Copyright 2012 by John T. Reed

The politicians of both political parties are doing everything they can to distract voters from the real issues of federal government policies.

The real issues are, in rough order of importance:

1. Reversing the direction of the U.S. debt-to-GDP ratio. It is 104% and rising. It must be lowered to 60% or less ASAP. It was 112% at the end of World War II, the all-time record. The lowest it has been since World War II was 25% in 1974. This is an emergency akin to a ship at sea being on fire. The fire must be put out before you worry about the comforts of the passengers or the speed of the ship.

2. Stopping Iran from acquiring nuclear weapons. It appears likely that if they acquire one, one will soon explode in the U.S. or one of its allies.

3. Improving the GDP growth rate from around 1% recently to 3% or higher.

4. Ending our boots-on-the-ground occupation of Afghanistan while continuing to kill al Qaeda and Taliban from the air.

Is that what the presidential candidates and pundits are talking about in the campaign? Barely. They are talking about tax returns, war on women, gaffes, being out of touch, keeping past promises, values, civility, whether the dumb voters will fall for this or that ploy, etc. Don’t waste a minute listening to or thinking about any of that stuff.

If Romney wins, how will that affect the four important issues listed above?

1. Roughly speaking, he will do nothing to lower the debt-to-GDP ratio other than slow the growth of the debt (the numerator) and try to increase the growth rate of the GDP (the denominator). In other words, he intends to lower the debt-to-GDP ratio by ignoring government spending and trying to grow our way out of it. That has no hope of working. The debt is too big and plausible growth rates and the federal tax revenues that will result from higher growth are drops in the bucket. For example, GDP is now $15.3T. 5% growth, which is very high historically, would add 5% x $15.3T = $765 billion to the GDP. According to Hauser’s Law, 19.5% of that would turn into tax revenue or 19.5% x $765 billion = $149 billion of additional tax revenue. Since that is a mere 10% of the recent annual deficits, it is barely noticeably with regard to lowering the deficits and means the actual debt will still climb by 90% of what it is currently scheduled to climb at.

The Ryan plan aims to balance the budget in 28 years! Balance the budget means to stop deficit spending. In other words, the Republicans do not plan to stop the national debt from growing larger and larger until 28 years from now and they have announced no plan to lower the national debt ever. They would simply increase it ever so slightly slower than Obama.

Furthermore, 28 years is a silly number. We are likely to suffer hyperinflation from inability to borrow any more within about four years. When Ryan’s 28-year valhalla arrives, it will be more than 20 years after the U.S. suffered through the hyperinflation, which itself will wipe out the national debt (along with the life savings of many). And even if Ryan spends eight years as VP then eight more as president, he will be retired for 12 years by the time his 28-years-from-now balanced-budget date arrives.

About all the Republicans will accomplish if they win this year is getting blamed for the hyperinflation.

2. I have no idea that Romney will stop Iran from getting nukes. How would he? Our dropping nuclear weapons on Iran is about the only way to stop them. We do not have the money for another conventional war and China will not give it to us for a war against Iran.

3. Romney would probably improve growth by getting out of the way of the private sector, but as I said above, there is no hope of growing our way out of the debt crisis. We must cut federal spending by about 50% and we will be forced to do so in around six years. That is when the other “solutions”—kicking the can down the road, borrowing, “printing” money—all finally stop working. At that point, the U.S. government will spend the money it takes in in taxes, and not a penny more. The Social Security and other entitlement recipients will scream and threaten to vote the Congress and president out, but when there is no money to pay those benefits, there is no money, and that means there is no other “generous, compassionate,” political party to vote in. Both major parties will at that time be forced to admit, “It’s over. There is no money to pay all those entitlements and there never will be.”

There will be no choice in the voting booth about how much we spend. Both parties will be forced to spend the same. The only thing you can decide in the voting booth then is whether we will shut down the U.S. military or cut Social Security and Medicare checks. At that point, the U.S. Congress and president will simply fight over how to slice of the $2.3 T tax revenue pie. The additional deficit spending part of current federal spending will no longer be an option. Paying off the national debt—U.S. governmen bonds—as they mature, will also no longer be an option. Paying the interest on U.S. bonds not yet matured will probably not even be an option. When there is no money, there is no money.

4. Romney may end the Afghan war. Obama probably will, too. It is all just inertia now. Sorry if your child dies there. It appears they are only dying now because our commanders in chief want to look tough on terror. They fear leaving too soon makes them look weak. There is no longer much military mission in Afghanistan, only a political publi- relations mission.

Stuff like Romney’s tax returns are utter nonsense. Romney hav already disclosed all his tax returns to Tim Geithner, who was found to have cheated on his taxes before beoming head of the Treasury and the IRS. If Romney had done anything wrong on his taxes, you can bet Geithner’s subordinates would have audited and prosecuted him.

John T. Reed