OTHER PEOPLE’S MONEY

We are within days, not weeks, of entering a whole new phase of the COVID 19 crisis. This is when the geniuses in charge of our government realize they are running out of other people’s money.

Margaret Thatcher:

“The problem with socialism is that eventually you run out of other people’s money.”

When I was stationed in Vietnam I quickly learned the significant difference between two words: “outgoing” and “incoming.” Outgoing meant our own artillery was firing at targets. That was very loud, but not a threat to us. Incoming meant we were being attacked and I needed to take cover.

Shortly before the end of my last tour I was at Da Nang AB when I heard a rocket go overhead. So I yelled “incoming” and immediately dropped down into the nearest pot hole bunker. This was why those bunkers were there. I was walking with an airman who had only been in country about three days. I was his flight instructor. As I was lying down in the bunker, he was just standing there staring at me. Just as I told him that “incoming” meant we were under attack, a rocket hit about a ¼ mile away. It was not close enough to cause either of us harm, but it was close enough to permanently change his perspective on things. No one had to explain what “incoming” meant again.

There is another important term to understand. That is “financial death spiral.” I was responsible for purchasing the insurance for a major corporation. I soon discovered that they had a health care plan that was literally in a financial death spiral. What happened was that this program offered top of the line protection. It was a great plan, but it was much more expensive than the other health care plans. Someone had decided that the solution was to raise premiums for employees who signed up with this plan. Employees, who chose other, less expensive plans, would pay much less. It probably sounded like a good idea at the time. But it resulted in adverse selection. The more rates increased on this plan, the fewer number of healthy employees who were willing to pay for it. The result was an unsustainable loss ratio. Increasing rates would only make things worse, because it would increase adverse selection. It was in an irreversible financial death spiral.

State governments who ordered strict shelter in place directives have put their own economies into a financial death spiral. But, like that airman in Vietnam, they didn’t even recognize the danger. The longer this lasts, the worse it gets. They have drastically cut their own income while simultaneously increasing expenses. That has never worked. If they increase tax rates they will get even less actual tax revenue because the economy cannot absorb more taxes. The only possible solution is to cut expenses quickly and dramatically. They will eventually do exactly that, but only as a last resort after begging the federal government to fund their own financial mismanagement. Sooner, rather than later, these governments will have to start laying people off. These will be people who thought they were essential. People who thought working for the government meant job security.

Governor Newsom is already asking to borrow money from the Federal Government to pay unemployment claims. How does he intend to pay that back? He is already hinting at drastic budget cuts. Few in the MSM realize what this really means.

Some governors are focused only on the need to be safe and open the economy slowly and responsibly. Whether they realize it, or not, they are instead blundering into a far more dangerous situation. The economic impact of this shutdown is going to be far more deadly than COVID-19 and that will soon become impossible to ignore. If you think people are angry now because Governor Newsom won’t let them go to the beach, wait until they realize the economic damage being done to the golden state.

Some predictions are easier than others. I predict that sooner, rather than later, there is going to be ten times the reporting on the economic disaster than there will be about COVID-19. It won’t be long before the COVID-19 death toll is the least of our worries. That is particularly true when it becomes obvious that the number is deliberately over inflated. Every restriction put in place to “safely reopen the state” greatly increases the danger of financial meltdown. But, it is already too late. This economic storm is on the way and nothing is going to slow it down. The more a state is governed by a socialist mentality, the more the severe the economic destruction. Margaret Thatcher warned us. Eventually you run out of other people’s money. When you stupidly order people to go home and stop working that happens sooner rather than later.

TDM.

One thought on “OTHER PEOPLE’S MONEY

Leave a Reply