Is the government ever better than the private sector at doing anything? I say yes: it is better at grossly mismanaging just about everything it touches.
The latest case in point is the poster child for government bureaucracy and inefficiency, the U.S. Postal Service. This quasi-government entity just reported an annual loss of a record $15.9 billion for the year, a dismal showing that came along with a foreboding forecast for more red ink in 2013.
Last year, the Postal Service defaulted on billions of dollars in payments in an effort to avert bankruptcy. Meanwhile, the flailing entity also reached its borrowing limit. Lack of operating capital, huge payments due for future retiree health benefits and a lack of revenue from changing consumer habits has exposed this agency for the anachronism that it has become—and that’s despite its monopoly on first-class mail delivery.
What the Postal Service’s troubles highlight is one of many big government threats to your prosperity, because ultimately, the taxpayers are the ones who are going to pay the price for this governmental folly.
Here are five big-government threats to your prosperity that you need to understand and prepare for now, before they take you by surprise and gobble up your hard-earned money.
It’s no surprise that the Postal Service is losing money. For decades, its monopoly on first-class mail delivery made it a fat and lazy government-created cash cow that could simply rely on a lack of competition for its success. Then came services such as FedEx (NYSE:FDX) and UPS (NYSE:UPS), and then of course the explosion of electronic communication via e-mail, which rendered the old-fashioned letter an inefficient waste of time.
Yet because the Postal Service is a hybrid form of a governmental agency, and because it employs so many people, we the taxpayer will almost certainly be tapped to rescue the Postal Service from its own monopoly mismanagement. That means higher costs for us all in the form of increased postage on first-class mail, and it means a reduction in service in the form of plans to cancel Saturday mail delivery. Together, it means the productive citizen gets less for more—or put colloquially, it means you and I will continue to get screwed by government mismanagement yet again.
The recent deal on the fiscal cliff proved that whatever bi-partisan solution we get from Washington, it’s probably going to involve more money out of your pocket. Already, all of our paychecks are smaller thanks to a 2% increase in the Social Security payroll tax. Then there are the additional taxes on the most successful Americans, individuals making more than $400,000 or couples earning more than $450,000. Soon we’ll start facing the increased tax burden associated with ObamaCare, which is estimated to confiscate well over $100 billion from the economy.
I suspect that the tax increases we’ve seen this year are just the beginning of more of the same going forward. Early indications are that President Obama is going to double-down on his rhetoric in the next State of the Union that the rich need to pay more, i.e. their “fair share,” for the cost of more government programs such as increased infrastructure spending, and more government of all stripes. With a compliant Senate in place, and what has so far proven to be a Congress that’s ready to compromise with the president so as not to look like the bad guys, the likelihood of more money out of your pocket in the years to come is an almost certain bet.
The Federal Reserve, the European Central Bank, and the Bank of Japan all have one thing in common—each wants to make their respective currency as cheap as possible. Indeed, the latest buzzword in the markets right now is a “currency war,” meaning that central banks around the world are trying to debase their way into economic prosperity. This veritable race to the bottom to see who can make their currency the weakest, and thereby create favorable conditions for companies that export goods, has been going on here in the U.S. for some time now.
The quantitative easing and zero-interest-rate policy of the Federal Reserve over the past couple of years has failed to result in much improvement in the employment picture, and in the most recent quarter we witnessed a contraction in GDP. In Japan, the new policy is to stimulate inflation after two decades of deflation. In the case of Europe, that region is doing whatever it can to inflate its way out of debilitation sovereign debt.
The bottom line here is that debasement of the world’s currencies is a ticking time bomb that will explode in the form of mass global inflation—and that means your money is going to buy far less than in the future than you think it’s going to.
The Crisis Cure
“You never want a serious crisis to go to waste,” said former Obama Chief of Staff Rahm Emanuel. Well, there are always plenty of crisis to go around, and that means plenty of opportunity for big government to swoop in and take away more of your rights, and more of your money. Natural disasters such as Super Storm Sandy give government the opportunity to funnel your money to Congressional pet projects, as evidenced by the pork-laden spending we saw in the latest Hurricane Sandy federal relief fund package.
Then there is the curtailment of Second Amendment rights proposed by President Obama in the name of making the country safer. The theory here is that we have to do something to keep kids safe, so why not attack the Constitution? Of course, the president and leftist politicians won’t put it in such blunt terms, but the reality here is that big government wants more control over your rights and your money, and gaining that control in the name of public safety or to cure a crisis is a great way to do so. Unfortunately, the more control the government has, the less control the individual has.
What Can One Do?
The four big-government threats to your prosperity outlined here represent daunting obstacles to your personal sovereignty, as well as to your prosperity. Fortunately, there are ways to shield your wealth, and your liberty, from the tentacles of an ever-expanding federal leviathan.
Having a properly constructed, diversified equity, bond and commodity portfolio, along with taking proactive steps to insure your physical security, your health and your finances, all represent broad steps you need to take to make sure you minimize the threat to your prosperity posed by big government.
Whatever you do, don’t let yourself be a victim of circumstance. A failure to act in your own rational self-interest with your money represents the ultimate in complacent behavior. Don’t let yourself fall into this trap. Be proactive, not reactive, and always remember that you are the only person who can take charge of your money—and your life.