Paul Ryan and His Roadmap for America’s Future

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Markets in the US were closed yesterday. In the rest of the world, the noise continued.

European investors still have their eyes on Greece…a welcome diversion from their own sins and errors. More on this later in the week…

Asian investors still have their eyes on China. The powers-that-be in the Middle Kingdom seem to have begun tightening credit… If it continues, China’s bubble will burst… Perhaps the most remarkable thing about this is that no one seems to know who the powers-that-be are. Ben Bernanke may be a fool. At least he’s predictable. China’s real leaders are unknown…and unpredictable. More on that sometime in the future too…

But for today…let’s focus on the good news. Well, our first item is good news if you were fool enough to follow our “Trade of the Decade.”

We suggested that buying Japanese stocks could be the best investment you can make in the next 10 years. We immediately heard from dozens of friends and enemies. The friends were concerned because they thought we’d made a bad bet. Enemies were delighted that we’d lost our grip completely. After all, they remarked, who in his right mind would buy Japanese stocks?

Well hardee, har, har… Guess what market is leading the world so far this year? That’s right… Japan. Later, colleague Alex Green explains why Japan hasn’t been such a bad bet after all.

We’re six weeks into the new decade, we’ll claim victory now…and change the subject. Who knows what will happen in the next 514 weeks.

Meanwhile, here comes more good news: the US federal government may not go broke after all. Rep. Paul Ryan, who hails from the sovereign state of Wisconsin, has come up with a solution.

Before we get to the solution, however, let us take a minute to describe the problem. In short, the feds are spending too much money they don’t have. The Obama administration says it doesn’t see any balanced budgets anywhere in America’s future. The Congressional Budget Office, a far-sighted group if ever there was one, looks all the way to 2080. It sees no hint of fiscal equilibrium either. Just deficits and debt. By its estimate the US budget grows to 50% of GDP and the official US debt rises to 7 times GDP.

This exercise by the CBO is not a forecast. It is merely an extrapolation. If present trends continue, that is where we would end up by the time your author is 131 years old. Of course, there is no way present trends could continue that long. Even at 2 times GDP…debt cannot be sustained. It would cost more than half of all America’s tax revenues to the pay the interest on such a large debt. Already, depending on how things go in the economy, as much as 30% of the money borrowed by the US could soon be necessary just to pay the cost of past borrowing.

Fortunately, Mr. Ryan has a solution. He calls it a “Roadmap for America’s Future.” After studying it for all of 30 seconds, we’re convinced that Mr. Ryan should get a GPS. His roadmap is a series of squiggles, dodges and twists to US tax laws…along with a few torques to the spending side too… that leads the country to a dead end. Most of his effort has been concentrated on bringing health care outlays under control. No effort is made, on the other hand, to cut military spending. Typical. Weak, limp, pusillanimous. The benefits now; the costs later. That’s why America’s residual respect for Congress is just about exhausted. The institution is incapable of correcting its own mistakes. Instead, it just makes them worse. Even with Mr. Ryan’s roadmap, America drives in the wrong direction for the next half a century. It is only sometime after 2050 that the federal budget deficits finally stop.

Any solution that doesn’t pay off until we’re all dead is no solution at all. It’s a way of avoiding a solution…which is what Congress desperately wants to do. A real solution will come. But not from Congress. Instead, it will come unbidden. And unwelcome. Like the plague.

At least, that’s our reading of history. Once the system tips out of control it stays out of control until it finally blows itself up.

It would be fairly easy to get the budget under control…that is, if there were no political system to prevent you. The US government shouldn’t be in the business of giving out drugs or regulating heart transplants. It also shouldn’t be in the business of telling the rest of the world what to do. The solution is simple: abandon the imperial agenda…let people take care of themselves, both at home and abroad…and downsize the federal government.

But that is not going to happen. We may be on the road to ruin…but too many people are enjoying the ride. We’re not going to stop any time soon. More than 40 million people on food stamps…thousands of military contractors…millions of government employees… People who want the government (other citizens) to pay for their gall bladder operations. People who pay no taxes. GM executives. AIG bondholders. University administrators. Lobbyists.

It is a wholly rational and completely foreseeable trend. People always seek to improve their wealth and status in the easiest way possible. What’s the easiest way? Take wealth from someone else. That’s why criminals are still in business…after thousands of years of trying to stop them.

But common criminals lack status – except in the ghetto. So, the smarter, better connected and better educated of their ilk go into government. Or they use government for their own ends. That way, they get other peoples’ money. But they also get respectability…even an elevated social status.

Congress is supposed to confront the problems of the nation…and solve them. But with more people getting something from the government than supporting it, Congress is not likely to change course. It responds to the perverse will of the people…and to its own corrupt predilections. We are all victims of democracy now…

The government grows…deficits become unstoppable…and the empire sinks under the weight of so many parasites.

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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13 Comments on "Paul Ryan and His Roadmap for America’s Future"

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V.R.Sonti
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I agree with the sentiment: the problem is that Rep. Ryan is the ONLY man who HAS ANY KIND OF PLAN! The rest are part of the gravy train.

I give up, and mutter : Che sera, sera!

W Talbot
Guest
Your comments about the demise of the worldwide fiat currency system bring to mind another possibility. Are we witnessing the self destruction of the experiment with Democracy! As you stated “Congress is supposed to confront the problems of the nation…and solve them. But with more people getting something from the government than supporting it, Congress is not likely to change course. It responds to the perverse will of the people…and to its own corrupt predilections. We are all victims of democracy now…” Democracy, specifically unviversal sufferage (every citizens right to vote), is only a recent form of goverment and seems… Read more »
Sambo
Guest
W Talbot: I concur. Since when has the majority of voters voted for what is best for the country? Voters only vote for what appears best for them individually. A vote for lower taxes? A landslide win! And bankruptcy follows. Democracy relies on transparency, healthy debate, freedom of speech and a lack of corruption to succeed. What we are seeing is media and politicians distorting transparency, debates being twisted and turned into meaningless mush, our freedom of speech being squashed and corruption (NSW, SA and QLD state govs?) becoming rife. Elections have become about appealing to ‘marginal seats’ (minority groups)… Read more »
Dan
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In defence of democracy, it does work if the system is meritocratic. The current systems of democracy around the world were designed in previous eras, and most are failing because of over-centralization of government (too few people eg: several dozen having power over too many eg: tens of millions). They are good, insofar as the authors knew about human nature (democracy assumes corruption hence the short terms of government between elections, and the right to universal suffrage), but technological advances and the development of transnational corporations, international treaties, and foreign control of key national assets have broken democracy – but… Read more »
Fiscal Phil
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Democracy will work only after a national emergency. At the moment Australia’s democracy is muddled, ineffecient and slowly being corrupted by political parties who are incapable of doing what’s right (as opposed to popular) or at the beck and call of special interst groups. The NSW govt is template for the future of Australian Govt both federal and state unless there is a major shift in our democracy. It has nothing to do with liberal or Labor its just corrupt. I welcome the possibility that the economy will crash and burn because it may result in people finally seeing that… Read more »
Sambo
Guest
Dan: Short terms of Government is good as you say, but is at the same time the reason for short-term outlooks by Governments. It encourages “make the voters happy now, worry about the future when it arrives” attitudes. Unfortunately I don’t remember any Democracies being particularly merit-based. Mostly just popularity based. Merit and popularity are two different things… Fiscal Phil: Definitely agree with you, although I suspect that after the ‘National Emergency’ it is not Democracy that will prevail – it is Dictatorship in the guise of Democracy. For instance, a Democratic system fails and crumbles, and the people want… Read more »
Biker Pete
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F. Phil: “I welcome the possibility that the economy will crash and burn…”

Give them pain, those Aussie b*stards! Let them suffer like the UK! Let’s have major unemployment, retail going bust, banks failing, starve the obese into submission, depression across the nation. And let’s not forget half-price McMansions. (Then, after our ‘national emergency’ let the Red Revolution begin… .)

Your rant is highly original, F. Phil. Quite a manicfesto!
Too much fluox… or too much Hendrix? :)

Fiscal Phil
Guest
(Then, after our ‘national emergency’ let the Red Revolution begin… .) Ahh you see Pete im a card carrying capatalist, but a one that believes that true enterprise must be rewarded to all. I’d love nothing more than to have a generation believe that their own good fortune is based on their endeavours, whether that means working hard for their own business or for someone elses. Not based on having cheap overseas labour provide us with junk they probably don’t need and which we borrowed money to buy. it’s a simple dream pete and one I would think all Australians… Read more »
Dan
Guest

Sambo: Democracy is meritocratic insofar as its voters are educated and able to determine what merit should actually be.

Sambo
Guest
Dan: Perhaps I look too much at the supposed Democracies of the US and Australia…but even educated voters would want short-term fixes if it suits them. ‘Work Choices’ may not have been such a bad idea for the economy as a whole, but for individuals in the short-term it is fairly rotten. The ‘take your medicine’ legislation loses out every time to the ‘more candy!’ policy. Fiscal Phil mentioned that the two party system is broken – and I think we would all agree with that. This Democracy has turned into a “vote for the one you hate the least”.… Read more »
Dan
Guest
Australia is not a particularly good example of Democracy but it is a good example of how to manage a colony by maintaining political stability. The system favours a two-party political game which (if you scratch anywhere beyond the surface) is clearly incestuous and is really not more than single party system with occasional representation permitted by the occasional innocuous independent politician. When it comes to important issues, such as foreign policy, there never has been a way of having any influence by the public in Australia. Granted there are rare exceptions, but if you look at any big issue… Read more »
Ross
Guest
DD plugged the most recent Ron Manners book recently, if you have paypal you can order it on-line. He is erratic and not of the stuff that is going to be successfull politically outside certain parts of WA or Queensland but he is likeable and spirited. It may surprise you how many libertarians there have been that have attempted to organise for decades but many times the eccentricity of the characters got in the way of the pitch. Singo couldn’t even sell them as a force. They have a few trip wires for me too, like many being pro euthenasia,… Read more »
Brian
Guest
Are you kidding me?? Over 60% of Americans are dependant on government handouts and you have the audacity to dismiss Paul Ryan’s plan with such malice????? This is a plan that America has needed for a LONG time. It is time to stop worrying about which government program to expand or bring up next and start cutting government programs. We are becoming an entitlement society and all the government wants to do is handout more!! Unbelieveable that the midset is so warped that an actual plan to give people back their individual freedoms and liberties and help them to become… Read more »
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