Stop the Insanity

by | Nov 21, 2008 | Cash Flow, Weekly Column | 2 comments

insanity.jpgOne definition of “insanity” is doing the same thing over and over, expecting different results each time. If we want to right America’s economic ship as quickly as possible, we’ve got to stop the insanity of thinking we can borrow and spend our way to prosperity.

This insanity exists at all levels of the economy. It’s embraced by governments, by companies, and by individuals. It is systemic and it is lethal. We are currently paying the price for decades of living on more than we earn while watching our debts mount ever higher. The bell has finally tolled.

There are many solutions to what has become a complex problem. The biggest solution is that we must stop borrowing for non-income producing expenditures. That means everyone, including individuals, corporations, and governments.

I am sure of one thing: that everyday Americans and the free markets are imminently capable of sorting things out and getting our economy back on track. That does not scare me. What scares me is the old line, “I’m from the government and I’m here to help you.”

What is causing me to lose sleep is the unprecedented “socialismization” of America we are witnessing. It appears the old administration, the new administration, and the Congress have all decided the best way out of this mess is to borrow more, spend more, adopt the European economic model, and increases taxes on the rich. This is a recipe for the destruction of wealth and economic viability. In its place will be years of stagflation, if not a depression.

Being wealthy is quickly becoming un-American. In our recent election, “the rich” were vilified. In fact, it isn’t even politically correct to want to aspire to be rich anymore, as articulated by former President Bill Clinton, who said the American Dream is to become middle class.

We’ve recently heard every politician running for president malign the “greedy fat cats” on Wall Street. Indeed, greedy-fat-cat.jpgthere is no doubt that greedy, get-mine-at-all-costs attitudes and behaviors exist on Wall Street and deserve maligning. But listening to the media and the pundits, one would go away with the impression that every corporate executive and corporation is greedy, if not downright evil. My experience is quite different. I find most corporate executives to be hardworking people with integrity, who bring those qualities to the companies they work for.

But there is another type of greed that we haven’t heard much about from the media or the politicians. It’s just as bad as corporate greed, maybe even worse, and it’s growing exponentially in the U.S. It’s the greed of those who want to “spread the wealth around” by taking from those who have. Call it populist greed, socialistic greed, or the greed of the masses, it’s just as ugly as the “Wall Street Greed” we’ve heard so much about.

If the experiences of other countries that have tried this experiment of socialism are any indication, this solution will actually exacerbate the problem. The European economic model—let’s call it “socialism lite”—actually takes away the tools of the lower and middle class to become wealthy by making it infinitely harder to keep enough capital to reward further risk-taking.

About the only way one can ever become wealthy in a socialistic system is to be born into wealth. In America, however, 85% of millionaires are first generation, meaning it is relatively easy to accumulate wealth here.

burning-cash.jpgSpreading the wealth around may seem like an attractive short-term solution, especially to those who don’t have much. Yet in the long term, it will only hurt them by reducing their ability to become successful.

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