By Chriss W. Street, Orange County Treasurer

Like a junkie that has to get a fix to maintain the same high, the U.S. Government deficit
spending addiction has expanded for the last 30 years at approximately the same 10%
compounded annual rate of the growth during the tumultuous three decades that included the
Great Depression, World War II and the Cold War. Fortunately, the American people are
increasingly convinced that feeding this addiction not only does not work; it might be dangerous.

U.S. Federal Reserve Chairman, Ben Bernanke, earned the title “Helicopter Ben” from critics
who latched onto his quote; “The U.S. government has a technology, called a printing press that
allows it to produce as many U.S. dollars as it wishes at no cost.” Mr. Bernanke went on to
state that the Federal Government could always rent helicopters and fly over cities dumping out
cash to get the economy moving. This is the equivalent of the “pusher man” who gives out free
samples of narcotics expecting that the users get hooked.

From the outset of the financial crisis, the U.S. Federal Government has been flying its
helicopters over America and sprinkling huge amounts of money on programs such as, “Making
Homes Affordable”, “Cash for Clunkers”, unemployment benefit extensions, infrastructure
boondoggles and various Wall Street crony bailouts. This spending and guarantee orgy during
2009 resulted in a U.S. budget deficit of $2.5 trillion and only generated an incremental increase
in GDP of $200 million. Only government can avoid going to prison for involuntarily taking a
dollar from some person, squandering 92 cents and giving a nickel and three pennies back.

Passage of the $787 billion American Recovery and Reinvestment Act (ARRA) was trumpeted
as the silver bullet to save the economy and create 3.5 million jobs. The Administration
estimated that although each job would cost taxpayers $92,136, a resulting increase in gross
domestic product of $105,000 would more than pay for the cost. But a referral to
“Recovery.Com”, the official U.S. government web site regarding ARRA “funded jobs”, states
that only 681,825 jobs have been funded so far and at a cost of $117,933 each. Consequently,
the US Government actually spent $25,797 in overhead cost for a “make work” job. Further
more, given that the average American working in the private sector makes only $36,400 per
year, it would take the equivalent of 3.24 full-time workers taxed at 100% of their annual income
to pay for one make work job.

The U.S. Federal Reserve at their April meeting predicted that unemployment will fall to 9.3%
this year and 8.2% in 2011. In order to achieve this reduction, the U.S. economy would need to
add 385,000 jobs each month through December of this year and 323,000 each month next
year. With the trend of initial jobless claims running above the 400,000 level where the
economy starts subtracting net jobs, these numbers seem psychotic.

The “generosity” of the U.S. Government with Americans’ money is not restricted to our own
domestic concerns. In a show of support for the European $1 trillion bailout of Greece, the U.S.
Federal Reserve recently opened up U.S. dollar swap agreements with the European Union,
England, Switzerland and Canada. Since the Federal Reserve is not required to be publicly
audited, we will never know how big of a commitment the taxpayers will be responsible to pay.
The only possible alibi the U.S. Government can provide to support their deficit spending is that
it encouraged a massive increase in discretionary personal consumption.

Unfortunately, this focus on conspicuous consumption versus productive investment is why U.S. industrial
production as a percentage of GDP has been cut in half over the last 30 years. Today, the GDP
of the U.S. is only 22% industry and 77% services versus the GDP of China of 49% industry and
only 40% services. With the average age of Americans increasing and their savings rate for
retirement having expanded by 4% since the beginning of the financial crisis, we may have
reached the tipping point that explains why consumption targeted government stimulus is a
failure.

It is clear that deficit spending has not only been ineffective, but has dangerously skewed the
American economy to focus on consumption versus production. If the definition of insanity is
doing the same thing over and over and expecting different results, then it is time for Americans
to force their government to go “cold turkey” and break the long term addiction to deficit
spending.