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What Is Normal?

The Problem of Surplus Wealth

The opinions expressed by columnists are their own and do not necessarily represent the views of

Roughly speaking, the federal deficit doubled from $10 trillion to $20 trillion during the eight years of Barack Obama’s presidency.  Little was said about this phenomenal growth at the time, and even less was done about it.  Of course, now that the Republicans are in charge and have had the audacity to cut taxes, the horror of the deficit is once again a topic of conversation among the chattering classes.  Even so, no one has offered a viable solution to the problem, and no one ever will.  The conventional wisdom says that this is so largely because the consequences of curtailing the deficit are immediate, while the consequences of not curtailing it are in the far off into the future.

We would argue that this understanding is just flat wrong, that there are serious and immediate consequences associated with the continuing growth in the deficit.   Now, to be clear, we are not talking here about the supposed evils of debt per se, or about the immoral nature of burdening future generations with a large burden of debt, or about any of the other commonplace observations that the “talking heads” and “experts” make for lack of anything useful to say about the issue.  We are talking about the consequences associated with the existence of “surplus money.”

The subject of “surplus money” is well known in the banking and investment world, where it is routinely blamed for everything from creating bubbles to the emergence of casino-type finance capital.  In her classic tome, The Origins of Totalitarianism, Hanna Arendt blamed the “overproduction of capital and emergence of superfluous money” for the advent of 19th century imperialism.  Specifically, she wrote:

"For the first time, investment of power did not pave the way for investment of money, but export of power followed meekly in the train of exported money, since uncontrollable investments in distant countries threatened to transform large strata of society into gamblers, to change the whole capitalist economy from a system of production into a system of financial speculation.”

At the same time, the issue of “surplus money” is rarely if ever mentioned when it comes to government.  After all, if federal funds were in “surplus” there would be no need to borrow so many trillions of dollars, year after year (after year).  Right?

Wrong!  You see, Congress doesn’t borrow all that money year after year because it is needed to make up for shortfalls caused by unanticipated events such wars, economic crashes, or natural disasters.  In truth, our honorable legislators borrow all of that money simply because they can, and because it makes them look both generous and benevolent, which, in turn, helps to ensure their reelection.  It is indeed “surplus money” because its purpose was not determined by “need,” but by a desire for near-term gratification.  And this, we’re afraid, is a prescription for mischief.

Do you ever wonder why American presidents are now inclined to make war, by executive action and thus in violation of the Constitution?  The answer is simply because they can.  The money for these wars is readily available.  No one has to figure out where the funds for war – and seemingly endless occupation – will come from.  No one has to raise levies (i.e. taxes) to support their foreign adventurism.  Presidents can, more or less, do as they please, and expect that Congress will rubber stamp the funds whenever they get around to it.  Most reliable estimates place the costs for the war in Iraq and the ONGOING operations in Afghanistan in the neighborhood of $2 trillion.  For better or worse, George W. Bush never blinked an eye about these costs – precisely because the surplus capital made it a non-issue.

Hannah Arendt went on note that one of the consequences of surplus money in 19th century Europe in addition to the need to search for investments abroad was “an unparalleled increase in swindles, financial scandals, and gambling in the stock market.”

And so it is today with the flood of trillions of dollars of “surplus” funds, which have turned the federal government into a swamp of corruption and waste, and have created multi-millionaires of common politicians.  In what world should a man and his wife – lifelong “public servants” – now be worth well over $100 million, simply because he was president and she a senator and secretary of state?  In what world should a former high-school wrestling coach-turned politician even be able to pay nearly $2 million in hush money?  In what world should the House Minority Leader be able to condemn public policy with which she disagrees for enabling permanent “oligarchy,” even as she herself is one of the most powerful women in the world and is worth north of $120 million?

In all cases, the answer is “in a world with surplus capital and no constraints whatsoever on public men and women to keep them from allocating as much of it as they can in any manner they see fit.”

Steve Soukup is the Vice President and Publisher of The Political Forum, an “independent research provider” that delivers research and consulting services to the institutional investment community, with an emphasis on economic, social, political, and geopolitical events that are likely to have an impact on the financial markets in the United States and abroad.  He is also the Fellow in Culture and Economy at the Culture of Life Foundation.

Mark L. Melcher is the President and Editor of The Political Forum.

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