By: Douglas J Utberg

As we move throughout life, we frequently hear glowing speeches from political figures about the responsibility to our posterity.  For some reason, these concatenations of rhetoric seem to be frequently accompanied by a proposal for profligate spending that will enslave our posterity into an eternal spiral of debt.  Furthermore, this propensity does not seem to stop with any particular political party.  The Bush administration racked up a record amount of debt that has already been eclipsed Obama administration, with the trajectory set for an expansion of national debt that shatters all previous records many times over.

Government has become a big party where each new guy tries to out-do the guy that came before him.  Like with all parties, there is a next-morning hangover to deal with.  Unfortunately, the solution sought by our government is to keep partying in hopes that the hangover can be forestalled indefinitely.  (Or at least until the next guy is in office so that he can take the blame)  This series of buck-passing from one administration to the next will only turn the inevitable hangover into a crash-and-burn.  And on top of all this, the cost of this massive party is being paid for with borrowed money, the tab for which will be inherited by our children.

The truly frightening aspect of this national spending binge is that it is being undertaken for no meaningful purpose other than to secure re-election by politicians who seek to use public resources as a means to influence voters by providing social programs and subsidies.  As this phenomenon compounds over time, the government will be faced with the prospect of either raising taxes to crushing heights, accelerating the debt spiral by continuing to finance overspending by crowding out private capital in credit markets, or by devaluing the currency through monetary inflation by the Federal Reserve.  Of all the scenarios, inflation by the government is far and away the most likely, since money can be printed without congressional legislation.

In the end, this amounts to stealing from posterity so that the current political leadership can continue their ride in the seat of power.  It would be nice to think that responsibility will be returning to government in the near (or distant) future, but there is little evidence to support such hope outside of wishful thinking.  Because of this, it would be very wise to seek opportunities in assets like investment real estate that produce regular cash flow, and are financed by fixed-rate debt that will be devalued as the ravages of inflation are unleashed by government monetary expansion.