RPF0523-Last_Weeks_Fiscal_Catastrophe_and_Your_Response
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00:00:14.720 | I try to keep Radical Personal Finance positive and uplifting and encouraging and motivating. I
00:00:21.840 | really do. It's important to me to be a source of solutions and ideas rather than a source of
00:00:27.920 | complaining and whining. But I think we've all got a dark side and today, well, if you're looking for
00:00:34.800 | encouragement, you might want to skip today's show.
00:00:37.440 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:00:57.600 | skills, insight, and encouragement, I guess, sort of, of a type, that you need to live a rich and
00:01:05.520 | meaningful life now while building a plan for financial freedom in 10 years or less.
00:01:09.280 | My name is Joshua and I am your host and today let's indulge our dark sides just a little bit
00:01:14.560 | because life has seasons and not everything is always rosy.
00:01:26.320 | Today's show, I want to talk with you about the recent budget deal that the United States
00:01:31.440 | government has come together and passed. And this is just one of those things that I've been
00:01:37.760 | watching to see what would happen, but this is a nightmare and I think we need to face it head on.
00:01:43.200 | Now, as we begin, I will end the show with some positive ideas and the bulk of my focus for today's
00:01:48.800 | show is actually going to give you just some, I have a list of 10 things that I think that you
00:01:54.240 | can and I can do that will help us to weather the storms that are coming in the United States over
00:01:59.040 | the coming decades. But in watching the political process over the last couple of weeks, I have
00:02:05.040 | become fully persuaded that fiscal doom in the United States is, well, pretty much guaranteed.
00:02:12.800 | Now, I've done a show on it here and there, but frankly, I've always tried to keep my,
00:02:16.800 | tried to keep myself positive because there are so many metrics by which if we look around,
00:02:23.360 | we can measure positive improvements in the world. So many metrics. And I spend most of my
00:02:29.360 | time thinking about those metrics. Long-term, I'm an optimist, but optimism and pessimism
00:02:36.960 | really are, I think, poor, they're useful as concepts in a place, but really there are times
00:02:44.720 | at which most of the time realism is what's important, to see things how they actually are.
00:02:50.480 | I think it's every bit as foolish to go around saying that things are terrible,
00:02:54.880 | things are terrible, things are terrible, as it is to going around saying things are great,
00:02:59.280 | things are great, things are great. Life is much more complicated than that. Sometimes things are
00:03:03.760 | good, sometimes things are bad. Sometimes things are good for now and they're bad for longer.
00:03:08.800 | Sometimes things are bad for now and things are good for longer. But I have become increasingly
00:03:14.320 | concerned with the fiscal situation in the United States of America. And I think that
00:03:19.680 | it's important to talk about it again in light of the budget deal. Now, I did a show on this
00:03:24.800 | few months ago. And one of the things that I received back was some feedback of people saying,
00:03:30.480 | "Oh, Joshua, you've got it wrong." It may be that I've got it wrong. I'm certainly no expert in
00:03:36.000 | everything. I'm just a normal person with a slightly higher than average exposure to
00:03:42.160 | financial matters. And I'm doing my best to call it the way that I see it. If I am wrong, I hope
00:03:47.760 | that I'm wrong. But I think it's a form of cowardice to keep your mouth shut constantly
00:03:54.400 | when you see danger and see things that are concerning. And when we put together some of
00:03:59.440 | the recent events in the United States, I think there are long-term dangers. I think it'd be
00:04:05.200 | helpful. Let's start today with David Stockman's article recently published called "The Night of
00:04:11.760 | Fiscal Infamy," because I think this is probably one of the more succinct ways for me to get across
00:04:18.400 | the mood that I have. Of course, I could read dozens of articles. But David Stockman is – if
00:04:24.880 | you're not familiar with the name, he writes his website, DavidStockman'sContraCorner.com,
00:04:30.400 | and he publishes a newsletter. And he has an interesting background. He was the director of
00:04:37.680 | the Office of Management and Budget under President Ronald Reagan, which is an interesting – I'm not
00:04:42.080 | sure whether that's a benefit for him or not since President Reagan basically destroyed the fiscal
00:04:46.240 | situation in the United States worse than every president before him for years. And then since
00:04:51.680 | then, we've just been getting worse and worse and worse. He left Washington and he went on to work
00:04:56.240 | on Wall Street, and now he basically focuses on publishing his newsletter. But let me just lead
00:05:00.640 | off by reading his article. This is called "The Night of Fiscal Infamy," posted on Friday,
00:05:06.320 | February 9th, 2018. "We have crossed the fiscal rubicon, and not merely because Congress passed a
00:05:13.200 | $400 billion budget buster in the wee hours of the morning rather than abide a government shutdown
00:05:18.880 | beyond sunrise, and also not merely because the deficit is now locked in at $1.2 trillion,
00:05:26.480 | or 6% of GDP, during what would be the tail-end 10th year of the business expansion,
00:05:33.840 | fiscal year 2019, or that it is on a path to doubling the national debt to $40 trillion
00:05:40.160 | during what will be the 2020s decade of demographic no return, i.e. 30 million more retirees on Social
00:05:49.040 | Security and Medicare. What really happened is that the politics of the budget have now become
00:05:54.480 | even worse than the numbers. In a word, the GOP congressional leadership surrendered control of
00:05:59.920 | the nation's finances to Chuckles Schumer, Nancy Pelosi, Donald Trump, the military-industrial
00:06:05.760 | complex, and the domestic spending lobbies of every shape and form. The conservative fiscal
00:06:11.520 | opposition, what was left of it, has been obliterated. Indeed, if the budget is a battlefield,
00:06:17.920 | and we can testify that it's exactly that, last night amounted to the Battle of the Little Big
00:06:22.800 | Horn for the Freedom Caucus. Eight years on from the Tea Party uprising of 2010,
00:06:28.000 | they, like General Custer and his 200 men, are gathering flies where they fell on the steps of
00:06:33.760 | the Capitol at 5 a.m. In that context, the House vote split tells you everything you need to know.
00:06:41.200 | The faithless Speaker of the House rounded up every rhino, Republican in name only,
00:06:46.000 | careerist time-server, fiscal hypocrite, bloodthirsty defense hawk, and double-talking
00:06:51.040 | pork-barrel Paul that he could muster from the GOP caucus until he had 167 yes votes on the
00:06:57.760 | board. He then opened his hand to the Dems, who quickly delivered the 51 votes needed
00:07:02.480 | to approve the bill and eventually threw in 22 more for good measure.
00:07:06.400 | Then and there, of course, the swamp creatures took control of the U.S. Treasury,
00:07:10.880 | even as Speaker Ryan sent the 67 Republican no votes out back of the Capitol to be shot.
00:07:16.160 | Here's the thing. Mitch McConnell is a 54-year swamp creature, and Paul Ryan is a gutless wonder.
00:07:22.640 | So when Mitchells and Chuckles, as we labeled them yesterday, proffered their
00:07:26.400 | bipartisan deal in the Senate, Ryan had the choice of one, saying "hell no" and standing
00:07:31.920 | firm for a plan based on some semblance of GOP fiscal principles and GOP votes,
00:07:37.280 | or two, sentencing the Freedom Caucus to an ignominious end. The finality of it, in fact,
00:07:43.440 | lies in the insidious essence of the deal, which is now the law of the land. To wit,
00:07:48.160 | the bill puts Washington on fiscal holiday until at least March 1, 2019, and in the interim,
00:07:55.120 | the red ink emanating from the U.S. Treasury will rise like the floodwaters of Houston last summer.
00:08:00.560 | There will be no stopping it. That's because in the short run, the debt ceiling is suspended
00:08:08.080 | for 13 months. The Trump Treasury will therefore have open-ended, limitless borrowing authority,
00:08:14.560 | and no reason whatsoever to heed demands from the walking wounded of the Freedom Caucus for action,
00:08:20.480 | any action, to curtail the federal deficit. The only tool they ever had,
00:08:26.080 | leveraging debt ceiling increases, is now dead and gone. Likewise, the sequester caps are lifted
00:08:33.280 | for the next two years, meaning the way has been cleared for pork-laden appropriations bills for
00:08:38.880 | fiscal year 2018 and fiscal year 2019. Accordingly, there will be no more shutdown showdowns and no
00:08:45.680 | more continuing resolution leverage for fiscal conservatives either. Instead, discretionary
00:08:52.080 | spending, which has been creeping slowly higher every year due to last-minute end runs around the
00:08:57.840 | caps, will now literally erupt. Over the next two years, defense spending will leap by $82 billion
00:09:06.000 | annually, and the price the neocons and military hawks paid for that was a parallel $66 billion
00:09:14.320 | surge in domestic appropriations, thereby re-establishing the "parity principle" by
00:09:20.320 | which the warfare state and the welfare state crushed the nation's fiscal accounts.
00:09:25.360 | Defense In this instance, however, you have to ask
00:09:30.160 | exactly what was the defense emergency that gave rise to this hideous bargain. After all,
00:09:36.880 | the old capped levels, which reached back to the Boehner-Obama deal of 2011, will never again be
00:09:43.600 | revisited. Rather than spending $13.5 trillion on discretionary programs over the next decade,
00:09:50.320 | it will now be $16 trillion or more. But consider this, the entire GDP of North Korea is just $30
00:09:58.960 | billion. So the Department of Defense increase alone is 2.7 times the entire economy of the only
00:10:08.000 | hostile foreign power that has actually threatened, verbally, the US in recent years.
00:10:13.840 | In fact, when you add up the defense budget of all the alleged hostiles, China $215 billion,
00:10:21.440 | Russia $69 billion, Iran $12 billion, and the entire GDP of North Korea, you get $325 billion.
00:10:34.400 | That's less than 45% of the $716 billion bonanza bestowed on the Defense Department last night.
00:10:42.320 | Next, add in the defense budgets of Saudi Arabia, $64 billion, India, $56 billion,
00:10:49.520 | France, $56 billion, the United Kingdom, $48 billion, Japan, $44 billion, Germany,
00:10:57.440 | $41 billion, South Korea, $37 billion, and Italy, $28 billion, and guess what? You still have less,
00:11:06.320 | $700 billion, than the DOD's cornucopia of budget resources. Yet, as that heroic American
00:11:15.280 | Senator Rand Paul said during his filibuster last night, nobody would be talking about defense
00:11:21.200 | budgets this crazy big if we were not conducting seven different wars, all of them completely
00:11:28.800 | pointless and irrelevant to the safety and security of the American people. Stated differently,
00:11:34.560 | the military-industrial-congressional complex is now ruling the roost and has swallowed up
00:11:40.400 | most of the fiscal opposition, which was populated with neocons, militarists, and war hawks.
00:11:46.800 | That means, in turn, that it will be absolutely impossible to cut a single dime of domestic
00:11:52.320 | spending as far as the eye can see. Moreover, given the rather certain explosion of debt service
00:11:58.320 | costs to more than $1 trillion by the middle of the coming decade and the baby boom-driven
00:12:03.760 | entitlement wave, federal outlays are heading toward 26.5% of GDP or higher. That compares
00:12:10.960 | to just 21% in the most recent year completed, fiscal year 2017. At the same time, the drastically
00:12:18.560 | front-loaded tax cut will reduce revenue to just 16.5% of GDP in the year ahead. The math of it
00:12:26.240 | is that the U.S. is now heading for a 10% of GDP deficit on a long-run basis. Worse still,
00:12:35.600 | there is now no process available to slow the drift toward calamity. As a result of last night's
00:12:41.520 | action on a two-year budget deal, the congressional Republicans can now dispense with a budget
00:12:46.560 | resolution for fiscal year 2019 entirely, even though it is notionally required as a legal matter.
00:12:53.280 | That will spare them of the inconvenience of voting for a red-ink-saturated 10-year fiscal plan,
00:13:00.560 | along with the political shame of it. In effect, they have now institutionalized trillion-dollar
00:13:07.360 | annual deficits as far as the eye can see, added $15 trillion to the public debt in the next decade
00:13:14.160 | alone, and left the U.S. with $35 trillion of public debt and a $2 trillion annual budget
00:13:21.520 | deficit by 2027, which happens to be the peak year of baby boom retirements. And that, of course,
00:13:29.200 | assumes no recession in the interim. Since we don't believe for a moment that the current
00:13:35.360 | faltering business expansion will last for a record 219 months or double the previous longest
00:13:43.360 | expansion in recorded history, the true fiscal facts will ultimately be a lot worse. At the same
00:13:51.680 | time, no fiscal year 2019 budget resolution also means no chance whatsoever for entitlement reform,
00:13:59.040 | not even a minor beating up on food stamp recipients on behalf of stronger work requirements,
00:14:04.240 | which would only save a couple of billion per year anyway. That's because without reconciliation,
00:14:09.600 | getting any reform package through the 60-vote Senate filibuster has less chance than a snowball
00:14:15.680 | in the hot place. So now the bond market will be tested like never before. During fiscal year 2019,
00:14:22.400 | starting in October, the U.S. Treasury will borrow $1.2 trillion, and there will be no
00:14:29.280 | possible legislative action to stop it. And that will occur even as the Fed dumps $600 billion
00:14:36.720 | of existing debt back into the market. Unless the law of supply and demand has been stealthily
00:14:43.120 | repealed by the economic gods, a conflagration of biblical proportions in the bond pits is now
00:14:48.960 | unavoidable. And when the 10-year yield hits 3.5% and then 4.5%, it will be Katy bar the door in the
00:14:57.840 | entire casino, because nothing like the drastic collision ahead is priced into equities or
00:15:03.360 | anything else. Accordingly, if you want to grasp how the Fed's bubble finance and destruction of
00:15:09.360 | honest price discovery have left the casino defenseless in the face of the reckoning just
00:15:13.520 | ahead, you can't really find a better illustration than the recent ionization of the XIV. As the
00:15:19.920 | estimable Doug Cass summarized it, "Indeed, it took a bit over six years for XIV, an inverse
00:15:26.160 | VIX product, to rise from $10 to $144, but only one day for the product's price to implode to zero."
00:15:37.440 | As blogger Quoth the Raven tweeted this morning, "Six years of picking up pennies in front of a
00:15:42.160 | bulldozer wiped away in one session." That's what happens when bubbles burst, and we are now sitting
00:15:48.400 | on the mother of all financial bubbles. As we argued on Fox Business today, what happened on
00:15:53.280 | the floor of the house yesterday may finally be the red swan. At the least, it will prove to be a
00:15:59.200 | major inflection point in ending the financial fantasies of the last three decades. We called it
00:16:04.960 | the night of fiscal infamy, and it surely was. End of article. Now, the first question that most
00:16:14.400 | people ask with regard to articles like this, discussions like this, is, "Well, what do I do
00:16:20.720 | about my investments?" Let me clear that question right now. I have no idea. Go ask someone else and
00:16:31.920 | try to find their answer, because I have no idea. I can make a number of arguments that
00:16:37.840 | countries are not companies. I believe that's true. I can make a number of arguments that would
00:16:44.720 | say, "Well, things always work out in the long run." I believe that's true. But I have no idea,
00:16:51.120 | and guess what? Neither does anybody else. We're all just making guesses.
00:16:55.360 | But we are in a world that has become completely unconnected from anything in history with regard to
00:17:05.680 | government spending. How is that going to impact your investments? I don't know.
00:17:10.960 | I don't know. I don't know if anyone else really knows, because David Stockman, for all of his
00:17:19.680 | experience and his clarity, may very well be wrong for years in terms of what he expects.
00:17:27.280 | I certainly have been wrong in my predictions. I thought there was good, strong evidence
00:17:33.840 | that the United States would, during the calendar year 2016 or 2017, would go ahead and enter
00:17:42.720 | into recession again. It felt long overdue to me. I was wrong, totally wrong. Now, are we entering
00:17:50.640 | into recession right now, or the stock market gyration to the last couple of weeks indicators
00:17:55.680 | of anything? I don't know. What I do know is I have no idea about what the next few months will
00:18:02.560 | look like or that even the next few years will look like. But it seems to me pretty clear that
00:18:08.960 | over the coming decades, we, at least in the United States and many other places in the world,
00:18:14.080 | will face major societal upheaval. And one contributing factor to that is going to be
00:18:20.960 | the spending of the U.S. federal government. Now, the last time I did a show like this,
00:18:28.880 | I received a number of emails from very intelligent and thoughtful listeners
00:18:32.960 | suggesting to me that I am undereducated in this particular area. That may be true.
00:18:40.560 | But essentially, what was recommended was that there are no limits to government spending. There
00:18:52.720 | is no problem with governments running eternal deficits, that because of the taxing power and
00:18:58.160 | because of the fact that federal debts never have to be paid off, that there are no problems for the
00:19:02.640 | long term. Well, I was trained that way too. I was taught by Keynesians when I was in college,
00:19:08.640 | but I've come to think that basically the same suspension of any rationality that's required for
00:19:14.320 | most of the modern scientific things that are supposedly taught by experts applies to fiscal
00:19:20.480 | management. Basically, more and more, it seems like many people who want to be leaders on
00:19:27.360 | various questions of scientific investigation, and I'm happy to lodge economics under one area
00:19:34.480 | of scientific investigation. That's more of a social science than it is a hard science.
00:19:39.280 | But basically, what so many people want you and me to do is to deny any bit of our practical
00:19:45.440 | experience and to deny any appreciation of history and to fundamentally say,
00:19:51.360 | "Well, you just got to go along because the experts say so." Well, I may not understand,
00:19:57.760 | but at the end of the day, I got to figure out what do I do in my life.
00:20:01.440 | And things don't look very bright over the next few decades, at least not from my perspective.
00:20:09.440 | It's a little bit hard for me to take politicians seriously when in the recent discussion over
00:20:18.240 | discussion. What discussion? When nobody actually sits down and says,
00:20:24.240 | "Are we going to cut spending anywhere?" Here's what's happening. Everything is interrelated.
00:20:32.240 | I don't see clearly enough in order to articulate all of the interrelations, but
00:20:37.840 | we spend so much of our time in the US American culture arguing about politics and money,
00:20:44.000 | money as it relates to politics. Because of course, politics, the politician that you and I elect
00:20:48.960 | is the one who gets to write the checks to figure out who they want to pay back for putting them
00:20:53.200 | into office. Here's what's happened though. That's become increasingly meaningless.
00:20:59.280 | I read a book last year by Tyler Cohen called The Complacent Class. And it was so interesting to me
00:21:07.360 | because he brought out some ideas that I hadn't really thought of previously. One of the ideas
00:21:11.760 | that he brought out in that book was he talked about how in the past, political debates mattered
00:21:18.880 | because so much more of government spending could be determined by an executive who's in charge.
00:21:23.760 | And yet today, whatever executive is placed into the White House in the United States of America,
00:21:31.280 | they have very little ability to actually make a difference. Because of the steady growth,
00:21:40.720 | excuse me, Freudian slip, because of the steady growth of federal spending on entitlement programs
00:21:48.480 | and military spending and interest on a debt, the actual percentage of the budget that an executive
00:21:56.640 | could control has steadily decreased from, I didn't look up the numbers, forgive me, but
00:22:02.320 | majority of the budget to a tiny, tiny percentage. I have these numbers here from the
00:22:08.960 | Office of OMB, the Office of Management and Budget for 2015 of federal spending.
00:22:16.640 | And here was what it was in 2015. Total federal spending at that point was $3.8 trillion.
00:22:22.560 | The largest percentage of federal spending is 33% or $1.28 trillion, which is – which is spent on
00:22:32.560 | Social Security, unemployment, and labor. 33% of the budget by Social Security. Social Security is
00:22:41.360 | an area of government spending that is not only bankrupt, has been bailed out multiple times,
00:22:47.280 | but faces a demographic crisis in the future because of fewer and fewer workers and the
00:22:53.440 | massive growth of new – more and more people retiring, the massive growth of the baby boomers.
00:22:59.760 | Younger people, even though birth rates are higher in the United States than they are in
00:23:02.880 | many parts of the world, especially Europe, birth rates are too low and especially too
00:23:07.600 | low to support the large wave of the elderly. But that's 33% of the budget.
00:23:11.760 | Now, next biggest category is Medicare and health, which is $1.05 trillion, 27.24 – sorry, 27.42%.
00:23:22.480 | If you add that to the previous 33%, you come up with over 60% of the budget
00:23:29.360 | that's dedicated to Social Security and Medicare. One bit of kudos or at least President George W.
00:23:38.560 | Bush tried to have a conversation about Social Security. It ended in total disaster. He wrote
00:23:45.360 | about it in his book, in his autobiography, The Hard Decisions. He wrote about how one of his
00:23:51.120 | biggest frustrations with presidency, one of his biggest regrets, was that he couldn't push the
00:23:56.080 | discussion further to talk about some kind of discussion of privatizing some form of Social
00:24:00.800 | Security. Did you in the recent political environment, have you heard any serious
00:24:08.960 | politician discuss any changes to Social Security or Medicare on the federal level?
00:24:16.640 | I haven't heard of one. Supposedly, the Republicans and the GOP was supposed to have
00:24:23.920 | some kind of fiscal conservatism. And yet from the very beginning, President Trump,
00:24:28.240 | when he was then candidate Trump, always proclaimed that he had no intention of making
00:24:32.400 | any changes to entitlement programs as Social Security and Medicare are discussed. That's 60%
00:24:38.720 | of the federal budget that no politician will talk about.
00:24:44.560 | Next, of course, is military spending. In 2015, it was $609 billion. As you just read in the Stockman
00:24:53.840 | piece, we can expect that to continue increasing. That's 15.88%.
00:24:57.520 | Well, let's just add that up. Now we're at 76%.
00:25:01.440 | 76% of the federal budget on Social Security, Medicare, and military spending.
00:25:10.720 | I thought Stockman did a pretty good job of showing how disgusting the military spending of
00:25:18.240 | the United States of America is. The US military can't seem to win a war, hasn't won a war since
00:25:24.160 | World War II. And yet we keep on sending money constantly, telling them, "Well, you can't seem
00:25:30.720 | to win a war since the end of World War II, so we'll just send you more money to spread all
00:25:35.280 | around the globe and tell everyone what to do." It's disgusting. Now let's add one more.
00:25:42.400 | Interest on the debt in 2015, $229 billion or 5.97%. Add that up, we're now at 82.5% of the
00:25:53.680 | federal budget for the year 2015. 82.5%. And yet when's the last time you heard an honest
00:26:08.000 | political debate among political opponents who were actually dealing with a single bit
00:26:13.680 | of the 82.5%? You don't hear it.
00:26:20.960 | But what gets worse and worse and worse is all the political infighting. And everybody thinks
00:26:29.760 | the wrong thing about the other person. Now here's what's amazing. When you actually start digging
00:26:33.040 | into the numbers, what you find is that the people who sell themselves as conservatives,
00:26:38.160 | especially fiscal conservatives, are actually the worst of the lot.
00:26:41.760 | You know who spent the most money in the last rash of presidents?
00:26:48.320 | Reagan and Bushes. You know who's the most conservative fiscally? Who do you think
00:26:58.720 | in the recent past few decades of political history, who was the most fiscally conservative
00:27:03.440 | president of the past few decades? The answer, surprisingly, President Obama.
00:27:13.760 | I say surprisingly for many people, because although he never really championed himself
00:27:19.600 | as a budget hawk, in actuality, that's what happened. And there's this whole raft of
00:27:27.280 | conservative political ideology that says, "Oh, President Obama is going to spend this into
00:27:30.960 | oblivion." He wound up being extremely conservative in terms of fiscally. Now we can argue about the
00:27:37.040 | causes, because that certainly wasn't his goal. He never proclaimed that as, "This is my number
00:27:40.880 | one goal." But let me read you just an article here by an author named Dan Mitchell. This is
00:27:46.480 | interesting. Mirror, mirror on the wall, Obama definitely was not the biggest spender of all
00:27:50.320 | from October 16, 2017. "I've learned that it's more important to pay attention to hard numbers
00:27:56.720 | rather than political rhetoric. Republicans, for instance, love to beat their chests about
00:28:01.120 | spending restraint, but I never believe them without first checking the numbers. Likewise,
00:28:06.000 | Democrats have a reputation as big spenders, but we occasionally get some surprising results when
00:28:11.120 | they're in charge." President Obama was especially hard to categorize. Republicans automatically
00:28:16.800 | assumed he was profligate because he started his tenure with a Keynesian spending binge and the
00:28:21.840 | Obamacare entitlement. But after a few years in office, some were arguing he was the most frugal
00:28:27.200 | president of our modern times. So I crunched the data in 2012 and discovered that he was either a
00:28:32.320 | big spender or a closet Reaganite, depending on how the numbers were sliced. I then recalculated
00:28:37.920 | the budget numbers in 2013 and found that spending grew at a slower rate the longer Obama was in
00:28:43.440 | office. And when I did the same exercise in 2014 using another year of data, Obama looked even more
00:28:49.680 | like a tight-fisted fiscal conservative. Or to be more accurate, what I basically discovered is that
00:28:56.000 | debt limit fights, sequestration, and government shutdowns were actually very effective. Indeed,
00:29:02.160 | the United States enjoyed a de facto spending freeze between 2009 and 2014, leading to the
00:29:08.400 | biggest five-year reduction in the burden of federal spending since the end of World War II.
00:29:12.960 | And it's unclear that Obama deserves any of the credit since he was on the wrong side of those
00:29:16.480 | battles. Anyhow, I've decided to update the numbers now that we have eight years of data for
00:29:21.600 | Obama's two terms. First, a brief digression on methodology. All the numbers you're about to see
00:29:26.640 | have been adjusted for inflation, so these are apples-to-apples comparisons. Moreover, all my
00:29:31.280 | calculations are designed to show average annual increases. I also made sure that the stimulus
00:29:36.240 | spending that took place in the 2009 fiscal year was included in Obama's totals, even though that
00:29:41.760 | fiscal year began on October 1, 2008, while Bush was president. We'll start with a look at total
00:29:47.600 | outlays. On this basis, Obama is actually the most conservative president since World War II,
00:29:54.560 | and Bill Clinton is in second place. Obama, total outlays, 0.8%. Clinton, 1.5%. Bush, 1, 1.8%.
00:30:02.640 | Reagan, 2.6%. Nixon, 3.3%. Carter, 4.0%. Bush, 2, 5.1%. And LBJ, 5.9%. But total outlays doesn't
00:30:11.760 | really capture a president's track record because interest payments are included, which effectively
00:30:16.400 | means they get blamed for all the debt run up by their predecessors. So if we remove payments for
00:30:21.520 | net interest, we get a measure of what is called primary spending, total outlays minus net interest.
00:30:26.800 | As you can see, Obama is still in first place, and Reagan jumps up to second place.
00:30:31.280 | Primary spending, Obama, 0.7%. Reagan, 1.9%. Clinton, 1.9%. Bush, 1, 2%. Carter, 3.2%.
00:30:41.280 | Nixon, 3.3%. Bush, 2, 6%. LBJ, 6%. I would argue that one other major adjustment is needed to make
00:30:50.080 | the numbers more accurate. There have been two major financial bailouts in the past 30 years,
00:30:54.960 | the savings and loan bailout in the late 1980s and the TARP bailout at the end of last decade.
00:31:00.400 | Those bailouts created big one-time expenses followed by an influx of money from asset sales
00:31:06.080 | and repaid loans that actually gets counted as a negative spending. Those bailouts added a big
00:31:11.520 | chunk of one-time spending at the end of the Reagan years and at the end of the George W. Bush years,
00:31:16.240 | while then producing negative outlays during the early years of George H. W. Bush administration
00:31:21.040 | and Obama administration. So if we take out the one-time effects of those two bailouts,
00:31:26.400 | which I categorize as non-TARP for reasons of brevity, we get a new ranking. Reagan is now in
00:31:32.160 | first place, followed by Clinton and Obama. Primary spending, non-TARP. Reagan, 1.6%. Clinton,
00:31:40.160 | 1.7%. Obama, 2.1%. Nixon, 2.8%. Carter, 3%. Bush, 1, 3.2%. Bush, 2, 4.6%. LBJ, 6%.
00:31:54.080 | By the way, Lyndon Johnson has been in last place regardless of how the numbers are calculated,
00:31:57.840 | and George W. Bush has had the second worst numbers. For all intents and purposes,
00:32:02.160 | the above numbers are how a libertarian would rank the various presidents,
00:32:05.600 | since both domestic spending and military spending are part of the calculations.
00:32:09.680 | So let's look closely at how a conservative would rank the presidents, which is a simple exercise
00:32:14.320 | because all that's required is to remove military spending. Here are the numbers,
00:32:18.640 | showing the average inflation-adjusted increase in overall domestic outlays for various presidents.
00:32:23.680 | Still excluding the one-time bailouts, of course. By this measure, Reagan easily is in first place,
00:32:29.200 | though it's worth noting that three Democrats occupy the next positions,
00:32:33.520 | though Obama's numbers are no longer impressive while Republicans along with LBJ get the worst
00:32:37.840 | scores. Domestic spending, non-TARP. Reagan, 0.6%. Clinton, 2.5%. Carter, 2.8%. Obama, 3.3%.
00:32:47.280 | Bush, 2.0%. Bush, 3.9%. Bush, 1.0%. LBJ, 6.5%. Nixon, 8.4%. The bottom line is that Reaganomics
00:32:56.160 | was a comparative success, but should we also conclude that Obama was a fiscal conservative?
00:33:00.880 | I don't think he deserves credit, but I won't add anything to what I wrote above.
00:33:04.560 | Instead, I'll simply note that Brian Riedel of the Manhattan Institute has a good analysis of
00:33:09.120 | Obama's fiscal record. Here is his conclusion. "It is important to recognize that Obama did not
00:33:15.280 | stop trying to expand government after 2010. The president's eight annual budget requests
00:33:21.440 | gradually upped their 10-year revenue demands from $1.3 trillion to $3.4 trillion, while proposing
00:33:28.720 | an average of $1.0 trillion in new program spending over the next decade. His play, in short, was to
00:33:35.920 | gradually trim the budget deficit by chasing large spending increases with even larger tax increases.
00:33:42.320 | The Republican Congress stopped him. My assessment? Obama's most important fiscal
00:33:47.440 | legacy was a sin of omission. Despite promising to confront Social Security and Medicare's
00:33:52.560 | unsustainable deficits, the president refused to endorse any plan that would come close to
00:33:57.200 | achieving solvency. This surrendered eight crucial years of baby boomer retirements,
00:34:02.640 | while costs accelerated. With baby boomers retiring and a national debt projected to
00:34:07.600 | exceed $90 trillion within 30 years, this was no small surrender. In other words, the relatively
00:34:13.920 | good short-run numbers were in spite of Obama, and the long-run numbers were bad and still are bad
00:34:20.560 | because he chose to let the entitlement problem fester. But he was still better,
00:34:25.680 | meaning less worse, than Bush 1, Bush 2, and Nixon." End of article by Dan Mitchell.
00:34:34.480 | Now, I read those two articles in their entirety to you, at the risk of losing
00:34:40.720 | many listeners through them, to demonstrate to you the problem.
00:34:46.400 | And the problem is that now there seems to be no check, not even a debate. That to me is not
00:34:59.920 | obviously the problem, but a major problem. That to me is the most concerning thing about last week,
00:35:05.120 | the night of fiscal infamy, as David Stockman referred to it. When you have Republicans
00:35:12.240 | with the authority and the power and the political power to line up and pass gargantuan tax cuts,
00:35:18.560 | and then you have Republicans willing to line up with Democrats
00:35:23.840 | and pass gargantuan spending increases, we have a major problem.
00:35:28.800 | I thought the Babylon Bee article, Babylon Bee, of course, a popular satire site. I thought the
00:35:39.600 | Babylon Bee article summed it up nicely. This is about an accurate news article. It's a shame it
00:35:47.600 | has to come from a satire site. Here was the headline, "Republicans Announce Plan to Pretend
00:35:51.920 | to Be Fiscally Conservative Again the Moment a Democrat Takes Office." Washington, D.C.
00:35:56.960 | During a budgetary discussion Friday, Republican lawmakers announced a plan to pretend to be
00:36:01.200 | fiscally conservative again if a Democrat takes office again in 2020 or 2024. The GOP said it
00:36:07.520 | would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as
00:36:12.720 | political power swung back to the opposing party. "The second a Democrat is back in the White House,
00:36:18.160 | we will once again start yelling about fiscal responsibility," Speaker Paul Ryan said in an
00:36:22.880 | address to the House of Representatives Friday. "For now, we will continue to vote for unsustainable
00:36:28.240 | and irresponsible budgets that your children's children's children will pay for for centuries
00:36:32.720 | to come." At publishing time, Republicans further announced they would pretend to oppose giving
00:36:37.440 | Planned Parenthood a half billion dollars year after year once they need conservative voters'
00:36:41.760 | support to regain their offices. End of Babylon Bee article. Go on. Satire. That's a pretty
00:36:49.600 | accurate summary though. So what can you do? What can you actually do? Because I don't want
00:36:57.040 | to just be black and angry today on... I can hear a friend of mine's voice ringing in my ear about
00:37:06.480 | my black joke, unintentional black joke. I don't want to be black in mood and angry in today's show.
00:37:13.520 | I want to talk about some solutions. And here are some potential solutions.
00:37:22.960 | And as I get to them, I want to give you just a tiny bit of insight. I probably have a different
00:37:32.000 | perspective on some of these things based upon some experiences that I have that are not the
00:37:39.040 | norm in the United States of America. I, in many ways, do reflect common US American culture.
00:37:48.320 | I have been part of common US American culture, but I've been fortunate to have a bit more of
00:37:55.520 | an international perspective than perhaps some other people, especially more than many other
00:38:01.920 | US Americans who tend to be culturally more insular and inward focused than global in focus
00:38:10.320 | or global in experience. I can't claim much credit for it. A lot of that just comes from
00:38:16.640 | how I was raised and who I was raised by. My parents, when they were... Long before I was born,
00:38:22.960 | my parents worked as international missionaries broadcasting Christian radio programs behind the
00:38:29.120 | bamboo curtain into communist China. And in their work living in Asia, in their work, they would
00:38:35.040 | frequently host people in their home who were enemies of the state, smuggling Bibles into China
00:38:40.960 | at the risk of their life. This was a normal thing. And so growing up, they knew many of those
00:38:46.720 | people. They've seen the impact of oppression and totalitarianism. That kind of was normal.
00:38:54.080 | I have today experiences from around the world that are very current, that are a little bit
00:39:00.880 | different than I think many people. For example, I'm involved with some people in an African
00:39:08.720 | country and recently... It was in Kenya. Recently, there was a very contested political
00:39:16.240 | election in Kenya such that this particular place, they had an overnight increase in local
00:39:25.920 | food prices of five times. I want you to think for a moment, what would happen if due to political
00:39:32.080 | unrest and political instability, your food prices in your local supermarket increased by five times?
00:39:41.680 | If you spend $500 a month, you immediately have to spend $2,500 a month to feed your family.
00:39:48.080 | But let's make it worse because if you're spending $500 a month to feed your family,
00:39:51.600 | there's quite a room for luxury in there. Let's say that you've already cut your food bill
00:39:56.320 | to the absolute bare subsistence, which is how they live, living on a little bit of rice,
00:40:04.320 | a little bit of porridge, a little bit of grain, and about a gram of meat here or there as it can
00:40:08.400 | be spared, and now make a 5x increase in food prices. That was this year with friends of mine
00:40:16.160 | in Kenya. With the political violence and the political unrest with friends of mine in Kenya,
00:40:21.360 | there were hundreds, hundreds of people who had their homes burned for no other reason than they
00:40:28.400 | happened to be from the wrong, so-called the wrong tribe. I have one friend of mine who wound up with
00:40:37.840 | over 300 people living in his home. And no, that's not an overstatement. He had a large home,
00:40:47.440 | but they put 300 people, stacked them in the barn, stacked them in the yard. But all of these
00:40:51.920 | were people who had fled their homes due to political persecution in Kenya. This is in the
00:40:56.720 | past few months. This is today. This is current. Now, it is in Kenya, but that's today. That's not
00:41:02.960 | ancient history. That's a real situation. He still has over 100 people living with him due to
00:41:08.320 | political violence. They've been rebuilding the houses, systematically trying to get people over.
00:41:16.000 | But it's not just the loss of property, it's the loss of life. One of the men had gone back to the
00:41:20.480 | village where they lived to find out if it was safe to return and was killed by the political
00:41:26.880 | opposition because he was there. That's today. That's the past few months. That's a situation
00:41:32.960 | that I'm actively involved in. I have other friends who live in other places in Africa.
00:41:39.440 | It's not just Africa. I have a friend of mine from Venezuela. Talk about a nightmare. When I
00:41:47.600 | was in college, I had a bunch of lefty socialist college professors who held up Venezuela as the
00:41:53.040 | paragon of socialist success. Well, fast forward 10 years and none of them have yet recanted of
00:42:03.280 | they're trying to teach me that Venezuela was the way the government should be run.
00:42:08.160 | As the country implodes, the country implodes, the hospitals are broken,
00:42:16.080 | there's no food available, people are robbing trucks on the streets
00:42:21.680 | just to try to get a little bit of food, the exits are clogged. The Venezuelan government says,
00:42:28.880 | "Oh, we can't print passports because we ran out of paper and ink." Uh-huh. Yeah, sure. So you've
00:42:35.920 | got massive lines of people trying to get out of the country, but the Venezuelan government says,
00:42:39.600 | "We can't print passports." Well, here's one for you. You think it's all Venezuela?
00:42:46.640 | US IRS this month will now begin enforcing a new law that was passed a year... No,
00:42:55.600 | by end of 2015, a couple of years ago, a new law where if you owe the IRS large amounts of
00:43:03.120 | delinquent debt, over $50,000, the IRS will begin denying passports to you.
00:43:14.240 | So look how the government people do it. They say, "Well, we're going to put up borders. We're
00:43:17.680 | going to build a wall, right? Because we got to keep the bad people out." Yeah. So there's a
00:43:21.840 | giant wall that goes up, and now you've surrendered your right of free travel to a government that
00:43:26.960 | stands up and says, "We're going to keep all the bad people out." And now the exact same government
00:43:35.200 | to whom you every year by law are required to disclose all of your financial transactions,
00:43:41.360 | to disclose every dollar of income that comes into your hands, to disclose every single person
00:43:47.120 | that you gave money to, this exact same entity that requires you to disclose where your money is.
00:43:54.960 | After all, got to have that report on how much money is in your IRA and what it's invested in,
00:43:59.920 | and I got to make sure that every person that you do business with sends in a paper to the IRS.
00:44:03.920 | That exact same IRS that pays a whistleblower a percentage of the taxes if you cheat on your
00:44:09.840 | taxes and then somebody rats you out to the IRS, they're entitled to a percentage of the
00:44:14.640 | collections from you. That exact same IRS that has been proven to use their power for political
00:44:22.160 | targeting, proven. Before the 2012 election, senior IRS executives, most notably Lois Lerner,
00:44:35.360 | the head of the IRS department that oversees the activities of tax-exempt groups, starts singling
00:44:41.680 | out conservative-leaning organizations for extra attention, investigations, and harassment.
00:44:47.680 | Not because they thought they were violating the rules,
00:44:51.200 | but because they had words like Tea Party or Patriot in their name. And then, of course,
00:45:00.640 | instead of actually exposing it, Lois Lerner stages an event at a tax law conference,
00:45:08.640 | uses a planted questioner in the audience in order to allow her to disclose the issue on her terms.
00:45:15.040 | And, of course, all of the emails disappear and walks free. And the worst thing about it,
00:45:21.120 | nobody cares. All of the liberals and the Democrats that said, "Oh, it's just the
00:45:29.120 | conservative people. After all, they're nasty racists anyway." Well, how does it feel when
00:45:34.240 | President Trump has control of the IRS? Kind of stinks when there's a switch of political power,
00:45:42.000 | doesn't it? Now, I'm not aware of any allegations of us having done that, but, of course,
00:45:46.480 | I doubt it would surprise any of us to hear such allegations. The point is that that exact same IRS
00:45:52.320 | today, if you owe them over $50,000, will deny your passport application and disallow you from
00:46:01.840 | leaving the country. And you voted for it. You voted for it because you wanted a government
00:46:08.960 | official standing at the border saying, "Papers, please." Friend, we deserve what we got.
00:46:19.840 | We deserve what we're going to get. Now, I told you this was not going to be a fun show,
00:46:27.120 | but we deserve it. Now, you look for solutions. I don't know of a single solution
00:46:33.920 | on a political space. I don't see it. If we go through almost every single area of society,
00:46:42.560 | I can find...this is just the tip of the iceberg in problems, and I see no political solutions.
00:46:49.520 | You say, "Financial solution?" Uh-huh. Show me. Show me the financial solution. Show me
00:46:56.640 | the serious proposal by a serious economist. I don't even care if they are full-throated
00:47:02.960 | Keynesians. Just show me a serious proposal of anybody who thinks that we could ever even stop
00:47:12.560 | running a deficit. It's all games, and the day of reckoning will come. Now, when will it come?
00:47:22.880 | I don't know. How long can we keep pushing this snowball downhill? I don't know. A decade? A
00:47:29.680 | couple of decades? I have no idea. But I do know this. I used to listen to people who would make
00:47:38.960 | dire warnings about the future on different political issues, different fiscal issues,
00:47:44.080 | and I used to think, "Nah, they're overstating things." That's a little bit excessive. It's
00:47:50.480 | probably not so bad. I don't like to be a dire extremist. It's not very fun to be an extremist
00:47:57.360 | in today's world. I don't particularly like that reputation. But in hindsight, when you actually go
00:48:06.640 | back and you look and you say, "Wait a second. Were they right?" You know what you find?
00:48:14.000 | They were right, but they were too optimistic.
00:48:19.280 | Things can change faster than you ever believed.
00:48:26.320 | So what do you do? Well, here are just 10 practical things that are the best I can come up with
00:48:35.840 | that I think are actually useful. Number one, build yourself into a stronger person.
00:48:45.040 | And I mean that in the fullest sense of the world. You can't predict what happens out there,
00:48:53.280 | but you can influence how strong you are to deal with what happens out there.
00:49:05.600 | If I'm completely wrong and I'm indulging my paranoia, my catastrophism in today's commentary,
00:49:16.960 | you'll still be better off if you focus on building yourself into a stronger person.
00:49:22.960 | Now, when I say stronger, I mean stronger in every sense of the word.
00:49:29.520 | Make yourself physically stronger. I always love the quote from Mark Ripetoe,
00:49:33.600 | he always says, "Strong people are harder to kill." It's true. Strong people are harder to kill.
00:49:40.160 | So make yourself as strong as you're able with your physical strength, with your physical health.
00:49:46.240 | Make your body as strong and as competent as possible. Make yourself mentally strong.
00:49:52.640 | Challenge your ideas, challenge your positions, challenge your arguments, develop the skill and
00:49:57.920 | the practice and the habit of challenging yourself and defending your ideas. Develop your personal
00:50:06.640 | virtues, your self-discipline, your integrity, your work ethic. Whatever being a strong person
00:50:16.640 | means to you, do it. Develop psychological strength, spiritual strength, every bit of
00:50:23.600 | strength that you can come up with, but build yourself into a stronger person. Because here's
00:50:29.840 | where I was going when I was trying to give some of those examples of scenarios that I've been
00:50:34.000 | involved in. The strong survive no matter how terrible the circumstances are. I have a friend
00:50:41.360 | of mine who had a business in the Southern Philippines. This friend built a cell phone
00:50:47.680 | tower. It was a good business. So established some agreements to bring in broadband and digital
00:50:55.120 | service to the place, borrowed money, built a cell phone tower. There was good demand. It was
00:51:00.480 | a good business. And then there was a massacre by some of the Islamic terrorists there in the
00:51:07.680 | Southern Philippines in the town. I think over 40 to 50 people were killed, and it almost
00:51:13.120 | instantaneously destroyed the island, destroyed the economy. My friend lost his tower, lost his
00:51:20.160 | business, and wound up fleeing with his family in fear of his life. Had to buy protection from
00:51:25.520 | the leader of the Islamic terrorist organization to allow him and his family passage out of the
00:51:31.120 | area. It was a nightmare. But you know what? He's still alive, and he's still kicking,
00:51:39.200 | and he can rebuild. In all of the circumstances that I kept describing, my friend from Venezuela,
00:51:45.280 | a friend from Kenya, all of these people, they're still able to work. They're still there.
00:51:50.560 | Because in every war zone, in every place of catastrophe, you still are going to wind up
00:51:56.880 | with people. And the strong survive. The strong work at it. So build yourself into a strong person.
00:52:06.400 | Focus on it. I'm preaching to myself. I need to be continually focusing on building myself
00:52:13.040 | into a strong person. Because the circumstances that you and I face in the coming decades
00:52:18.720 | will be just like circumstances that other people have faced in past decades. But in the hard times,
00:52:26.480 | there are opportunities if you're prepared for them. That's number one. Build a strong person.
00:52:30.960 | Number two, build a strong family. Build a strong family.
00:52:37.760 | When structures of support fall apart, we all fall back on family. Now, this is actually one
00:52:47.120 | of the major indications of catastrophe in modern culture. Because families have become increasingly
00:52:55.520 | weakened and splintered, people place more of their hopes and their needs on government.
00:53:02.640 | But government cannot bring people together. The most that government can do is ensure
00:53:08.000 | justice for victims and ensure liberty. That's about it.
00:53:12.720 | I feel like I have almost nothing in common with many other US Americans.
00:53:23.360 | People want to get me all wrapped up in nationalism and American patriotism. I have
00:53:29.040 | more in common with my friend from Venezuela than I do with my next door neighbor. I have more in
00:53:35.360 | common with my friend from Kenya than I do with the person across town who just sees the world in
00:53:41.920 | a radically different way than me. And so this is one of the reasons for the increasing pressure
00:53:48.880 | being placed on political systems. As families and local communities disintegrate, there's more
00:53:54.800 | and more pressure on the political system to solve it. Well, when the political system
00:53:59.120 | falls apart, when the federal government cracks up and goes bankrupt,
00:54:04.480 | you're going to fall back on family whether you like it or not.
00:54:08.240 | We always do. So how strong is your family?
00:54:16.720 | When your mom and your dad's Social Security checks stop coming in,
00:54:20.160 | they're coming to live with you. So how strong is your family relationship with them?
00:54:25.600 | When your Social Security checks start bouncing and the Medicare doctor will no longer see you
00:54:33.680 | and you can't be physically strong enough to stand in the lines to see the one or two who will,
00:54:39.040 | you're going to move in with your children. How strong is your family?
00:54:46.960 | If you build a strong family, then you have a support network. You can support one another.
00:54:55.920 | Where are you going to go when your business goes belly up and you need money?
00:55:00.800 | You need to go to family. So don't worry about politics. Build your strong family.
00:55:10.080 | Number three, build a strong local community with people who live near you.
00:55:17.040 | Physical, in-person communities. You and I can't affect people in a state on the other side of the
00:55:25.440 | country, but we can talk to our neighbors and we can affect our neighbors. We can engage with our
00:55:31.200 | neighbors. We can encourage our neighbors. One of the most worrying trends has been the total
00:55:38.560 | collapse in the United States of the formerly strong local civic organizations. You go read
00:55:45.280 | Robert Putnam's book, Bowling Alone, and he just lays it out. And that's a decade old,
00:55:49.280 | more than a decade ago that he wrote that book. Now, there are other things that have taken the
00:55:56.080 | place of that to some degree, but build a strong community, a strong local community.
00:56:05.120 | Now, those three things are a lifetime's work. Building a strong you, building a strong family,
00:56:10.960 | and building a strong local community, those are lifetime endeavors.
00:56:14.240 | But the stronger those things are, the better and the more support you'll have.
00:56:21.200 | Number four, build a strong financial position in your personal finances.
00:56:29.040 | In short, work to have lots of money and no debt.
00:56:32.960 | The stronger you are, the more easily you can weather storms.
00:56:40.480 | Listen again, I am not predicting stock market collapses. I don't have a clue what the stock
00:56:48.480 | market's going to do. The ability for companies to engage in markets all around the world and to
00:56:56.160 | sell products is powerful. That economic enterprise results in profit. That profit is the result of
00:57:03.840 | thousands and thousands of people working together to create products that people want.
00:57:08.480 | I am not predicting that because the US federal government can't get its act together,
00:57:14.720 | that all of a sudden Coca-Cola is going to stop selling Coke.
00:57:21.360 | What I am predicting is that disruption in society will continue to get worse and worse.
00:57:27.920 | And the stronger your personal financial position, the better.
00:57:32.080 | Set a goal of having lots of money and no debt.
00:57:37.680 | "So Joshua, that's simple." Yeah, it's simple. But set a goal of having lots of money and no debt.
00:57:45.120 | And the stronger your personal financial position is, the easier life storms will be on you.
00:57:51.760 | If you're broke and deeply in debt and you get a flat tire on your car, it can be a catastrophe.
00:57:58.880 | There are many people for whom that flat tire would put them out on the street because they
00:58:06.080 | missed their rent payment, they get evicted from their apartment, and now they're out on the street
00:58:10.080 | and they can't figure out how to rebuild things. But if you have money and no debt, then now your
00:58:16.720 | personal tire need is no longer a catastrophe.
00:58:22.880 | So four, build a strong financial position in your personal finances.
00:58:27.760 | Number five, build a strong performance in your job. Your income is the single most
00:58:34.080 | important thing that will keep you going through times of economic hardship,
00:58:39.200 | through times of economic calamity, through recession. Your income is vital.
00:58:48.000 | As long as you can sustain your income, you can weather through.
00:58:52.800 | If you have income, you can make different choices. You can cut your cable, you can make
00:58:59.280 | different choices and buy cheap food instead of fancy food, as long as you have income.
00:59:04.320 | If your income disappears, you've got problems. So your income is the most important thing for
00:59:09.680 | you to focus on to keep you going through economic calamity. So you're going to need to build
00:59:13.680 | a strong reputation for performance at your job. Being a valuable worker,
00:59:21.360 | valuable to the company, making a difference on the job is crucial.
00:59:30.080 | While you're doing it, build a strong network to help you easily transition to another job,
00:59:35.280 | a new job if you need one. A strong network will help you in your job and it will help you get a
00:59:42.320 | new job when you lose yours. This may be a good time for you to go back and listen to
00:59:48.160 | episodes 192, 193, and 194 of Radical Personal Finance. That is a trio of shows dedicated to
00:59:59.360 | this topic. 192 is called Recession is Coming, How to Not Get Laid Off in the Next Recession.
01:00:05.760 | Guess what, friend, as I record this in February of 2018, recession is coming.
01:00:12.640 | You don't want to get laid off in the next recession. Recession always comes.
01:00:18.800 | Recession is coming. You don't want to get laid off. So listen to episode 192. Number 193 is
01:00:26.160 | called Make a Backup Plan in Case You Get Laid Off in the Coming Recession, Simple Action Steps
01:00:30.720 | for You to Consider. Those are things that you could do today. And then 194 is You Just Got
01:00:36.960 | Laid Off, Here's What to Do Next. My show dedicated to as a resource for somebody who just got laid
01:00:43.680 | off to say, okay, here's what I need to do next. Build strong performance in your job and a strong
01:00:50.960 | network to help you transition to a new job if you need to. Number five, build a strong business
01:00:58.320 | if you own a business or consider building a sideline business or at least have ideas
01:01:04.640 | about alternative sources of income. In your business, look at it and ask yourself this
01:01:10.720 | question. What would happen during hard fiscal times in the United States? What happens to my
01:01:17.760 | business during recession? Can I strengthen my business? Most businesses can press forward
01:01:25.840 | regardless of what happens in the government world. But some businesses can't. So if you're
01:01:35.600 | reliant on government spending for your business, make sure that you're building up a business that
01:01:41.200 | can continue to grow or at least you have an exit plan. Next, six, seven, build a strong portfolio.
01:01:50.560 | Protect your investments. You say how? I don't know how you can do it, but ask yourself how you
01:02:03.840 | would do it given your investment constraints. My answer usually revolves around understanding
01:02:13.600 | your personal financial goals and starting with your personal finances. You can weather a 20%
01:02:23.200 | decline in the stock market pretty well if you're living where you want to live, you have minimal
01:02:29.440 | and no debt, you have money in the bank, and you have a job that pays you well. In that situation,
01:02:35.760 | your investment account balance is not the most important thing for you.
01:02:41.120 | It's a little harder to weather that same 20% decline when you are deep in debt,
01:02:48.640 | trying to figure out how to move your family across the country to switch to a better job,
01:02:55.520 | and you're out of money and have nothing around with which to work.
01:02:59.840 | So my answer is usually investment, sorry, personal finance planning.
01:03:05.200 | Out of debt, low expenses, high income, emergency fund. Then let your investment plans run.
01:03:13.600 | Now within the context of an investment plan, build a strong portfolio. Understand the
01:03:20.400 | diversification in your portfolio, understand the risks in your portfolio, and build a portfolio
01:03:26.160 | that will help you to sleep comfortably at night. If appropriate in your investment plan,
01:03:32.160 | protect your investments. Protect them with insurance strategies, whether that's physical
01:03:41.120 | insurance policies to protect something like a physical investment, whether that's insurance
01:03:46.080 | strategies in terms of a trading strategy, protect your investments.
01:03:50.480 | Number eight, build a strong escape plan. You always need to be able to get out
01:03:58.400 | if you can, if you want to. I consider that this IRS recent, the integration this month of these
01:04:09.920 | new IRS guidelines, one of the most appalling breaches of trust, because it starts to place
01:04:18.960 | constrictions on somebody's movement. I am so sensitive to government interaction, because
01:04:27.920 | government is always used as a tool of violence for those who want to exert violence on somebody
01:04:33.760 | else. It always winds up in whoever is popular and powerful at the time being able to take
01:04:42.960 | advantage of the person who's weak. Don't allow yourself to get in the position of
01:04:49.440 | weakness if you can avoid it at all. For example, for a long time, one of the
01:04:53.520 | worst things about if you're behind on child support payments, many of the family courts
01:04:58.080 | have become weaponized against so many people, especially men. If you wind up and you put
01:05:03.600 | yourself in a situation where you're behind on your child support payments for the court,
01:05:07.760 | now your passport has been restricted. That's not new. That's been the way it's been. The
01:05:11.680 | amounts of that, I think if memory is right, are pretty small. I think it's something like $2,500.
01:05:16.080 | If you're in arrears on child support, you've got a problem. Make sure that you're putting
01:05:21.360 | yourself in a situation where you don't get there. Build an escape plan. If you need to get out of
01:05:27.360 | the inner city where you live, make a plan and get out. If you need to get out of an unsafe state or
01:05:34.160 | an unsafe region, make a plan and get out. If you need to get out of a bad country,
01:05:39.680 | make a plan and get out. Build a strong escape plan so you can move fast.
01:05:44.480 | Open a newspaper, get online, study Venezuela. I do not think the United States of America
01:05:53.200 | would ever look like Venezuela. I don't. Venezuela is very different. But I think it's important to
01:05:59.360 | study real life, current scenarios like Venezuela and learn the lessons. The International Monetary
01:06:08.320 | Fund is predicting a 13,000% inflation rate in Venezuela this year. Yes, you heard that right.
01:06:17.440 | I repeat, the International Monetary Fund is predicting a 13,000% inflation rate in Venezuela
01:06:29.680 | this year. That's today. That's not the Weimar Republic. That's not Zimbabwe. That's Venezuela,
01:06:43.520 | a modern economy sitting on untold wealth as measured in natural resources
01:06:53.520 | with a rich and proud cultural heritage. A decade ago,
01:07:00.800 | I was sitting in a college classroom in Central America,
01:07:06.000 | listening to college professors expound the virtues of Venezuela and Hugo Chavez.
01:07:13.840 | Today, a decade later, the International Monetary Fund predicts a 13,000% inflation rate in Venezuela
01:07:21.840 | this year. The refugees are lined up at the border of Colombia, desperate to get out.
01:07:28.320 | You always need to be able to get out. So build an escape plan. If you don't have a passport now,
01:07:36.480 | get one. If you don't have an idea on where to go, make one up. Build an escape plan,
01:07:44.480 | because the easiest way to get around most problems is just leave.
01:07:50.720 | Number nine, build a strong homestead, a strong home base.
01:07:58.160 | One of the major tragedies of the modern era is that the government has been
01:08:04.320 | trying to disconnect the financial system from real wealth, the real things that you need.
01:08:12.080 | And our houses and our land is a net consumer of financial means rather than a provider.
01:08:20.800 | Our houses sit empty. We heat them and cool them all day long while we're not there,
01:08:27.440 | or we drive in a car to go and work at a job that we don't like that's 50 miles away from
01:08:31.120 | where we live. What's the point? Build a strong homestead, a place where you want to be.
01:08:37.840 | Build a house that you want to be in. Make your house provide for you, not just to keep the rain
01:08:44.640 | off, but also make your house provide your energy for you. Make your house beautiful. Make it a
01:08:49.280 | house filled with love. Make it a house that cools you, that feeds you. Put a flock of chickens in
01:08:55.200 | your backyard. Put a dairy goat in your backyard if you want one. Raise some fish so that you can
01:08:59.920 | eat protein. Plant a garden with your children so they can get good microbes in their skin.
01:09:05.120 | It's proven to improve their health. Build a place that you want to be.
01:09:09.280 | Pay the house off so that it's a stable place to live. Back it up with money in the bank and a
01:09:16.560 | fruit tree out front so that you can build a stable life. Your property should provide for you.
01:09:21.440 | Number 10, build a strong plan for the future. Future is incredibly bright.
01:09:29.200 | What happens is when you're in the middle of crises, or you're in the middle of what looks
01:09:34.720 | like a crisis, as I sketched out with discussion of fiscal stupidity,
01:09:40.560 | when you're in the middle of a crisis, it's easy to forget that the dawn is coming.
01:09:46.080 | But if you look back over the arc of history, what you see is that through every crisis comes
01:09:52.560 | opportunity. The future is bright. Every single year, the world gets better and better and better.
01:10:01.520 | And ultimately, when the United States of America implodes, just like all of the other
01:10:11.840 | empires before us have imploded, whether that's slow and painful or whether that's quick and
01:10:18.800 | fast, same thing, whether it's slow or fast, something else will replace it. And by being
01:10:29.600 | strong yourself, by building a strong family that supports you and that you support others,
01:10:37.920 | by being engaged in a strong local community, by building a strong financial position in your
01:10:44.720 | personal finances, by having strong job prospects or a strong business, by having a well-built,
01:10:51.600 | strong portfolio, by having that strong escape plan to fall back on if you ever need it,
01:10:57.120 | and by having that strong home base to work from and to build from,
01:11:00.320 | then I'm convinced you may have the opportunity to be one of those who builds the next thing.
01:11:10.160 | If you go and you study the life cycle of many companies that wind up bankrupt and in ashes,
01:11:16.320 | it's not unusual to find an employee or a handful of employees that come out of that company
01:11:22.080 | and get together and say, "Now that we're unburdened from the wreckage that was the
01:11:29.120 | previous company, now that we're unburdened from the debt, now that we're unburdened from
01:11:35.280 | the corporate regulations, let's build something new and better." My hope is that you can be part
01:11:42.320 | of that that's new and better, and me too. That's my best summary of the ideas that I have to
01:11:49.840 | improve things for the future. Don't try to convince me from here on out that politics has
01:11:56.560 | any hope of making a difference. I haven't really thought politics had much of a difference,
01:12:02.640 | made much of a difference for the last decade. I mean, man, national politics. I hadn't really
01:12:07.120 | thought it made much of a difference, but just watching last week with the Republicans and the
01:12:12.320 | Democrats and the boondoggles of the last couple of weeks convinces me beyond measure that politics
01:12:19.280 | has no hope. The hypocrisy from the politicians is so thick. It's insane. It is insane.
01:12:29.760 | How any normal, reasonable person can think that all...can think that those people just don't just
01:12:42.080 | lie through their teeth. But whatever sounds politically expedient is beyond me. Maybe there
01:12:46.880 | were a few handfuls. Kudos to Rand Paul for standing up and speaking on the record. I think
01:12:51.920 | his speech, I went and watched some of his speech. It should be required listening in my mind for
01:12:59.040 | most citizens before voting. I'd love to see that happen, but whatever.
01:13:03.280 | I just can't buy it. I'm not really sure how to end this show. I don't have a powerful,
01:13:15.840 | punchy ending. I don't have any strong closing story or call to action. I just want you to be
01:13:23.920 | strong. I hope this is not too dark. I don't want to compare the severity of these things.
01:13:38.640 | But the only example that comes to me as I think about when it comes to political stuff,
01:13:46.320 | I wonder about the inevitability of things. Because I think the future is not decreed in the
01:13:56.320 | sense that it's unchangeable. The future is open. It can be changed. I think sometimes,
01:14:05.120 | I don't know if you're familiar with the Rumbula massacre during World War II. It was one of the
01:14:11.440 | worst massacres of World War II, massacres of Jews by the Nazis, where they killed about 25,000
01:14:18.240 | Jews. It happened near Riga, Latvia. It was huge and in an evil way. But basically, the way that
01:14:31.760 | the events worked out is the Nazis decided that they wanted to clear out the ghettos in Riga.
01:14:41.760 | They came in and they made big plans. They had the people dig these big pits. It was so evil.
01:14:46.640 | They brought in some people who had been really skilled in giant massacres of people previously.
01:14:54.720 | They brought out bulldozers and they dug these giant holes in the ground. They had to
01:15:01.120 | dig them with ramps so that it would be efficient to load the people down into.
01:15:07.040 | Then they swooped through the ghetto and they started grabbing all the people off the street.
01:15:13.040 | They actually marched them 10 kilometers, something like 10 kilometers out of the city
01:15:18.000 | to the planned murder location. While they were marching them there, they had guards along the
01:15:24.160 | road. Then they had this whole system set up. They took the people and they marched them to a place.
01:15:30.080 | They told them to take their clothes off. They took all their clothes off, made stacks of them.
01:15:33.440 | Then they marched them naked right down into the pits and then they started shooting them.
01:15:37.280 | They did it very systematically down in levels where they would make force the people down into
01:15:42.800 | the pits and make them lie on the people below them in the pits who had just been shot. Then
01:15:50.480 | the guards lined up and shot them in the back of the head. They killed 25,000 people in one day.
01:15:59.440 | What's the point? The point is that you always wonder, is there a point along the way which if
01:16:07.040 | people just simply moved and fought back that they could stop the madness, stop the evil?
01:16:17.040 | It's hard to believe there's not.
01:16:25.760 | If you think about thousands of people being marched 10 kilometers, you can never get enough
01:16:30.960 | guards with guns to keep that many people
01:16:36.960 | hostage unless the people themselves are not strong enough to fight back.
01:16:49.920 | Now, at the fear of using a horrific comparison, and in no way am I comparing fiscal insanity
01:16:58.160 | to the Holocaust, but in a way, I often think about that. People just standing there digging
01:17:07.280 | their own graves. There are many accounts of Jews being forced to dig their own graves right before
01:17:12.880 | they're shot. You wonder, at what point in time when somebody's digging their grave, do they not
01:17:16.000 | just turn around and say, "No, I'm not going to do it"? On all of this political stuff, it's like
01:17:23.120 | the culture of the United States is being ripped apart. You just wonder, at what point in time are
01:17:29.440 | people going to stop and say, "This isn't working. The violence doesn't work." I don't know. I don't
01:17:40.160 | know if it's possible. I hope it is. But I do know that if you're strong, if you're a strong person,
01:17:47.520 | strong family, you're part of a strong community, you're in a strong financial position, you have a
01:17:52.000 | strong performance in your job, strong business, strong portfolio, strong homestead, strong escape
01:17:56.480 | plan, then perhaps you could be one of those who could either fight your way off of that road
01:18:06.080 | while everyone's marching to their death and you slip away, or perhaps you can be one of those who
01:18:13.040 | organizes the victims to stand up and say, "No, we're not going to take this." But if you're broke,
01:18:24.080 | you're a weak person, your family is torn apart, you're not part of a local community,
01:18:32.400 | you're broken in debt, you're struggling at your work, it's not going to work. You can't be part
01:18:40.720 | of the solution. So don't worry about politics. Don't worry about the federal government. I don't
01:18:45.040 | think much of anything is going to change this year. But work to become a stronger person. Do
01:18:52.560 | the good that you know to do and get busy. Because who knows if Stockman's right or not, but it sure
01:18:59.440 | feels to me like this last week was indeed a night that will live in infamy, at least for me.
01:19:05.520 | Doesn't seem many other people paying attention to it, but for me, it was the final nail in the
01:19:11.760 | coffin of the idea that there's anybody in government who wants to spend less money.
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