Guest Post: The United States Of Delusion

Submitted by Charles Hugh-Smith of OfTwoMinds blog [10],

The irony is that clinging to delusion rather than face the necessity of deep cuts in borrow-and-squander budgets will lead to the involuntary reset of the entire system, depriving every vested interest of their share of the swag.

We are living in the United States of Delusion. The delusion has four key sources:

1. We can borrow-print-and-spend our way to prosperity when debt and fiscal/monetary stimulus are yielding ever more marginal returns:

The Dangerous Blindspots of Clueless Keynesians [11] (January 2, 2013) The Keynesian model is a Cargo Cult, mired in a distant, romanticized past where Central Planning, intervention and manipulation were solutions rather than the root of the economy's fatal disease.

2. The risks of this fatal fiscal delusion are masked by a complicit Mainstream Media and a perception-management, manipulation-dependent Central State and Federal Reserve.

Spoiled Teenager Syndrome [12] (January 3, 2013) Masking risk, cost and consequence creates an illusory world that eventually crashes on the unforgiving rocks of reality.

Is masking risk, cost and consequence a strategy that leads to success? No; it is a pathway to repeated catastrophic failure. What is the Central Planning strategy being pursued by our Central State and the Federal Reserve? Masking risk, cost and consequence.

3. The true costs of the Neoliberal Cartel State are cloaked, massaged and distorted by bogus budgets and wildly unrealistic projections.

Sickcare Will Bankrupt the Nation--And Soon [13] (March 21, 2011)

Sickcare is fundamentally a system of interlinked politically powerful cartels.Insiders who refuse to speak on the record for fear of antagonizing the powers that be, exorbitant price increases, confidential agreements and a tug-of-war between warring tribes. Is this the Mafia we're talking about?
From the point of view of investigative journalism, it could al

so describe America's health care industry. Stated truthfully, the industry is a highly profitable and politically powerful group of companies which operate in cartel-like fashion: that is, they use their clout to limit competition and establish highly profitable pricing. [14]

Western Pennsylvania has about 140 MRI machines, while the 32 million residents of Canada share 151 MRI machines. And the U.S. machines are getting a lot of use: the number of CT and MRI scans (scans other than old-fashioned X rays) tripled from 85 to 234 per thousand insured people since 1999.
While proponents are quick to note that scans are cheaper than the alternative diagnostic procedures, one firm's research found that a doctor who owns his own machine is four times as likely to order a scan as a doctor who doesn't. [15]

As if that wasn't enough to highlight the self-serving nature of "fee for service" cartels, MRI scanner manufacturer General Electric waged a two-year lobbying campaign to roll back cuts in Medicare reimbursements for scans. While the effort proved unsuccessful due to the intense political pressure to reduce soaring Medicare costs, critics observed that providers simply made up the reduced reimbursements by increasing the number of tests administered.

The only solution that actually addresses the systemic problem is to get rid of the entire fee-for-service structure and break up the cartels.Healthcare must be reconnected to diet, nutrition, fitness, lifestyle and community, and to education and emotional well-being.

If You Want Solutions, First Pin Down Where the Money Is Going [16] (May 23, 2011)

If you really want a solution, then start by pinning down exactly who's getting all the money. Then find out if they're accountable for how it's spent. Nobody wants to admit the reality: our nation is dominated by cartels and fiefdoms serving entrenched constituencies whose budgets are simply not sustainable.Please consider this chart of the University of California system's employment of professors and administration. If we extrapolate the lines, then soon there will be more highly-compensated seat-warmers in administration than there will be professors teaching in the classrooms.

It seems that some members of the Education Cartel and Fiefdom came to do good but stayed to do well--as in triple the national median earnings of full-time workers:

(Source: www.championnews.net/ftf_teacher.php?tid=78195&year=2010 [17])

Salary: $172,163
Position: High School Teacher
Full/Part Time: Fulltime
Percent Time Employed: 100%
Assignment: Physics (Grades 9-12 Only)
Years Teaching: 30.5
Degree: Master's

Salary: $163,526
Position: High School Teacher
Full/Part Time: Fulltime
Percent Time Employed: 100%
Assignment: Driver Education
Years Teaching: 32
Degree: Master's

And how about those pension and retirement costs? We have an answer for New York City, and it is sobering. NYC budget - pension costs skyrocketing: [18]

Over the past decade, New York City hasn’t really grown its population but has increased expenses from $28.8 billion to $49.7 billion. The vast majority of that $20.9 billion increase has been in the form of more dollars to fewer employees. Pension costs are killing us most: this has grown from $1.3 billion in 2002 to $8.3 billion in 2012.

That's a 638% increase in pension costs in one decade, while the city budget leaped 72% despite a stable population. The share of the budget devoted to pensions jumped from 4.5% in 2002 to 16.7% in 2012.

I have addressed these issues many times, for example in The Devolution of the Consumer Economy, Part II: Rising Costs, Declining Wages [19] (April 8, 2011) and Complexity: Bureaucratic (Death Spiral) and Self-Organizing (Sustainable) [20] (February 17, 2011).

I have highlighted the Education and Sickcare Cartels, but there are many others with exploding costs and zero alignment with accountability or performance. The Department of Defense, famous for routinely losing track of hundreds of billions of dollars (and does anyone lose their job over that gross mismanagement? No, everyone gets a promotion and raise for doing such a swell job), manages to triple the cost of every weapons system, regardless of the actual performance benefits (increasingly marginal, perhaps?)

The new F-35 fighter aircraft cost $150 million each, once we add in the overruns, replacing the Super Hornet F-18 E/F that cost $57 million each. (Once lifetime costs are included, the F-35 will cost upwards of $300 million each.) Is the F-35 really three times better than the F-18? Which would a commander facing 100 bogeys rather have, 30 F-35s or 90 F-18s? (I suspect they'd take the 90 F-18s, as long as they were loaded with the latest Sidewinder and long-range air-to-air missiles. As has been famously pointed out, at some point quantity becomes a winning quality.)

Will 100 F-35s prevail over 1,000 dirt-cheap drones? How about 10,000 drones? If the future of warfare is increasingly powerful unmanned networked drones (and it clearly is), why are we spending $1 trillion+ on hyper-costly aircraft that are essentially designed for a previous era?

4. The consequence of substituting delusion for reality is ignored or hidden from view, with the complicity of all the self-serving, entrenched vested-interests.

Is there any evidence that continuing to borrow and squander money on diminishing returns will magically cause a sudden return to productive investment? Of course there isn't; the magical belief that doing more of what has failed will eventually evade causality is delusional.

Does anyone seriously think that counterproductive "investments" in diminishing returns will "grow our way out of debt"? Of course not; everyone with a vested interest in the crumbling Status Quo is terrified that their share of the borrowed/printed swag will be cut. So the only alternative is to cling to a delusional state where belief in the impossible replaces a realistic assessment of risk, cost and consequence.

The irony is that this strategy of clinging to delusion rather than face the necessity of deep cuts in borrow-and-squander budgets will lead to the involuntary reset of the entire system, depriving every vested interest of their share of the swag. Is delusion a sustainable state? No. Thus we can confidently predict that causality, factuality and karma will eventually sweep aside delusion and all those who cling to it.

My new book Why Things Are Falling Apart and What We Can Do About It [21] is now available in print and Kindle editions--10% to 20% discounts.