Liberty Maven

So many people are blinded by the Iraq war and the fear of terrorism that they miss the biggest issue in the 2008 election. It’s the economy, stupid! This was the rallying cry and strategy of the Clinton (Bill, not Hillary) campaign in 1992. Many argue that it helped him win the election. The current administration and many of the front-running (according to national polls) Presidential candidates seem to have adopted a strategy of, “It’s the war, stupid!” Or to put it more accurately, “It’s the fear, stupid!”.

Perhaps they have the fear part right, but the reason we should be afraid is not terrorism or Iran obtaining nukes. It is our ’spending us into oblivion’ economic policy. Our national debt is now over $9 trillion dollars and growing. The value of the dollar is now worth 4 cents when comparing it to the value of the dollar in 1913, the year the Federal Reserve was created. That is a 96% drop!

There are 4 ways the federal government can fill their coffers: raising taxes, printing more money, borrowing it from other countries, or reducing costs. All 4 options have poor effects on the general populace. No one likes to pay higher taxes and politicians are loathe to push a policy to raise taxes, unless it is raising taxes on the richest tax payers.

With the size of the federal government growing immensely buoyed by the fear of terrorism, Iran building nukes, and the growing demand for the government to do something about global warming it is equally unlikely for policy makers to reduce costs.

By default, the answer becomes borrowing money from other countries and printing what we can’t borrow. These actions are seen as lesser evils because the people are shielded from the immediate effects. After all everyone knows that printing more money is “free”, and isn’t it a good idea to borrow money? Everyone uses credit.

Not so fast.

As more money is printed, it dilutes the money supply which devalues the dollar. This means that a dollar spent today will buy you something that cost only 4 cents in 1913. This also strangles the middle class and poor people because by the time the printed money trickles down to them prices have increased. It really is a hidden tax.

Why is doing something about this devaluation important? After all, it is just culturally acceptable that each year prices increase for certain goods. Why should this dollar devaluation invoke as much fear as the threat of terrorism? Other countries are currently holding 25% ($2.3 Trillion) of the United States debt. As the dollar value decreases these countries are going to be less willing to lend us money. They are acting in their own self interest as any investor should. The dollar is quickly becoming a very poor investment.

When other countries refuse to lend us money what will happen? This is difficult to predict precisely, but an era like that of the financial crisis of the 1970’s is probably the minimum. A complete collapse of the United States economy would be the maximum effect. How secure would our country be from terrorism then?

So the final question becomes “what should we fear the most”? Certainly we can fear an economic collapse as well as the threat of terrorism at the same time and act accordingly. This means focusing our attention on reducing the size and scope of government in order to protect ourselves economically while properly targeting terrorism in a fiscally responsible way.

This means no nation building in Iraq due to the extreme cost of both life and money. This means working our way back to a sound currency. This means directly targeting those who attacked us on September 11th rather than spreading fear and fabricated excuses for attacking other countries.

It’s the fear, stupid!, but let us react accordingly.