Guest Post: More Cliffs Than Fiscal

Tyler Durden's picture

Via Charles Hugh-Smith of OfTwoMinds blog,

The fiscal cliff is not the only cliff we're racing toward; there are others.

The fiscal cliff dominates the mainstream news, but it is more like a bump on the pathway to the real cliff. In essence, the path has turned down and we're picking up momentum, gaining speed as we head for the cliff.
The real cliff is the gap between what has been promised and what can plausibly be collected in tax revenues: $86 trillion but one recent estimate, over $120 trillion by other guestimates. The difference is caused by the relative rosiness of the projections to control Medicare and Medicaid spending. Lower estimates assume we can stop the growth of these programs in the long-term, something that has not yet happened for the reason that the system lacks any controls to do so.
This gap widens by $7 trillion a year. That is, the promises to present and future retirees and beneficiaries goes up if we count the promises made not just for 2013 but for the future.
This $7 trillion is twice the entire Federal budget and roughly 50% of the nation's GDP. 
Understood in this way, we can see that raising taxes by $200 billion or cutting expenditures by $200 billion is not going to keep us from hurtling off the real fiscal cliff in a few years.
The fiscal cliff is only one edge we're racing toward; there are others. One is a Constitutional Crisis cliff that is just beyond the fiscal cliff, because the Constitution has failed to limit the power of concentrated wealth (the financial Aristocracy) and failed to resolve the Tyranny of the Majority: 50+% of the voters are now dependent on Federal transfers, while 25% pay 90% of the Federal income taxes. Those collecting benefits will naturally vote for what they perceive as their immediate self-interest, which is raising taxes on the minority until the minority rebels.
The only other option is to print the needed $100 trillion, which will destroy the nation's currency and economy. Either way, the 50+% will find the promises made are empty. Either the oppressed 25% opt out ("when belief in the system fades") and tax revenues collapse or everyone's $1,500 transfer from the Federal government will buy a single loaf of bread. Either way, we will face a political crisis.
We have been trained to ridicule any suggestions that technology won't/can't save us, but the one undeniable truth about technology is that it destroys 90% of the jobs in the industries it revolutionizes. Agriculture, for example. Music stores. Travel agencies. Some other employment sectors are only cut in half, for example admin assistants. The range of job losses triggered by advances in technology is between 98% and 50%, depending on the rigidity and inefficiency of the industry being transformed.
For forty years we have counterbalanced this loss of employment by borrowing and spending money on labor-intensive consumption: more healthcare, more retail, more tourism / hospitality, more government. But even these sectors are starting to come under technological pressure, despite the political moats that have been dug around healthcare, education, defense, housing, etc.
The pressure is not just technological, it is financial: the game of borrowing ever-more money to fund all this labor-intensive consumption is almost over. Right now we have a structural deficit of $1.3 trillion, and simply keeping it at this level will require politically impossible limits on the growth of government spending. Meanwhile, tax revenues have topped out. As tax rates go up, people change their behavior to pay less taxes. As a result, tax increases always raise far less money than static, linear projections estimate.
Many claims for technological revolutions are overblown and unrealistic. High school physics, chemistry and biology, bolstered by an interest in keeping up with scientific advances (via mainstream science magazines such as Scientific American), is more than enough to analyze claims of "scientific revolution" with a grounded skepticism. To take but one example: all those stories about nano-robots being introduced into our bloodstream to chomp away at our clogged arteries. What will fuel these little machines? Some recent work suggests they can use glucose as a fuel, but even this ignores the reality that the clogged arteries are a symptom/result of lifestyle choices, not the cause per se of heart disease. In one field after another, horrendously costly "cures" are actually being directed at symptoms, not causes.
With even a modest foundation of scientific understanding, many of the claims for "revolutionary" technological advances founder on basic limits of the real world or the cost and difficulty of scaling up a technology to the point that it is both affordable and broadly applicable.
I recently saw an article hyping an advance that could eliminate batteries in pacemakers--the aforementioned glucose-fueled electronics. But given that perhaps 1% of the global populace can afford a pacemaker, how "revolutionary" is this advance? It seems extremely marginal compared to indoor plumbing, clean water, eliminating malaria, etc.
What technology reliably accomplishes is a wholesale reduction of human labor and jobs.  What it no longer does is create new labor-intensive industries. 
We thus face an inequality cliff that is (unsurprisingly) connected to the fiscal and constitutional cliffs: how do we transfer wealth from the productively employed few to the many unemployed/ under-employed without creating a society of dependents? We have "fixed" this problem by borrowing or printing trillions of dollars. That "solution" has now entered the marginal-return death spiral.
We will have to come up with a new social contract built on community rather than a debt-dependent Central State and its cartel/fiefdom partners. Hoping that technology will solve that knotty problem for us is delusional, as technology only further reduces human employment.
This essay was drawn from Musings Report 49. The Musings are sent weekly to subscribers and major financial contributors (those who contribute $50 or more annually).


My new book Why Things Are Falling Apart and What We Can Do About It is now available in print and Kindle editions--10% to 20% discounts.

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Snakeeyes's picture

The chart of projected spending is sickening. Especially since the clowns in DC have no intention of cutting back.



1100-TACTICAL-12's picture

The Jubilee cometh, in one form or another.

SWRichmond's picture

"...until the minority rebels..."

Until Atlas shrugs.

Bicycle Repairman's picture

"We have been trained to ridicule any suggestions that technology won't/can't save us,"

In the 1990's technology saved us by creating lots of well paid high tech jobs.  The government turned around, created the H1B visa program, subsidized outsourcing and destroyed those jobs.  Basically they drove a knife into the back of Americans who spent years getting trained largely at their own expense.  Savings and tax revenue also left with those jobs.  It was a conscious decision by government.

Why bother with technological solutions if the political system will simply lay waste to them?

Shizzmoney's picture

The United States Government is a bubble.

Joshua_D's picture

All states are bubbles. All societies are bubbles. The wheel is turning.

The trend is your friend's picture

"all this leads to war" ...Kyle Bass

"Looks like plenty of seniors are gonna get whacked to save on SS and Medicare"... Soprano. 


Yes, war(s) are on the pathway to the final scene. They can delay the inevitable but the real problem is too many people fighting for too few resources. We all know it. Japanese people have reacted with a net decline in population growth. They see the destructive nature of over population. The UK (MI6) reacts by releasing the AIDS virus into the wild. An extreme way to control the exponential growth factor to be sure they fear it's runaway growth. India birthing 1 new human-imal every minute.

gnomon's picture

In the backrooms of various capitols around the world they are desperately trying to figure out how to eliminate 90 per cent of us without destroying most of the infrastructure and the overall environment.  

I don't think that it can be done.

To the ovens willingly?

Winston Churchill's picture

Neutron bombs.Man made viri causing  pandemics with only the elite innoculated..

They already have the means.

The timing is up to them.They will be unleashed when control looks like its

slipping from  their psychopathic hands.

gnomon's picture

Fukushima?  Spent Fuel Pools all around the world all need intensive tending to keep the rads from releasing.

lincolnsteffens's picture

Now there is a new  job creation category and population eliminator both at the same time!

Spastica Rex's picture

The frogs are nearly boiled. In the West, "Occupy" and the "Tea Party"  were the "revolutions."

Game over, but I don't think anybody has a real clear idea of what the final die-off(s) look like, how they happen, or how long they take.

Everybody dies anyway, so I'm not too concerned. The Industrial World was nice while it lasted (for many).

Viva the 10%ers! Viva the chosen half-billion!

e-recep's picture

no revolution is bloodless. ows and that tea party thinghy were no where near a revolution.

merizobeach's picture

"To the ovens willingly?"

In a sense, yes, but only because the metaphorical 'ovens' are actually the grandchildren-sterilizing/mutating effects of the GMO crops we're stuffing into ourselves.

I'd link it, but I have several times before already, and there are so many articles on the topic now, just google 'GMO sterility'.

GMadScientist's picture

As usual, slightly less than one mind.


tmosley's picture

Buy my book.

Buy My Book.




MrTouchdown's picture

Technology destroys jobs? That Lauddite Fallacy is just so tempting to latch onto!


The only way to "destroy jobs with tech" is if there is a limit on how many businesses can exist within an industry. Of course, that's exactly what most regulations do. Remove that hurdle and everyone will have their own tech based firm. 

Spastica Rex's picture

That's just silly. And it's "Luddite."

tickhound's picture

All you did there was BUY TIME for a model that is designed to INSIST the earth GROW, while CHOKING it at the same time.

I mean, EVerybody's a fucking luddite now?

Maybe, bitchez, it's time to start questioning the model???  The one we've come to assume is NATURAL?? 

The model that offsets the lack of profits associated with LABOR SCARCITY, by increasing those profits through EVEN MORE labor scarcity!?! 

Saving some energy is profitable in this model, JUST NOT FOR YOU.  Your energy has been on the chopping block of this model since day one.  When human INNOVATION becomes this increasingly larger worry, maybe its time to question how this technology is being utilized, and under what premise, what goals?  It's no stretch of the imagination to think that we could use technology, DIFFERENTLY.  Its all designed for PROFIT first... SOLUTIONS are secondary side effect happen-stances.

No system is perfect.  We all know this.  But THIS ONE's time is over.  Great when we had to "fetch a pail a water"  But it sucks now.       

Next thing you know we are conditioned to believe INFLATION is GOOOOOD so long as WE'RE BEGGING for floods to wipe out towns and cities to offset the LACK of Growth.  Some analysts convincing OUR DUMBASSES to actually want this shit, cuz the model says so.

None of these freaking "analysts" are EVER going to question the premise.  Its not profitable for them.  Any REAL, long term solutions CAN'T come from them.   

MrTouchdown's picture

What model? Was there more to your post you forgot to put? Seems like you left something important out. Like a point (for example).

We farm only a small portion of arable land - not because we can't, but because we're not allowed to. The number of firms is constrained due to regulations causing barriers to entry. Tis very straight forward.

As to solutions for problems - having more firms will help immensly with that.

Jeepers Creepers's picture

The problem is our electorate is unable to even concede small "sacrifices", that's what worries me most. 


Tell our voters you want to raise the age of eligibility on Social Security or MediCare by just one year and the it's political suicide.  Tell them you want to cut just the RATE of growth of government spending (not actually cut spending) and the MSM will act like we'll all be on bread lines.  Raising taxes more on the "rich" is like telling kids there's a Santa Claus. if you confiscated all earning above $250k it wouldn't even put a dent in our problems.


The only way I see it getting fixed is when we hit a wall ,  because our Honey Boo Boo country is certainly not going to smarten up at the last minute before we hit it. 

Vidar's picture

Technology reducing the labor needed to provide goods and services is a good thing. It frees up labor for doing other things. Until everyone's desires are satisfied and scarcity is no longer a problem (a LONG way off) the reduction in labor is not a problem. It seems like a problem today because state regulations and licensing makes it impossible for individuals to start their own businesses and welfare makes it easier to go on the dole instead of coming up with a new way to create value. If it were not for the state, the vast majority of the unemployed would be able to support themselves by expanding the jobs they currently find in the black/grey markets and starting new small businesses. In a free economy you only have to make enough money to support yourself and your family, in the current system you have to pay all kinds of taxes, fees, etc just to have a "legit" business. This makes it almost impossible for people to start new business, which is the aim because the state is in league with the big cartels and wants to insure their profits.

A perfect example is the medical field. If it were not for drug laws and medical licensing requirements, there could be millions of independent first aid/minor emergency businesses run out of people's homes. These types of businesses could sell various drugs (including recreational), give health advice, diagnose simple infections, set broken bones, stitch up wounds, etc. at very low prices for low income people, but they can't exist because of the AMA cartel and drug laws. Similar businesses would pop up in every industry if it were not for state interference in the economy.

Peterus's picture

"how do we transfer wealth from the productively employed few to the many unemployed/ under-employed without creating a society of dependents?"

Not by monopoly of centralized and legal force. Not at all actually. Humans have infinite wants (I'd like a personal space elevator and FTL spaceship for instance, but have many more urgent needs, so I can't even start realizing these) there is no upper limit for "jobs". As long as people can freely go into new fields and start serving different wants of their neighboors - unemployment will never be a problem. Socialism first creates class struggle with people that profit from violeting others - as one class and the violated as another - and than plays this class struggle for votes. Dramatic inequality comes from violence not nature and not freedom.

Oldwood's picture

How does any technology displace employment if nobody has the money to buy it? We have had increasing technology for more than a century and there is less poverty than ever. I understand the fundamental concept that technology replaces labor, but I can't make the leap of massive unemployment because of smart phones. Even taking in consideration of off shoring of jobs, still, if no one has a job, no one will be buying phones regardless of where they are made. If we invented technology that made elctricity virtually free, would that lead to unemployment or the lack of people requiring employment to live?

Gimleteye's picture

Repudiate all governement debt now, reset, every state a country

pine_marten's picture

Congress needs to raise taxes not to insure making good on commitments to the people but to make sure they have enough money to stuff up their theiving holes when they leave the building........

QQQBall's picture

Zactly! Now, cud you please tell me sumtin nice?

Garth's picture

About those jobs -- the robots are coming...

Jeepers Creepers's picture

I don't believe our unemployment problem though is one of technology, it's one of incentives. 

Tell someone they get two years of unemployment, and finding a new job is just not a real priority.  Get food stamps, welfare, and free health care and you're almost a dope to get up and go to work in the morning.  Humans need incentives to be productive.

Most of the technology advancements have offsetting effects with respect to employment.  Yes, there's slightly more robots in factories, but those same robots need more engineers to design them and more technicians to service them.   E-Commerce may have killed certain retail sectors (mainly teenager minimum wage jobs), but look at how many small businessses have popped up online.  If anything, technology has substituted worthless jobs for quality ones.

The technology argument is a cop out, and it doesn't really matter anyway because you can't legislate technology to move backwards anyway.

kevinearick's picture

Welcome 2 Kville

Plank: [I]t is impossible to obtain an adequate version of laws for which we are looking unless the physical system is regarded as a whole.

Darwin: Animals manifestly enjoy excitement and suffer from ennui…and many exhibit curiosity.

Restak: The second approach – the one that predominates in contemporary psychology – is based on the idea that voluntary movement as well as behavior is only apparent, and that both processes consist of nothing more than automatic responses to external stimulation (those CA psychos get paid a lot of money for a reason)…such experiments derive their inspiration from the Russian physiologist Ivan Pavlov, who in the early 20th century strapped dogs to a laboratory table…What is actually occurring in such a highly artificial situation is a selective definition of ‘behavior’ on the part of the experimenter (hammer/nail).

To prove it, animals are allowed to move freely about in an environment such as a maze. They are then taught to run from one point to another in the maze to obtain food. In such a test, those animals with prior experience of moving about in the maze learn the task more quickly (recursion)…Experiments by Vinogradova suggest that the hippocampus is necessary for information to be registered independent of any reward or punishment considerations. Averse therapy in our prisons, token economies in our mental hospitals, hierarchies of rewards in business – all are spinoffs from the operant-conditioning experiments based on stimulus and reward (where is my prize?). Movements, along with behavior, can never be adequately explained in terms of stimulus and response, since both are constantly changing.

In other words, we don’t all want to show up at the skating rink at the same time to stand in line to skate in the same circle, as the empire is determined to have us do, and pay it with our energy for the privilege, regardless of the monetary policy creating artificial supply and demand.

Restak: To be reading this you must be awake. You might think of wakefulness as similar to the maintenance of a degree of muscle tone without which a muscle becomes weak, flabby, and eventually paralyzed. Wakefulness depends on a two-way system capable of conducting information…the reticular formation’s activity (brainstem)…your ability to recall…the reception, analysis, and storage of information…capacity is located principally in the cortex.

The motor cort4ex can be thought of as a computer; the premotor cortex its computer program. But for every computer and computer program there must also be a programmer…Loss of initiative, placidity, a desire for sameness in the environment – those were only some of the unfortunate results of cutting the fibers of the prefrontal lobes…Easily distracted by trivial events around him, the prefrontal-lobe patient will break off whatever activity he is engaged in at the moment and direct his full attention to distractions in the environment. Complex goals are replaced by simple ones, interests dwindle and horizons shrink.

Ya gotta be smarter than the computer, and the niggers that program them. Contrary to their programming, alertness, information processing, and action, the mind, is not a one way street designed to replace the frontal lobe initiative with artificial intelligence entropy. Program yourself, or someone else surely will. If you think in terms of hierarchy, your child will be the boss, while you think you are. Prisoners dilemma is a choice, passed from generation to generation, embedded in false assumptions, creating the centrifuge.

Restak: Mental activity thus takes on the quality of a dynamic process. Trying to pin down what part of the brain is involved…is like trying to describe the precise location and movement of a subatomic particle.

Irrationality, emotion, may be employed as a form of constructive mobility or deconstructive immobility. The limbic system is a lock and key

MacLean: The three brains amount to three connected biological computers, each having its own intelligence, its own subjectivity, its own sense of time and space, and its own memory and other functions. Except for altruistic behavior and most aspects of parental behavior, it is remarkable how many behavior patterns seen in reptiles are also found in human beings.

Restak: Certainly, even the least introspective person recognizes the continuous interplay between what we feel and what we know. (context schizophysiology)

MacLean: Affective feelings provide the connecting bridge between our internal and external worlds and, perhaps, more than any other form of psychic information, assures us of the reality of ourselves and the world around us. The limbic system contributes to a sense of personal identity integrating internally and externally derived experiences.

Restak: From here it may be just a step to understanding how behavior based on intensely felt emotion can stir large numbers of people into irrational, even destructive behavior.

MacLean: The explanation that found appeal under the banner of the swastika was that the Fatherland was threatened by one of its minority groups and that the resulting widespread sense of uneasiness (anxiety) could be relieved by the torture and extermination of this group. (Abraham)

“San Francisco is a city of paradoxes. It prides itself on inclusivity, but is the exemplar of the exploding gap between America’s rich and poor. Preservation of affordable housing is enshrined as a top priority in the City’s general Plan, yet housing is historically unaffordable.”

You are the center of global slave labor technology, income inequality is accelerating out of control, and you have an inclusive business plan, so you fail to see that the Fed fails every time it doubles down on its own rigged roulette wheel, as both the buyer and the seller of last resort, despite leverage from all the derivatives held by the entire elite class, as one false assumption after another, holding the empire up, falls into a growing abyss. That’s it, throw some more worthless pension paper into the black hole, and wonder why it acts like fertilizer.

Do you really think intelligent kids are chomping at the bit to get Apple Empire TVs, Google Automated Transportation, Facebook Behavior Monitoring, & PayPal Monetary Micromanagement, in a closed-loop technology circle controlled by a-holes like Ron Conway, Henry Kissinger and the rest of that cabal?

Love may be an emotional paradox, but it is not a logical one, if you understand brain balance (compilation) outside prisoners dilemma. It’s in your own self0interest to make children the priority, which requires breeding on the characteristic, because as an adult you are already a derivative in time. Empire is a self-fulfilling prophesy for those who choose it. The city casino would not look so appealing if the table with straps connected to a power source was easily recognized at the entry, but the shoes are a dead giveaway.

Funny, my mom lived a few blocks from here, when she was alive…and they don’t call it the Pacific Fleet by accident. Whether you are the hunted or the hunter depends upon perspective, location relative to the black hole…unless you can open a vortex gate at will.

epwpixieq-1's picture

"Many claims for technological revolutions are overblown and unrealistic" - regrettably this is very true.

why does someone needs nanobots costing thousands, to "help" with alleviating the symptoms for his/her disease, when one can DECIDE to eat healthy (mostly vegetables), and by doing this simple free and cost saving decision to cure him/herself out of whatever health predicament one is in.

An interesting observation made in a Russian science fiction book, "The long sunrise of Ena" by Evgeny Gusliakovski, states:

"Have you considered that the surrounding environment counteracts any force leading to increasing of complexity. Every increment in complexity requires more and more energy expenditure. The higher the level of complexity, the more resistance Nature creates. The complex constructions require constantly feeding with energy, otherwise they disintegrate on their less complex elements".

In our case Energy is not only the natural resources we consume to TRANSFORM (inefficiently) the locked energy content in them, but also the human efforts, the time spent/elapsed, and not at least the money required, for it by itself (supposedly) is a derivative of the time, the energy and the human efforts.

Nature provides all the answers to all our needed, the only problem is that the current system has not been set up for efficiency but WASTE, and this is true for our energy as well as economic infrastructure.

SmittyinLA's picture

We could not only stop but reverse medicaid spending by simply enforcing immigration law

Getting Old Sucks's picture

We could also stop developing drugs and procedures that keep people alive so long.  However, the would piss TPTB off.  We could also let those near death just die in peace without trying every procedure to drain the last Medicare/Medicaid buck out of that person.  Again, that would piiss TPTB off.  Smokers, drinkers, obese, etc. are junkies.  TPTB are the suppliers and make riches.  TPTB provides the treatments for these addictions too and make riches.  The Government is just to middleman administering for TPTB.  The old and addicted eventually die anyway, TPTB are richer for their actions.  The Government just passes the bill along to the ordinary citizens and says it was all for you.

Liberty2012's picture

Great article 1st half. For the second half, keep in mind that you can't use current "numbers / costs" to reflect the other side. Ponzi costs dint compare with real costs.

We are not currently realizing as much benefit from the technology because our work is being stolen - raking a take. I think we will see a return to a more leisurely work pace and more knowing your local stores.

As long as most people help each out during the transition back to reality, we will be okay. Be nice, don't point fingers, do what you can when you can to help.

Merry Christmas and Happy New Year!

Bicycle Repairman's picture

A lot of the promises are health care promises.  We will not come anywhere near meeting the promises, or this nation's health care needs without real health care reform.  Instead, the political class delivers Obamacare.  If it weren't for the number of people Obamacare will loot and kill, it would be a joke.  And Obamacare is the best that this political class can do.

Diogenes's picture

"To take but one example: all those stories about nano-robots being introduced into our bloodstream to chomp away at our clogged arteries. What will fuel these little machines? Some recent work suggests they can use glucose as a fuel, but even this ignores the reality that the clogged arteries are a symptom/result of lifestyle choices, not the cause per se of heart disease. In one field after another, horrendously costly "cures" are actually being directed at symptoms, not causes."

Vitamin C and Lysine will eliminate 90% to 95% of heart disease. Vitamin C strengthens the arteries, Lysine removes the plaque. Linus Pauling proved this in the 90s, backed up by a Harvard study that proved vitamin c strengthens arteries, the only thing they tested that did.