Unfunded federal liabilities of $108 TRILLION
National debt of $13 TRILLION
Annual federal budget deficit of $1.5 TRILLION
Those kinds of numbers make our state's upcoming budget deficit of $20 billion seem kind of trivial, no?
The big difference between California and the federal government, of course, is that we can't print up our own money to fix the problem by "kicking the can" down the street for another generation to pay.
Much like a normal household, we have 4 ways in which we can bring our budget into balance:
- Reduce expenses
- Increase income
- Receive a gift from a rich relative
What I have witnessed and experienced is our state's preference to raise income. To you and me, that means increased taxes and fees. You'd have to be nuts not to think that more of this is coming our way.
We've also shown an inclination to borrow our way out of our troubles. Now, I don't have a problem with any entity - a person or a government - borrowing money, as long as the term of the loan matches the expected lifespan of what's being purchased.
For instance, if we issue state bonds with a maturity of 30 years, and those funds will be used for the construction of a dam or other significant piece of infrastructure, I'm OK with that. What I can't abide by is when we borrow long-term funds for short-term expenses.
The $15 billion Arnold borrowed on our behalf when he first came to office comes to mind. That money has long been spent, and we'll have to pay the bill for a very long time.
The last option is a gift from a rich relative. In our state's case, that would be Uncle Sam. What plays in our state's favor is that we are one of Uncle's favorites. We are the epitome of Too Big To Fail.
Here's the problem, though: We're not the only state with financial problems. If Uncle gives us some money, he'll have to give all of his other financially inept nieces and nephews some money, as well.
For that to have any chance of passing muster with the House and Senate, they will have to force us to swallow some very bitter medicine. We will have to go on some sort of austerity plan.
That plan will necessarily consist of tax increases and service cuts. For the long-term, the shrinking of government will be great for California, as it may provide political cover to our spineless state "leaders" to make the cuts that are long overdue.
My concern is with the short-term. What will be the likely reaction from the people that pay taxes being asked to pay even more, and from the people that receive the benefits being told that the trough is empty?
I think the recent events in Greece spell that out quite clearly.
If we don't have violent protests this summer (and next), I will be shocked. We will have civil unrest. And unlike the recent violence we've seen from people upset their tuition is going up and/or their services are being reduced, I believe that the formerly-passive tax paying public might jump into the fray as well.
Enough is enough.
So what can you do to reduce the negative impact of what might be coming our way?
On the financial side, you should have already started your own austerity program. If not, start one now. In the coming months and years, financial liquidity will rule. Money gives you options. The more of it you have (or keep), the more options you have.
The more dependent on the state or a job you are, the less able you are to act in your own best interests. Flexibility and adaptability will help to ensure your success.
Personally, for the last 2 years, my family has worked to reduce our dependence on any one person or stream of income. If one fails, we're not decimated.
We have a cash reserve which now allows us to buy what we need when the best prices present themselves. When we look to buy something, our first instinct is to look at Craigslist or Freecycle first. If it's not available, we look to buy it online (specifically with out-of-state companies to save the nearly 10% sales tax), THEN we'll look at buying from a retail store.
Our focus is on the preservation of OUR capital, not on the cash flow of the state. They have shown that they don't deserve our loyalty.
Regarding civil unrest, I strongly recommend each and every one of you learn how to defend yourself and your household. I've got to believe most preppers have already got this mindset, but if you haven't taken some concrete, practical steps to learning about safety awareness and some flavor of self-defense (from martial arts, to pepper spray/stun gun, to firearms training), please do so now.
If you need more incentives, look at your local newspaper, and count up the number of stories on robberies, home invasions and assaults. Do that every day for a week. Nice, huh?
You never know when violence can erupt. In Philadelphia, for instance, they are having increasing problems with "flash mobs". A viral text message is shared, and suddenly a few thousand people show up in one spot. They're not there for a poetry reading. You might find yourself in the middle of this.
See how well calling 9-1-1 works in that situation.
I've got a new, favorite saying: Audentes fortuna juvat. It's Latin for, "Fortune favors the bold."
Our coming times will not be kind to the meek or passive. Bring a bit of boldness into your life.
You can follow Chief Instructor at Accept The Challenge.
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