Vermonters for Economic Health

An Essay by Tom Licata: 

"The fault, dear Brutus, lies not in our stars, but in ourselves…" so said Shakespeare. 

We have lived beyond our means and the answer to this economic problem is this:  We must methodically manage an orderly reduction in our standard-of-living.  Without such action, a disorderly reduction is inevitable.

Let me explain just how integrated and sobering our world economy has become.

“In 1980, the total value of global financial assets was roughly equal to world gross domestic product (GDP)."  In 2007, these same financial assets increased to 356% of world GDP; most of the increase coming from private and government debt.  Why does this matter?  Foreigners hold some 50% of U.S. public debt.  Should their capacity (or willingness) to lend diminish, who would fund the U.S.’s projected $10 trillion deficits over the coming 10 years?  One-third of Vermont’s total budget is provided by the U.S. federal government.  Should their capacity to grant this diminish, who would fund Vermont’s shortfall?

Simply put, there’s not enough money – by consumers, families, businesses or governments - to payback all this debt.  Much of this deleveraging, or reduction of debt, will occur through bankruptcy. If proper truth-telling and policies are not realized, the social unrest witnessed in Greece will wash upon our shores.

Think of this as an (economic) journey across the U.S. of A.  Departing from New York, on day three you blow out a tire in Chicago and are forced to use the only available spare-tire.  That’s where the U.S. and world economies are today.  In the U.S., after nearly $2 trillion of monetary stimulus (think printing of money) and roughly $1 trillion of fiscal stimulus (think government spending and bailouts), our available “spare-tire” is exhausted.  At this journey’s juncture, the printing and spending of money we don’t have is a fool’s errand.

Some call me a "doomsayer."  I call myself a "realist."  It’s simple math.  Two quick examples:  (1) Since 1990, inflation-adjusted U.S. debt grew 155% while GDP grew 54%.  Why does this matter?  With debt growing three-times faster than GDP, a greater number of (inflationary) U.S. dollar-claims will be chasing a relatively shrinking production of U.S. goods and services. (2) U.S. health-care expenditures, driven mostly by the baby-boom demographics that retire some 10,000 citizens’ per-day, are projected to grow two-percentage points per-annum above projected U.S. GDP.  Why does this matter?  This two-percentage point disparity in health-care expenditures will eventually crowd-out almost all other U.S. expenditures.  I love math, don’t you?

A society cannot consume and not produce:  Since 1990, Vermont inflation-adjusted government spending rose 131% compared to Vermont medium household income growth of just 9.7%.  During this past decade, Vermont government payroll, benefits and education spending rose roughly 70%, while Vermont private-sector job growth rose at a pre-recession 2000-2007 rate of 0%.  Ouch!

How does Vermont alleviate this inevitable reduction in our standard-of-living?  How does Vermont eventually grow and prosper out of its profligate ways?

Ours is a spending, land-use and growth problem.  Not a revenue (think more taxes) problem.

Ours is a problem of freedom.  Ours is a problem of culture.

Vermont has become almost paralyzed “by the political dependency culture it has created.”  Government isn’t society.  Government is to provide the framework for which civil society occurs.  Always under the disguise of compassion and fairness, Montpelier’s policies have consistently created the very economic stagnation that is responsible for much of our citizen’s impoverishment and lack of adequate employment.

Dorothy Canfield Fisher, writing of Vermont’s 1778 motto of "Freedom and Unity" stated:  "The Vermont idea grapples energetically with the basic problem of human conduct – how to reconcile the needs of the group, of which every man or woman is a member, with the craving for individual freedom to be what he really is."

“With the craving for individual freedom to be what he really is:” This, my fellow Vermonters, is what Montpelier’s policies have consistently deprived its citizens of; as it’s ever-more difficult to succeed and grow in a culture that’s become increasingly hostile to business, land-rights and ultimately to job creation.