Middleclass disappearing


What happened to the disappearing
middle class in Arkansas?


Arkansas is overrun with illegal
aliens, we have already lost life as we knew it, and we continue to support
illegal aliens with our tax dollars.  Our
educational system is in the toilet because of bilingual education (which
is not provided in any language other than “Mexican
Spanish”), the welfare system no
longer exists for Arkansans who need assistance, Social Security has been
depleted to the point of “pay as you go” because the “fund” has been misused,
and population growth has encroached on our wild lands.  Food, water, gas,
and electric energy are at an all time low. 
We have depleted the fossil fuels that power our cars, and provide us
with heat in the winter.


Arkansas’ Senators Pryor and Lincoln have decided the situation is not dire
enough, and they support another amnesty for illegal aliens to reward them for
breaking our laws. It appears that Pryor
and Lincoln will only be satisfied when this country is barren and its citizens
demoralized. We cannot even sustain the current population of Arkansas.


Please call Senators Pryor and Lincoln (CALL 1-866-340-9281) and demand “No Amnesty.” Demand
that they support enforcement of existing immigrtion laws.

Liz D.

America Has an Immigration Problem

America Has an Immigration Problem

But Liberals Have a Problem With the Problem

we have an immigration problem? Yes, we do. But that depends of what the
meaning of “we” is, if you know what I mean. If by “we” you mean we Americans,
then yes, there is an immigration problem for America. If you are a
conservative and you say “we” have a problem and that “we” means we Americans,
then yes, there is a problem in America. Now comes the hard part. If you are a
liberal – like, say, Katie Couric – and you say “we” have a problem you don’t
mean we Americans…you mean we liberals.

our politics today, the invasion of America by criminal aliens is not what is
always meant when the phrase “immigration problem” is used. To our liberal
friends the problem is not stopping the invasion, but stopping those who want
to stop the invasion. Let me explain:

do not think of America in the same light as others. While most of us think of
America as a country that is great, and that it is great due to our commitment
to the rule of law, individualism and, most significantly, to the freedom and
extraordinarily high standard of living that Capitalism has produced, the
liberals think of America as a country that is not great, just lucky. Liberals
do not like Capitalism because it encourages individualism and individualism
allows the common man to become uncommon. In the liberal mind, allowing the
unwashed to be left to their own devices is dangerous. To do so, in the mind of
a liberal, is to take the risk of inequality. The last thing a liberal wants is
for some person who, just because she or he wants to reach their full
potential, will break the liberal caste system.

how liberals can make the leap from seeing the greatness surrounding them to
thinking that Capitalism has been bad for America is beyond me. But they do. I
think their thinking goes something like this: “America is missing a great
opportunity to become a better place and would be if we replaced this horrible
Capitalism with Socialism. Then everybody would be equally wealthy and nobody
would be unequally wealthy.” In simpler terms, they think that getting rid of
the lead in pencils would provide everybody with an equal writing ability.
“Let’s make everybody poor and then we will have equality”, they say.

problem for the liberals is that most people do not want to vote for a kind of
government that would confiscate the tools they use to build an independent
life in order to make them “equal”. But the problem for America, indeed, the
world, is that there are some people that would fall for this empty promise.
Bowing to political correctness I will pretend sensitivity and refer to these
people as the politically untutored.

that brings us back to the immigration “problem”. As I stated above, the
liberals do not consider an onslaught of politically untutored voters a
problem. Indeed to the liberals a growing caste of politically untutored people
means more votes they can tally. As we have seen throughout history, the lower
the political sophistication of the voter the more likely that voter will fall
for false and unrealistic promises. The only way the liberals can gain and keep
the power they need to crush individualism and replace it with forced
plebeianism is to find enough of the politically untutored to take advantage

when enough of the politically untutored are running around the United States
and stealing into the voting booth, the liberals will gain control of the
country. “Ignorance…we need more of that” is the liberal cry.

enough ignorance (oops, I mean politically untutored) migrating to America, the
liberals will have the votes to bring the same kind of government to America
that these politically ignorant (dang it, I meant to say untutored there…beg
your pardon) migrants are breaking the law to escape in their own country.

the only problem the liberals will have is deciding which one on them gets to
be the next Hugo Chavez, Fidel Castro, or better yet, Kim Jong Il.











Persecution of a Patriot



Feds Target 60-Year-Old Militiaman For Stance on Second Amendment

By Ralph Forbes

Why is the government afraid of a retired, overweight, elderly man with respiratory problems?

At the bond hearing for Hollis Wayne Fincher, known as “the gentlegiant,” the federal court conceded it was at heart a free speech case—but from the government’s standpoint Fincher had uttered “scary” free speech, so his bond was set at $250,000, equal to the deed to his 120-acre homestead, which has been in his family for three generations.

Fincher has been accused by the federal government of possessing three illegal machine guns. However, many believe the case has more to do with Fincher’s writings and beliefs than it does any firearms he owned.

Yes, it is a First Amendment case, the inalienable rights to freedom of speech, assembly and petition. But it is equally a Second Amendment case, securing the God-given right of self-defense, which protects every American from having his or her right to keep and bear arms from being infringed by the government.

In the spirit of America’s patriots of 1776, in 1994 Fincher and others founded the Arkansas Militia, realizing that the fundamental right to protect all other rights is the right of the people to keep and bear arms.

Recognizing that the best security of a free people lies in the people, not the government, Fincher wrote The Silver Bullet, a treatise showing that infringements upon this basic right stem from the poison tree of unconstitutional perversions of law.

The Arkansas Militia then sent copies of this nearly 300- page elucidation to Gov. Mike Huckabee (R) and a host of other officials, including county sheriffs, to educate them on the law of the land.

No one said it wasn’t correct.

On March 18, 2006, The Morning News of Northwest Arkansas published an Anti-Defamation League (ADL) approved story on Fincher, The Silver Bullet, and other patriots.

Mark Pitcavage, a Columbus, Ohio-based “fact-finder” for the ADL, an unregistered agent of Israel, said the ADL “monitors” Americans that it deems “potentially dangerous,” especially if they have “extreme views” and/or are “heavily armed.”

The ADL was particularly concerned about the Washington County Militia, Fincher and The Silver Bullet. So eight months later, on Wednesday, Nov. 8, 2006, federal agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATF) and FBI, aided and abetted by Arkansas State Police, the Arkansas State Bomb Squad, the sheriffs of Washington and Madison counties and the police departments of Fayetteville and Springdale, raided Fincher’s home and arrested the 60-year-old man.

The raid was committed under color of the federal “gun violence prevention program,” the so-called Project Safe Neighborhoods.

Fincher’s bond hearing was held in the Ft. Smith, Ark., federal courthouse, under a gold-fringed flag and with a swearing-in that failed to include “so help me God.”

ATF Senior Special Agent Wade Vittitow testified that Fincher’s arrest was the result of the Morning News article, which the government submitted as Exhibit #1. He also testified that he “could not follow the logic” of the “dangerous” Silver Bullet.

Vittitow admitted Fincher had no criminal background, had never exhibited violent behavior, had lived on the family homestead all his life, and had family members close within the area. Nevertheless, the feds maintained the gentle giant was “a flight risk.”

Fincher did not trust the feds with the deed to his homestead, so he remains in jail “happily preaching Jesus” and the Constitution to his fellow prisoners. In the meanwhile the feds continue to catch and release illegal aliens.

The government doesn’t fear the gentle giant or his guns; they fear the power of his ideas for restoring our constitutional republic.

You can obtain a copy of his Silver Bullet by downloading it at arkansasmilitia.com.

(Issue #4, January 22, 2007)


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A Dishonest Man

By Don A. Bright

U.S. District Judge Jimm Larry Hendren is a dishonest man. 
Hendren practices dishonesty in the most devious and destructive form there
is.  Hendren lies for the State.  Hendren lies in order to keep the
benefits of power:  Power for himself and power for others of his ilk who
use their power to strip others of their freedom.  It takes a powerfully
warped ego to make a person so arrogant as to lead that person into the
corruptness that is manifested in Hendren’s judicial vacuousness. 

Jimm Hendren is the antithesis of “honorable”, a term that is attached to his
black robe and, in this case, not the man.  I have been in many courtrooms
in my life and have always performed as instructed by the phrase “all
rise!”  On January 12, 2007 I stayed in my seat when that call came to
announce the judge’s leaving the courtroom.  I did that because after
being exposed to the gangrenous demagoguery and arrogance that flowed so
eloquently from the lips of this man I felt no need to “rise!”.  It felt

What I had just witnessed was the behavior of the generic target of our
forefathers when they defined the danger of the state without boundaries. 
Our Constitution was written for the sole purpose of stopping men like
Hendren.  Most troubling is the fact that Hendren is well aware of
that.  His fear of being exposed as the power groping statist he is was, I
am sure, the very reason he took the actions and made the declarations he did
during the trial I witnessed.

The trial I am writing of was The United States vs. Hollis Wayne Fincher. 
Mr. Fincher was subjected to a “no knock” assault from the minions of the
federal, state, county and municipal law enforcement agencies and arrested for
having “illegal” guns in his possession.  The raids (there were warrants
for 13 other friends of Wayne) themselves were of little note here. 
Although more “illegal” guns were confiscated from others who were raided, only
Wayne was arrested.  Why?  I’ll let the officer that was part of one
of the raids where the person involved was not placed under arrest speak on
that.  That officer, when asked by the victim of the raid why he (the
victim) was not being arrested, made the following statement, “we’re after
Wayne Fincher”.

This startling revelation made the reasons behind the “get Wayne Fincher” raids
very clear to all of us who follow local politics in the Washington County
area.  Wayne was a very brilliant and formidable opponent of those in
power in the area.  His imposition of constitutional guidelines and laws
into the give and take of Washington County politics frightened his
opponents.  It made sense that they would stop at nothing to get rid of
this man.  They did.  I’ll let the reader fill in the blanks here… I
want to get back to that Hendren fellow.

It is no secret that our federal government is exercising more and more power
over the individual is the last half of this century, give or take.  And
one does not need to have an IQ in 3 digits to know that the Constitution is an
offense to those whose thinking is statist.

They hate it.  Thus it has become necessary for these elitists to make the
Constitution irrelevant. How best to do that?  Simple.  Instruct the
judiciary to exercise control of it.

This they have done.  The simple exerting of two fictions is all that is
necessary for this task.  (1.) Instruct the populace that only they (the
judiciary) can interpret the meaning of the Constitution, and (2.) buttress
that fiction by excising the Constitution from the courtroom.

That is how we end up with lapdogs the likes of Hendren.  He will resort
to any kind frightening rhetoric and gavel thumping arrogation to protect his
naked regalia and that of his fellow travelers.  To exercise control over
the commons is commonplace in these exalted waters.

Let’s take a look at how Hendren did just that in ruling over the Fincher
trial.  With inordinate comfort and a hubristic smile “judge” Hendren did
the following:

* Refused to “allow” the use of Fincher’s ultimate and necessary defense, i.e.
the Constitution of the United States and the Constitution of the State of

* Refused to “allow” Fincher his inalienable and constitutional right (6th
Amendment) to be tried by a jury. Hendren would only “allow” Fincher to give
testimony in front of Hendren, himself, and then denied Fincher the right to be
heard by a jury of his peers.

* Intimidated the jury by telling the jury it could not think outside the box
the judge defined.

To back up these charges, I offer the following quotes from Hendren’s
instructions to the jury:

“You are the sole judges of the facts: but you must follow the law as stated
in my instructions, whether you agree with it or not.”
note: Simply a lie.  All jurors in the United States have the right to
acquit if they think the judge is incorrect in his definition of the law, if
they think the law is a bad law, or if their conscience tells them the
defendant is being abused by the prosecution or judge. http://www.fija.org/)

“It is your duty to find from the evidence what the facts are.  You
will then apply the law, as I give it to you, to those facts.  You must
follow my instructions on the law, even if you thought  the law was
different or should be different.” 
(Editor’s note:  See above

 Compare the above quote from earlier ones in his instructions to the

“Each of you must make your own conscientious decision, but
only after you have considered all the evidence, discussed it fully with your
fellow jurors, and listened to the views of your fellow jurors.”

“You are entitled to consider that evidence in the light of your own
observations and experiences in the affairs of life
Emphasis is

About the defense introducing and interpreting the Second Amendment as evidence
Hendren had this to say:  “…and I don’t know that I’ve got a problem
with that, but I think that there would be a problem if the matter were going
to be submitted to the jury about whether they think that is what the First
Amendment – the Second Amendment – says or not, because that’s not a matter for
the jury to decide.  The Court will tell it what the law is, the
applicable law.” 

On the role of the judge and that of the jury Hendren makes this arrogant
and errant barrage of affluent:

“The judge, being myself in this case, is tasked with determining issues of
law, evidence, (sic) and procedure.  Those matters are not for the
consideration of the jury.  It would be unfair to put it to them. 
They are not legally trained.  They’re not judges.  They’re not
trained and hopefully experienced (sic).  They’re not experienced in such

In other words, according to Hendren, American citizens who sit on a jury
are too stupid to be there.  Why, then, I ask, do we even have
juries?  Hendren, obviously, considers juries one of life’s burdens put
upon judges.

So what to think?

I think that Hendren’s chicanery, evasion and ambivalent stratagem points to
the existence today of the very thing that our forefathers sought to avoid
through the Constitution – a dictatorial judiciary that sets the rules for the
other two “co-equal”  branches of government and the citizenry a large.

I think that there are men who are so unlimited in ego and self delusion that
they not only break the rules and laws of society…they indeed break the bonds
of humility that must govern civilized society. 

Jimm Hendren does not judge…he cheats.

Liberty And The Constitution Go On Trial

Liberty And The Constitution Go On Trial

By Michael Gaddy

 On Monday, January 8th in Federal court in Fayetteville, Arkansas, Liberty and the Constitution, represented by Hollis Wayne Fincher, are being put on trial by the jackbooted thugs at the Bureau of Alcohol Tobacco Firearms Explosives (BATFE) Yes, these are the same criminals responsible for the murders and other malicious acts at Ruby Ridge and Waco.

Mr. Fincher, age 60, was arrested on the morning of November 8 following a raid on his home involving federal agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE) and FBI and assisted by Washington County Sheriff’s Office, Fayetteville Police Department, Springdale Police Department, Arkansas State Police, Arkansas State Bomb Squad and the Madison County Sheriff’s Department. Mr. Fincher was charged with possession of a firearm in violation of the National Firearms Act of 1934.

Fincher, a renowned constitutionalist, Lt. Commander of the Washington County Arkansas Militia and co-author of a document entitled The Silver Bullet; a treatise on the unconstitutionality of the Federal Firearms Act of 1934, has no previous criminal record.

At the core of Mr. Fincher’s arrest may be a diabolical scheme by the Washington County, Arkansas local and county governments to implement laws and regulations that are straight out of the United Nations Agenda 21 program. It appears the “investigation” into Mr. Fincher’s allegedly illegal firearms originated about the same time Fincher and others began to protest to local government their proposed adoption of laws that infringe on private property rights.

Hollis Wayne Fincher is an imposing man, both physically and intellectually. He intimidated those in local government with his vastly superior knowledge of the US and State of Arkansas Constitutions to the point that when he stood to speak (with permission) at the hearings to protest their proposed unconstitutional laws, he would have a sheriff’s deputy stand beside him; something to which no one else in attendance was subjected.

Mr. Fincher and Don Bright have been able through their presence and knowledge, to expose the countywide zoning scam of those in the local government of Washington County. The day after Mr. Fincher’s arrest, the council met in “emergency” meeting where the questionable zoning ordinance was passed with only one reading.

A local radio personality, fellow soldier and constitutionalist in the fight against the proposed zoning ordinance, Mr. Don Bright, stated on his radio show after the arrest of Mr. Fincher that he believed the “coincidental” arrest could have originated in the highest offices of Washington County. At the emergency meeting, the County Judge accused Mr. Bright of linking him to the arrest; when Mr. Bright protested, he was forcibly removed from the meeting by three deputy sheriffs. The questionable zoning ordinance was then passed.

When Hollis Wayne Fincher was arraigned on the “illegal” gun charges, it was learned the BATFE had placed an undercover plant in one of the militia meetings. Acting as an agent provocateur, this plant had suggested, “judges be awakened with a gun barrel in their mouths” to which Mr. Fincher had replied “Be careful what you say, this building might be bugged.” Magistrate, Beverly Stites-Jones clairvoyantly replied, “Obviously Mr. Fincher agreed with the idea” and said “that’s what he’s thinking right now” and “I have a fear and do they intend to follow through.” She did not elaborate on whom she meant by “they.”

At the arraignment, BATFE Special Agent Wade Vittitow stated under oath, “the arrest was not about the militia,” although a total of 14 search warrants were issued to search the homes of other militia members. Several allegedly “illegal” firearms were found during these searches but no one was arrested but Mr. Fincher.

During the same arraignment process, five illegal aliens were arraigned on various drug (meth) charges and an additional illegal was charged with identity theft. A court appointed interpreter was brought in to insure the accused understood the charges against them. All six were released on their own recognizance while Mr. Fincher has been held in jail since the arraignment in lieu of $250,000 bond and the condition he move out of his home and into his daughter’s home, post the deed to his private property with the court, give up all his weapons, not attend any militia meetings, and be subjected to electronic monitoring.

Ironically, late last week, Assistant US Attorney Wendy Johnson, filed a motion with the court requesting the judge not allow any defense arguments based on the US Constitution or jury nullification! Yes, that is correct—the government does not want to allow the defense attorney to use the supreme law of the land in Mr. Fincher’s defense.

If a defendant is not allowed to base his/her defense on the Constitution, we are certainly doomed. If we allow these criminal acts perpetrated on law-abiding citizens to continue, we might as well turn in all our guns and schedule a fitting for our chains

Yes, Hollis Wayne Fincher goes on trial on January 8th—but so does our Constitution, our Liberty and our right to own firearms. If Mr. Fincher loses this battle, we all lose.




The Arkansas and the U.S. Constitutions are in rags

Arkansas Freedom blog will be used to expose a myriad of problems facing Arkansas & U.S. citizens. It is intended to enlighten and inform those who are too busy to research and/or don’t know how.

Many of you are familiar with our writings and may or may not agree with our opinions, but hopefully are open-minded enough to seek facts and verify if in doubt.

We find that many folks simply do not know either what is going on in our governmental institutions or why. It takes time and effort to ferret out the truth when our mainstream media is so controlled and biased…especially in a society being ripped apart by political correctness, propaganda, and a system designed to control and milk its citizens, resulting in the destruction of our middleclass.

Politicrats now pick & choose which laws to enforce against whom, and can falsify testimonies, “facts”, etc. to get their desired results. There is no one to protect citizens except ourselves…just ask Fincher, the Border Patrol agents, and many more.

Fincher another Ruby Ridge?

Was the unconstitutional arrest of Hollis Wayne Fincher intended
to be another Ruby Ridge, Waco or the travesty of Border Patrol agents Ramos
and Campean’s trumped-up arrest and conviction.

The arraignment of Fincher so indicated: BATFE agent Wade Vittatow
spouted venom vilifying Fincher  stating
Fincher’s home was in the “boondocks”, implying 
Fincher was  hiding from federal
jackboots, then an admonition that the road was so bad leading to the Fincher
homestead that an attack on Fincher could produce casualties.

It appears Vittatow and the other 7 enforcement agencies
were set on provoking a shootout with Fincher. 
What explanation can be ascertained from 8 law enforcement agencies, one
snitch (entrapment that produced nothing) and hundreds of thousands of taxpayer
dollars to illegally snare one patriot? Judge Hendren and Congressman Boozman
stated Fincher is a patriot. Why conviction and incarceration?

The order to ensnare Fincher came from New Orleans via
dual-citizen Attorney General Alberto Gonzales.

“Jury perjury” is a practice of the BATFE.  “Star Chamber” tactics were employed:  the person on trial is not allowed to present
their defense to the jury and the jury is not allowed to hear the statements of
the defendant, which is “jury tampering”.  Both unconstitutional.

Prosecutor Balfe’s response to Motion for Arrest of Judgment
failed to prove their case. Fincher was not allowed to use the 2nd
Amendment in his defense, yet Balfe selectively used the Constitution in his Arrest
of Judgment response, citing two federal statutes he claimed were within the authority
granted to Congress by the Constitution. 
Where ? The Constitution is not subservient to Federal statutes.

Balfe’s case rested on a violation of the “Commerce Clause”,
making it incumbent on him to prove, he failed.

The Feds, like children, change the rules of the game, and
in so doing have made the Constitution irrelevant.


Joe McCutchen

Fort Smith



Constitution vs. Federal Statutes

What is the relationship of the illegal conviction of Hollis Wayne Fincher to the Military Commissions Act and the Martial Law Codicil?

October 17, 2006 President Bush signed the two into law.  The Military Commissions act abolished Habeas Corpus, laying the foundation for military tribunals for U.S. Citizens. The second Republic killer called the Martial Law Codicil permits the President to seized control of state and National Guard units for any activity he deems a “disaster”.  This law neutralizes the Insurrection Act and the Posse Comitatus Act.

These two laws are literally the foundation of the American concept of due process and prevented the centralization and militarization of law enforcement.  A spinoff of the aforementioned is the Safe Neighborhood Act, giving the impression that law enforcement agencies would protect citizen neighborhoods—a false flag.  The Act allegedly is to seek out and punish gang activity.  So who are the troops who would patrol our neighborhoods? Some are already here—local police departments that have become appendages of Homeland Security.  Local police are receiving combat weaponry, armed personnel carriers, and other assets incompatible for law enforcement but suitable for martial law.

Who will disarm the population? See above.

Why was Hollis Wayne Fincher brutally arrested by eight enforcement agencies, headed by the BATFE and a surrogate Federal Prosecutor dancing to music of George Bush by an Act designed to uncover gang activity? Police departments have been instructed by Homeland Security to view critics of the “war on terrorism” as potential terrorists.

The Feds command and “local” police obey in the name of “presidential security”. The Feds are busily defanging American citizens across the board, and the individuals occupying all levels of government have become our enemy instead of our protectors.

Hollis Wayne Fincher was acting to alert the American citizens of the many dangers posed by a criminally corrupt federal government who are warmongers and torturers.

Objectively view the past six years.

Why aren’t Boozman, Pryor, Lincoln making us aware of this criminality?


Joe McCutchen


The lights are going out all over the U.S.

The lights are going out all over the United States.  Another one went out 1/12/07 when “Compassionate Conservative” Judge Jimm Hendren kicked the Constitution (U.S. & Arkansas) out of his courtroom by disallowing its mention, then made the jury leave the courtroom during Wayne Fincher’s own reasoned, knowledgeable defense of his militia and his weapons.  Evidently the judge believes he knows the law (arbitrary unconstitutional laws passed by congresses), juries don’t (they might question some statutes violating constitutionally guaranteed rights?), and so he decided what they may hear and what they may not (judge and jury?)…according to the desires of the federal prosecutors.

Thomas Jefferson said that the government fearing the people equals freedom, people fearing the government equals tyranny.  I asked if we will follow Jefferson or appointed U.S. Attorney Robert Balfe III/A.G. Alberto Gonzalez…via Judge Hendren?   A guilty verdict was returned by a jury, who was never instructed it’s their right and duty to adhere to the facts of the case, consider the merits of the law, and the fairness of its application. The role of jurors is to protect private citizens from the increasing government abuses of power, and from unconstitutional statute and case laws.  

Jurors protect against tyranny by refusing to convict people of false crimes. Jurors who are knowledgeable of their historical role understand they, not the judges, have the absolute and final word as to both the facts and law. They should not be intimidated by the courts or judges, and know they are the last peaceful defense of our constitutional liberties. Go to www.fija.org for verification. 

This injustice compares to the Border Patrol agents sent to prison for protecting our border, while the illegal alien criminal drug smuggler goes free. 



Barbara McCutchen

Fort Smith, AR




The end of money

by Dr. Chris Martenson
The End of Money
December 17, 2006

Prepare to be shocked.

The US is insolvent. There is simply no way for our national bills to be paid under current levels of taxation and promised benefits. Our federal deficits alone now total more than 400% of GDP.

That is the conclusion of a recent Treasury/OMB report entitled Financial Report of the United States Government that was quietly slipped out on a Friday (12/15/06), deep in the holiday season, with little fanfare. Sometimes I wonder why the Treasury Department doesn’t just pay somebody to come in at 4:30 am Christmas morning to release the report. Additionally, I’ve yet to read a single account of this report in any of the major news media outlets but that is another matter.

But, hey, I understand. A report this bad requires all the muffling it can get.

In his accompanying statement to the report, David Walker, Comptroller of the US, warmed up his audience by stating that the GAO had found so many significant material deficiencies in the government’s accounting systems that the GAO was “unable to express an opinion” on the financial statements. Ha ha! He really knows how to play an audience!

In accounting parlance, that’s the same as telling your spouse “Our checkbook is such an out of control mess I can’t tell if we’re broke or rich!” The next time you have an unexplained rash of checking withdrawals from that fishing trip with your buddies, just tell her that you are “unable to express an opinion” and see how that flies. Let us know how it goes!

Then Walker went on to deliver the really bad news:

Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.

As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.

Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.

Wow! I know David Walker’s been vocal lately about his concern over our economic future but it seems almost impossible to ignore the implications of his statements above. From $20 trillion in fiscal exposures in 2000 to over $50 trillion in only six years? What shall we do for an encore…shoot for $100 trillion?

And how about the fact that boomers begin retiring in 2008…that always seemed to be waaaay out in the future. However, beginning January 1st we can start referring to 2008 as ‘next year’ instead of ‘some point in the future too distant to get concerned about now’. Our economic problems need to be classified as growing, imminent, and unsustainable.

And let me clarify something. The $53 trillion shortfall is expressed as a ‘net present value’. That means that in order to make the shortfall disappear we’d have to have that amount of cash in the bank – today – earning interest (the GAO uses 5.7% & 5.8% as the assumed long-term rate of return). I’ll say it again – $53 trillion, in the bank, today. Heck, I don’t even know how much a trillion is let alone fifty-three of ‘em.

And next year we’d have to put even more into this mythical interest bearing account simply because we didn’t collect any interest on money we didn’t put in the bank account this year. For the record, 5.7% on $53 trillion is a bit more than $3 trillion dollars so you can see how the math is working against us here. This means the deficit will swell by at least another $3 trillion plus whatever other shortfalls the government can rack up in the meantime. So call it another $4 trillion as an early guess for next year.

Given how studiously our nation is avoiding this topic both in the major media outlets and during our last election cycle, I sometimes feel as if I live in a small mountain town that has decided to ignore an avalanche that has already let loose above in favor of holding the annual kindergarten ski sale.

The Treasury department soft-pedaled the whole unsustainable gigantic deficit thingy in last year’s report but they have taken a quite different approach this year. From page 10 of the report:

The net social insurance responsibilities scheduled benefits in excess of estimated revenues) indicate that those programs are on an unsustainable fiscal path and difficult choices will be necessary in order to address their large and growing long-term fiscal imbalance.

Delay is costly and choices will be more difficult as the retirement of the ‘baby boom’ gets closer to becoming a reality with the first wave of boomers eligible for retirement under Social Security in 2008

I don’t know how that could be any clearer. The US Treasury department has issued a public report warning that we are on an unsustainable path and that we face difficult choices that will only become more costly the longer we delay. 

Perhaps the reason US bonds and the dollar have held up so well is that we are far from alone in our predicament. In a recent article detailing why the UK Pound Sterling may fall, we read this horrifying evidence:

Officially, [UK] public sector net debt stands at £486.7bn. That’s equal to US$953.9bn and represents a little under 38% of annual GDP. Add the state’s “off balance sheet” debt, however – including its pension promises to state-paid employees – and the total shoots nearly three times higher. Research by the Centre for Policy Studies in London says it would put UK government deficits at a staggering 103% of GDP.

If we perform the same calculations for the US, however, we find that the official debt stands at $8.507 trillion or 65% of (nominal) GDP but when we add in our “off balance sheet” items the national debt stands at $53 trillion or 403% of GDP.

Now that’s horrifying. Staggering. Whatever you wish to call it. More than four hundred percent of GDP(!). And that’s just at the federal level. We could easily make this story a bit more ominous by including state, municipal and corporate shortfalls. But let’s not do that.

Here’s what the federal shortfall means in the simplest terms.

  1. There is no way to ‘grow out of this problem’. What really jumps out is that the US financial position has deteriorated by over $22 trillion in only 4 years and $4.5 trillion in the last 12 months (see table below, from page 10 of the report). The problem did not ‘get better’ as a result of the excellent economic growth over the past 3 years but rather got worse and is apparently accelerating to the downside.

Any economic weakness will only exacerbate the problem. You should be aware that the budgetary assumptions of the US government are for greater than 5% nominal GDP growth through at least 2011. In other words, because no economic weakness is included in the deficit projections below, $53 trillion could be on the low side. Further, none of the long-term costs associated with the Iraq and Afghanistan wars are factored in any of the numbers presented (thought to be upwards of $2 trillion more).

The future will be defined by lowered standards of living. As Lawrence Kotlikoff pointed out in his paper titled “Is the US Bankrupt?” posted to the St. Louis Federal Reserve website, the insolvency of the US will minimally require some combination of lowered entitlement payouts and higher taxes. Both of those represent less money in the taxpayer’s pockets and, last time I checked, less money meant a lower standard of living.

  1. Every government facing this position has opted to “print its way out of trouble”. That’s an historical fact and our country shows no indications, unfortunately, of possessing the unique brand of political courage required to take a different route. In the simplest terms this means you & I will face a future of uncomfortably high inflation, possibly hyperinflation if the US dollar loses its reserve currency status somewhere along the way.

    Of course, it is impossible to print our way out of this particular pickle because printing money is inflationary and therefore a ‘hidden tax’ on everyone. Consider, what’s the difference between having half of your money directly taken (taxed) by the government and having half of its value disappear due to inflation? Nothing. Except that the former is political suicide while the second is conveniently never discussed by the US financial mainstream press (for some reason) and therefore goes undetected by a majority of people as the thoroughly predictable outcome of deficit spending. All printing can realistically accomplish is the preservation of some DC jobs and the decimation of the middle and lower classes.

In summary, I am wondering how long we can pretend this problem does not exist. How long can we continue to buy stocks and flip houses, forget to save, pile up debt, import Chinese made goods, and export debt? Are these useful activities to perform while there’s an economic avalanche bearing down upon us?

Unfortunately, I am not smart enough to know the answer. I only know that hoping a significant and mounting problem will go away is not a winning strategy.

I know that we, as a nation, owe it to ourselves to have the hard conversation about our financial future sooner rather than later. And I suspect that conversation will have to begin right here, between you and me because I cannot detect even the faintest glimmer that our current crop of leaders can distinguish between urgent and expedient.

What we need is a good, old-fashioned grassroots campaign.

In the meantime, I simply do not know of any way to fully protect oneself against the economic ravages resulting from poorly managed monetary and fiscal institutions. For what it’s worth, I am heavily invested in gold and silver and will remain that way until the aforementioned institutions choose to confront “what is” rather than “what’s expedient”. This could be a very long-term investment.

Are you shocked?

All the best.


© 2006 Dr. Chris Martenson

Expose, Rebuke, Return