America on welfare
At what point does America turn from being on credit to being on welfare?
Credit:” The ability to obtain goods or services before payment, based on the trust that payment will be made in the future: ‘unlimited credit.’”
Welfare: “Statutory procedure or social effort designed to promote the basic physical and material well-being of people in need: ‘rights to education, housing, and welfare.’”
These definitions can be adapted to explain what I mean.
The American economic system is a component of the larger American enterprise. The American enterprise has two components: 1) public and 2) private. Public, of course, includes the layers of government from local to state and federal. Private enterprises include 1) private entrepreneurial businesses and 2) public corporations, both of which are governed by laws and regulations that prescribe legal operations and determine tax liabilities.
Where things get more complicated is in the area of banking and finance that starts local and goes global. The US Treasury and Federal Reserve work in concert to manage money and obligations resulting from the government borrowing money to sustain the American system.
A simple formula can express relationships such that:
Y = R + Q / C + T
Y = Yield
R = Revenue
Q = Quality
C = Cost
T = Time
Now, you may wonder how that formula actually works with metrics applied, and that is another discussion. Conceptually, the American Enterprise (Public and Private) works in concert to Optimize Return on National Resources. That may be expressed as “Yield,” or “Y.”
Therefore, we are attempting to maximize Gross Domestic Product (GDP)(that is a part of expressing Yield) as a result of 1) government creating the best environment for commercial enterprise to produce goods and services for global consumption, 2) government providing quality services addressing essential needs of people, 3) people paying taxes to pay for government, and 4) corporations paying taxes for government.
When “We the People” allow our government to do things that exceed our ability to pay, government, on our behalf creates debt. When “We the People” allow our government to borrow money from other nations, such as China, our debt extends obligations to other governments that may be hostile to our values and our nation. That is what has happened.
Now, we have certain obligations: 1) national security and 2) social needs for which we are obliged to attend. We must prioritize.
Our situation requires more “Revenue,” expressed as “R.” Revenue creation is constrained by 1) GDP, the amount of positive cash flow generated by the production and sale of goods and services globally and 2) the capacity of individuals and corporations to pay taxes.
Today, America is not producing sufficient GDP – the source of revenue is too small to meet our obligations. America is spending and has spent too much – including squandering on wars that have failed to produce a positive return on cost. America has failed to exact sufficient revenue from those who can afford to pay: 1) wealthiest Americans and 2) corporations.
So, our National debate is reconciling the formula.
“We the People” want quality service, “Quality,” “Q,” at an affordable “Cost,” “C,” and in a timely manner, “Time,” “T.”
Time – before we die we want our services.
“Moody's says it may downgrade US debt if the debt limit isn't increased, report Zachary Goldfarb and Felicia Sonmez: "Moody’s Investors Service warned Thursday that it may soon downgrade the U.S. credit rating because of mounting concerns that the government will default, adding new urgency to negotiations between President Obama and congressional Republicans over the nation’s debt. Moody’s, one of the premier credit-rating agencies, said that political gamesmanship over raising the government’s $14.3 trillion debt ceiling has been worse than expected. If progress toward increasing the limit isn’t made by mid-July, Moody’s said it would take another step toward reducing the country’s top-of-the-line AAA rating by putting the United States under review for a possible downgrade."”