Where do $$$ come from?

In 1792 Congress passed The Coinage Act for the minting of the new government's coins. A facility was built in Philadelphia, the country's capital at the time, which still produces coins along with the Denver mint. Bills are produced at the U.S. Mint in Washington D.C. and Janet and I toured it, through high security and thick plexiglass walls, on one of our many excursions there, my birthplace. Interestingly, the Mint was the first Federal building authorized by Congress to be built, and now we have tens-of-thousands of Federal buildings. In 1866 the motto In God We Trust was stamped on all coins except the dime. By this time many regional mints have come and gone, yet Denver and Philadelphia remain. In 1874 the San Francisco Mint was built. The Mint also began producing foreign coins for a fee. The Bureau of Engraving and Printing, which produces all U.S. bills, was merged with the Mint under the Treasurer in 1981.

So that's where Kennedy half-dollars, coins, bills, Sacajewa dollars etc. are made and distributed from. Easy right? Up until 1861, silver was the standard, not gold, to provide the actual value of the coins, along with "the full faith and credit of the United States." Other countries also followed the Silver Standard. Beginning in 1906 the Gold Standard was adopted, but suspended throughout the World Wars. After 1946, the dollar was valued at $35 a troy ounce, and other countries pegged their currencies to the dollar. President Nixon ended true convertibility from dollars to gold in 1971, and the International Monetary Fund was established to fulfill a similar role, based on financial conversions, not gold conversions.So now, money is only backed by the full faith and credit of the issuer.

That's one reason we have trillions of dollars in debt. We don't literally print and mint the money we need to pay government expenses. The Feds borrow it, essentially, from themselves, investors in T-bills and China etc. -- but interest payments accrue. This gets to my point. When you have a finite government, "n" number of employees, "x" number of programs, and identifiable costs, setting tax rates and policies is straightforward. But the staffing, programs and costs to government change daily.

For example, take the Department of Human Services in the State of New Jersey. 10,000 employees and dozens if not hundreds of programs. Take DYFS, the Division of Youth and Family Services, still a part of Human Services. However, all they do now is certify and regulate child care centers in the state. At one time they also had hundreds of case workers working with children and families. My good friend David Gainer used to be one. DYFS workers could come to your home or the child's school and take your child away, no questions asked, usually to foster care, in cases of supposed or real abuse. Now that function is performed by a Department -- the Department of Children and Families. Ever since a gruesome death of a child by the neglect of their parents some years ago, which highlighted the division's spotty track record, monies have been poured into the new department to avoid future recurrences. So policies and staffing changed overnight.

Unforeseen things happen, and funds, and sometimes laws, are required to address them. Unplanned funds, uncollected funds are needed. That's why everyone ends up borrowing. "Life is plotless," Stephen King says, you never know what will happen. But in New Jersey we're lucky. We have a balanced budget amendment - it is illegal to borrow indefinitely like the Feds do to pay bills -- unforeseen or not.

Look at Hurricane Sandy. Billion of dollars in damages to East Coast infrastructure, homes, business and shorelines. New Jersey government has no "found" money to help make repairs -- which is partially its responsibility (with owners and insurance companies). Look at FEMA -- making low cost loans to homeowners and businesses. Where do you think they get the capital for those loans? Right, they borrow it from the Treasury. Congress just passed $50 billion in aid to NJ and NY hard hit by Sandy. You guessed it, where did they get the $50 billion from? There's no rainy day fund that big. Multiply that by disasters everywhere, building infrastructure, the cost of solving crime etc., and you see we would be crippled without borrowing. So the debt keeps increasing.

How do we pay it off? Simple: higher taxes, fewer deductions, and cuts to spending. We could continually hike taxes. That would just mean a revolving door in all governments every two and four years. And you know what they say about FNGs -- by the time they're trained, they leave. So, in my opinion, if New Jersey and many other states have to have balanced budgets, the Feds should also. Borrowing must be allowed for staffing, program changes and emergencies. But the piper needs to be paid back sooner and not later. A set time period should be fixed for paying down debts incurred, and plans formulated to do so, before incurring the debt in the first place. Laughingly, The NJ League of Municipalities has been trying for years to get the state to pay for all its "unfunded mandates" (laws), which local communities have to obey, implement and pay for. I have personal experience with this and New Jersey unfunded liability pension funds which jeopardize tens of thousands of future pension payments.

There are alternatives to borrowing. No FEMA. No Fannie Mae and Freddie Mac. Few government services. No more loans and a constant outlay of borrowed cash, especially when there's no hope of reasonable payback. (Look at the cause of the mortgage crises -- the lenders evil practices, buyers inability to pay, AND the collapse of home values.) Obviously, we couldn't live under such draconian measures. But, its simple really. When I signed my bank mortgage, I agreed to pay my loan back at a fixed rate for a fixed period of time, based on my income at the time. The bank didn't consider my future earnings -- it looked at my income and job stability when I applied. In 1989 we obtained a home equity loan to build our house addition. Again, given under terms of expected repayment. Janet and I can borrow on our VISA credit line, and we do. But we also pay it off every month, regardless of how much we have to spend that month. We were lucky -- we both had decent jobs, and later, decent pensions. Expenses must be offset by income, even if they're paid over time....

The Feds need a humongous debt-relief service. There's hundreds out there, they should call one.