynics argue this proves that political candidates are "bought and paid for" by big money interests. Of course, they are right. Rather than do what is in the best interests of their voting constituents, elected officials become lackeys for special interest groups - with a few crumbs thrown to "the people."
The US Congress recently passed a "Continuing Budget Resolution." This bill was rushed through Congress to avoid a "government shutdown." That would happen if it runs out of cash and is thwarted from borrowing more by the current limit (that always gets raised). The recent "crisis" followed Congress' abject failure to enact a budget for the 2025 fiscal year - that began October 1, 2024, more than three months ago. That is, Congress was beset with woe having failed to fulfill its primary constitutional duty of enacting annual appropriation bills.
The photo above is the 1,546 page Continuing Resolution passed to keep the government running while the representatives argue about the real budget bills for the already pending fiscal year. What is the chance that even one member of Congress read the resolution before casting a vote in favor of it? Or that President Biden did so before signing it? Former budget advisor to President Reagan, David Stockman, points out in his daily missive Contra Corner that a one-page resolution simply continuing last year's spending was all that was needed. Why was that not done?
When evaluating every government action, you should wonder "Cui bono?" - Who benefits? Congress approved this leviathan bill larded with so much pork and waste that the public, if it knew what was included, would be outraged and demand that Congressional heads roll. But they remain ignorant of what was included because the politicians' handmaidens, the main stream media, faithfully refuse to inform them.
Mr. Stockman combed through the resolution so you do not have to. Here are just a few of the many dollops of lard America's representatives saw fit to include - and impose the costs on taxpayers across the land:
$10 million for a museum dedicated to the history of candy.$5 million for a study on the mating habits of frogs.$3 million for a statute of a local politician in a small town.$2 million for the study of luxury golf course renovations.$1.5 million for the research project on the effects of social media on cats.$1 million for a new swimming pool in an affluent neighborhood.$800k for a festival celebrating a local fruit variety.
None of it was necessary to keep government operations running pending the drafting of a new budget. But special interest groups, lobbyists and businesses succeeded in getting their elected officials to include these and countless other frivolous expenses and favors in the resolution. They all agreed to support the resolution based on the implicit agreement that, "I'll support your boondoggle if you'll support mine." These examples, coupled with endless warfare/welfare costs, explain how the US has managed to run up $36 trillion in debt over the years.
Voters may believe that their nation is in its current precarious fiscal position because it has been governed by morons for at least the last forty years. That would be a mistake. Your elected representatives knew exactly what they were doing. They were knowingly and willingly advancing their own careers by helping make the richest segment of the population, their big donors, ever richer - and enriching themselves at the same time. The only group whose concerns were consistently overlooked were the millions of workers who pay the taxes that find their way into the pockets of the elite political insiders and their crony friends and supporters.
Argentina was formerly one of the world's richest nations. It fell on very hard times after its socialist government ran budget deficits for decades, papered over with printed money, that caused price inflation to soar to astronomical levels, beggaring the working classes. The nation's average annual inflation rate between 1944 and 2024 was 190%! Javier Milei succeeded in getting elected promising to take a "chainsaw" to government. The voting public was in such desperate straits that it decided to take a chance on him. He was elected one year ago. Since then, he eliminated numerous government departments, cut government employment by over 30,000, and in response to endless demands from special interests with their hands out for government funding, repeatedly responded, "No hay plata!" (There is no money!). He declared that a balanced budget was "non-negotiable." Result? In just one-year he produced the country's first balanced budget in 123 years! Argentina is a rare example of the people peacefully retaking control of their government from entrenched special interest groups. It only happened because conditions had become so intolerable that voters realized a dramatic change was necessary.
Many nations around the world find themselves well down the same road to perdition as Argentina but have refused to come to grips with the severity of their problems. The US Treasury needs to sell, on average, $10 billion of bonds every day to keep the government's lights on. It has hundreds of billions of dollars of bonds maturing each quarter that must be rolled over (i.e., it must sell new bonds to raise money to pay off maturing bonds). It also has to sell many hundreds of billions of dollars of additional bonds to cover the annual budget deficits created by Congress' ongoing act of spending far more than the Treasury receives in revenues.
The Federal Reserve Bank has backed itself into a corner because high interest rates cause the Treasury to incur ever higher interest payments to bond holders. While that will eventually bankrupt the nation, low rates will re-stimulate price inflation that will create a public furor. Thus, the Fed finds itself in a rapidly warming cauldron of its own making by continuing with the fiction that the twelve members of its Open Market Committee have the knowledge, business experience, insights and ability to micro-manage the $29 trillion US economy, consisting of millions of diverse businesses, from behind their mahogany desks in the Eccles Building in Washington. Recall that Jerome Powell insisted that rising inflation in 2022 was "transitory" and nothing to be alarmed about. That was followed by his rush to raise rates from near zero to 5% when proven wrong. That was followed by a rush to cut rates to prevent a recession - all proving beyond a shadow of a doubt that he and the Fed's hundreds of Ph.D economists do not have a clue about how the US economy actually works.
ELON TO THE RESCUE?
Will Elon Musk and Vivek Ramaswamy be able to cut $2 trillion in annual government expenses as promised? Of course not. Musk has already walked-back that claim and now proposes to cut expenses by half as much. However, they will be fought tooth and nail by every member of Congress whose business is to spend "other people's money" to satisfy the demands of their big donor political supporters. They will also be fought by the army of lobbyists who exist to pressure Congress to spend ever more, not less. They will be fought by the new President who has grand ambitions and a desire to expand the reach of government, not shrink it. And they will be fought by the vast, unelected administrative state that will vigorously battle to protect its powers and perks. All the while, the insider political-elite and main stream media will join hands trying to convince the public that requiring the government to live within its means would be a disaster. They will trot out statistics that purport to show the "benefits" of ever-larger government spending.
Their Exhibit A will be the contrived statistic called GDP. Politicians and the media have conditioned the public to believe that if GDP is rising, everything is getting better. It is calculated using the formula: C + G + I + (E-I) where C is "consumption," G is government spending, I is (business) investment and E-I is the net of exports minus imports. Those pushing for bigger government expenditures argue that when government spending soars, GDP soars. That is mathematically true per the formula, but egregiously misleading. Consider what the government does with the money. It spends over $1 trillion a year (20% of revenues) to pay the interest on its existing debts, much of which is owned by foreign investors, businesses and central banks. This refutes economist Paul Krugman's famous falsehood that we needn't worry about the national debt because "we owe it to ourselves". This $1 trillion pays just the interest on borrowed money that has long since been spent by former Congresses. Elon will find no way to reduce this expense, short of defaulting on it.
IGNORING REALITY LEADS TO CATASTROPHE
The long-suffering workers of the world who strive to feed, shelter, clothe their families and save for retirement, have to deal with zealots who have captured the ear of politicians and the media. One such group is "Just Stop Oil." They demand that the world immediately abandon the use of fossil fuels. Not next year - today! A quick thought experiment is helpful to see what would happen if they succeeded in their mission after throwing tomato soup on cherished paintings, interfering with traffic flow, gluing themselves to sidewalks and building interiors, and spray painting Charles Darwin's grave at Westminster Abbey.
The vast bulk of all agricultural products are planted, cultivated, harvested and brought to market using fossil-fueled vehicles. Indeed, fossil fuels' biggest contribution to agriculture is in the production of nitrogen based fertilizers that have created the agricultural bounty that feeds the world's rapidly growing population. The abrupt cessation of the use of fossil fuels would cause a world-wide famine of biblical proportions. Billions of people would starve.
Below is a chart showing the percentage of energy generated in the US by different sources. 83% of all power comes from the use of fossil fuels. Should that be stopped, the nation would shudder to a stop. Say goodbye to lighting, heating, cooling, refrigeration, and the use of all electronic devices including the computer or phone on which you are reading this. (Note also that 60% of "renewable energy" sources require the burning of biomass that produces CO2.)
Consumer and industrial goods are produced after diesel-fueled vehicles mine metal ores and minerals, transport them to refiners, then to factories, then to warehouses, distribution centers and retailers, then to the ultimate consumer, be that a business or a family. Huge quantities of goods consumed in the US are shipped from overseas using petroleum fueled shipping. If there were no fossil fuels used, the world would experience empty shelves in every grocery and retail store next week. In their zeal to promote their utopian vision, the JSO crowd utterly ignores how modern society works and manages to keep 8.1 billion people fed, clothed, and sheltered.
Are fossil fuels the evil portrayed by climate change enthusiasts? Consider what supported the stunning growth of the world's food and goods production depicted in the next chart that dates back 2000 years. It was fossil fuels. Their use rapidly lifted mankind into the modern world. Diffuse and intermittent energy sources such as sunlight and wind can not replace the concentrated energy found in fossil and nuclear fuels for the production of electricity that underlays the modern world. Should cleaner energy sources be sought? Of course, but to abruptly abandon fossil fuels before those new sources of energy are in place would be catastrophic. The result would be this graph - turned upside down.
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IS THERE A CLIMATE CRISIS?
Members of Congress and the main stream media are not climate scientists. All they do is selectively regurgitate projections and studies that purport to support climate alarmism. One thing is clear. Climate concerns have driven the expenditure of trillions of dollars. That money is unavailable to meet other pressing issues such as enhancing the electrical supply and delivery grid and feeding, housing, providing health care and education to the many developed nation's citizens and the tens of millions of migrants flooding into those nations.
Politicians are always eager to jump onto any popular bandwagon to gain attention. With regard to the climate they promise to reduce CO2 emissions to "net zero" by one date or another, usually 2030 - a mere five years from now. Climate models have proven to be uncommonly inaccurate because they must factor in an almost infinite number of future "inputs" many of which will have wildly varying or little impact on the future climate.
We recall the 1970's when some scientists were raising the alarm that the world was headed into a new ice age due to perceived global cooling. If trillions of dollars had been spent to "fix" that problem, that money would have been utterly wasted and the actions taken might have, instead, had terrible unforeseen adverse consequences. We read current theories of shooting vast quantities of reflective material into the atmosphere to reflect sunlight in an effort to keep the earth's temperature from rising. Imagine if warming is not actually a problem. Such action might led to massive and irreversible global cooling and there would be no means to undo that "solution."
David Stockman recently wrote about the climate issue. He too is not a climate scientist but he provides some interesting data that raise questions about claims that humans are rapidly driving the earth toward a disaster. This chart reports the average near-surface temperature of the northern hemisphere for the last 11,000 years.
The "begin" date was chosen because that was the low point of the last ice age. Following that deep freeze, the northern hemisphere warmed rapidly, allowing it to again be habitable by humans. The data reveal that for many thousands of years, there were huge temperature variations, all long before fossil fuels were used. It is abundantly clear that factors other than fossil fuel use caused those changes. Are fossil fuels without any downside? Not likely, but the extent of their impact is unknown. It is not scientific to say that temperatures have risen during fossil fuel's use, therefore their use was the cause of the rise. We are constantly hectored by those in the media and political classes to "Follow the science!" However, the first rule of science is: "Correlation does not prove causation."
The next argument is that the burning of fossil fuels produces CO2 gas and CO2 increases the world's temperature. It is unquestionably true that burning fossil fuels produces CO2, but that alone proves nothing. The next chart shows historic CO2 levels on earth (black line) over hundreds of millions of years compared to global temperatures (blue line). These levels have changed dramatically - all without any input of mankind's use of fossil fuels. And the changes are clearly not in tandem. During the last half of the Mesozoic period, temperatures rose while CO2 levels fell dramatically.
This raises an intriguing issue. Are warming temperatures the result of increased CO2 levels? Or do warming periods cause increases in CO2 levels? Stockman suggests that the current climate alarmism is simply a tool to vastly expand political power over the population by claiming yet another purported crisis that results in vastly enhanced government power and a commensurate reduction in the rights of the people. Who would have imagined twenty-five years ago that your government would try to dictate to you what kind of car you should drive (EVs), and what kind of furnace, range, and hot water heater you must install (electric), all while the electric grid is near max-capacity and threatening to fail. He writes,
The Climate Crisis narrative is the kind of ritualized policy mantra that has been concocted over and again by the political class and the permanent nomenklatura of the modern state—professors, think tankers, lobbyists, career apparatchiks, officialdom—in order to gather and exercise state power. Indeed, fabrication of false problems and threats that purportedly can only be solved by heavy-handed state intervention has become the modus operandi of a political class that has usurped near complete control of modern democracy.
Those supporting a "climate crisis" argue that proof can be found in the dramatic rise in property damage inflicted by hurricanes. It is true that storm-caused property damage in Florida has risen dramatically over time. What is rarely mentioned, is why. Florida has been rapidly built up over the decades. When a storm blows in, it destroys more property because there is more property to destroy.
Many argue that the recent devastating Los Angeles fires are proof of climate change. That requires one to consider what contributed to that disaster. First, they began as grass fires that quickly raged out of control due to the Santa Ana winds that have periodically blown in from the northeast for thousands of years. Thus, those winds were a "known" risk. Second, California has historically experienced alternating wet and dry years. That too was a "known" risk. Third, during dry years, ground vegetation rapidly dries out and becomes highly combustible. That too was a "known" risk. Fourth, it takes vast quantities of water to put out raging grass and timber fires. That too was a "known" risk. Fifth, wildfires have burned through California for millennia. That too was a "known" risk.
So, what did the State of California and county of Los Angeles do to ready themselves for a major wildfire with all of these known risks? They did nothing. They allowed vast quantities of dry brush to accumulate and a water reservoir to be emptied, resulting in fire hydrants running out of water to fight the fires. The devastation can be fairly laid in the laps of government officials who were too occupied with other matters to concern themselves with fire risk. Who will end up paying the price for their incompetence? Who pays for all government failures? Taxpayers.
Recall your secondary school biology class regarding the life cycle of plants and animals. Plants, the basis of all life on earth, take in CO2, nutrients, water and sunlight to grow. They thoughtfully give off vast quantities of oxygen that, together with the plants themselves, sustain all animal life on earth. One assumes that a CO2 poor environment would negatively affect plant life, and therefore all animal life, and that a CO2 rich environment would enhance plant growth benefiting animal life with more oxygen and plant food. What is the "right amount" of CO2 for the earth? No one knows but many people feel free to voice their uninformed opinions. Is the climate changing? Undoubtedly. It is always changing. Is it changing because of man's use of fossil fuels? That is issue remains unsettled.
Source: Shutterstock
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