Governments Going Broke

Discovery JANUARY 2010 THE QUARTERLY NEWSLETTER OF KOCH COMPANIES Governments going broke Throughout history, those societies with $1 trillion in borrowed money, much With the world’s third-largest popula- a high degree of economic freedom have of it earmarked for pet projects in the tion – much of it rapidly approaching re- not only been more prosperous, but name of “economic stimulus.” Such tirement age – the United States is facing healthier and happier. spending pushed the federal deficit to the real prospect of bankruptcy. Many The opposite is true for those whose a record $1.4 trillion. would argue it already is bankrupt. governments heavily interfered in busi- Not surprisingly, Congress recently Deadly deficits ness and commerce. raised the overall federal debt ceiling by If citizens do not $1.9 trillion to a record $14.3 trillion. U.S. PUBLIC DEBT And yet, despite all the evidence, all hold their govern- % too many governments seem intent on To be clear, the blame for such fiscal irre- ments accountable 2008 21 of GDP reducing economic freedom these days. sponsibility is non-partisan. During the and insist on fiscal 2009 42% (projected) They do so by spending enormous sums recent Bush administration, Congress responsibility, the of borrowed money and taking away the approved eight increases in the debt ceil- situation can only go from bad to worse ability of individuals to make decisions ing totaling $5.4 trillion. – a frightening prospect for those whose for themselves. From Britain to India to Mexico, debt finances are already under pressure. This is not the path to prosperity or ceilings have recently been raised, often To overcome large deficits, govern- freedom. It is a formula for misery and to unheard-of levels. Clearly, debt ceil- ments have few choices. These include national bankruptcy. ings do nothing to limit government raising taxes, cutting spending and in- debt if they are continuously raised. Binge spending flating the volume of currency to water Do the math down debts. Individuals who insist on spending The Bank of England has already chosen more than they make not only go into When consumers max out their credit cards (charge the limit on them), is it wise the last option (called quantitative eas- debt, they eventually go bankrupt. The ing) by creating £200 billion out of thin air. same is true for governments. to keep raising their borrowing limit? The debt level of the Greek government At some point, both borrow more than When government debts rise, economic growth lowers. On average, nations with has led its Prime Minister to suggest rais- they can ever pay back. They reach that ing individual income tax rates as high as point even sooner when income drops. debts exceeding 90 percent of GDP have less than half the growth rate of when 90 percent while cutting Social Security The hallmarks of government over- debt is less than 30 percent of GDP. payments by 10 percent. spending are easy to spot. They include By its own accounting, the U.S. govern- For award-winning TV newsman John wasteful programs, record deficits and Stossel, U.S. government overspend- frightening levels of national debt. ment has unfunded liabilities exceeding more than $100 trillion, more than the ing is cause for concern – and some Last fiscal year, the U.S. government entire value of the nation’s economy. grim humor. saw its tax receipts fall by more than 16 Those liabilities include Social Security, “I’d say they’re spending like drunken percent, yet its spending rose by more Medicare and pension benefits that the sailors,” quipped Stossel, “but that than 18 percent. government has promised to its citizens would be insulting drunken sailors, who That spending included more than but has no money to pay. spend their own money.” www.kochind.com/ViewPoint/gov.Growth.aspx International shared services Carbon cap-and-trade this issue… pg 3 pg 9 Year in review pg 5 Perspective: Charles Koch pg 12 Postal Pipeline Letters may be edited for length and clarity We thoroughly enjoyed reading the October Discovery magazine. We wish somebody would go to Washington and drum into their heads some of the ideas put forth in this edition. Regarding the picture of the five presidents across the front page and on page seven – we don’t know who most of those men are. We’d like them identi- fied in print. Jane Melton Coordinator, personnel Koch Specialty Plant Services Houston, Texas The Presidents of Koch Industries and their tenures (from left to right): Bill Hanna (1987-1999), the late Sterling Varner (1974-1987), Charles Koch (1968-1974), Joe Moeller (1999-2005) and Dave Robertson (2005-present). For decades, Koch companies have advocated On behalf of hundreds in the Domini- for a market-based approach to public policy can Republic, I want to say a hearty development. The following letters regarding that thank you for INVISTA’s donation of advocacy were received at kochind.com. surplus desktop and laptop computers! We are on the constant look-out for I read Byron York’s article in the Exam- items that will enhance development in iner on the current push to blame your a way that brings the greatest number company for “everything that ills us.” of people out of wretched poverty. To sum up my feelings, thank God for These computers will be used in a people like you, for without you we small community computer lab in a would surely sink. suburb of Santo Domingo. We have Until reading a recent article in Thank you for your values and for your already graduated one small class of biggovernment.com, I was unaware community members. The donated propensity to project these values in the of the outstanding work your com- current toxic political environment. computers will do that job so much pany and employees have done in faster and easier! Charles Jones the realm of charity and defense of Brownsboro, Texas true American values. Linell Stabler, President ACES North America I thank you for your support of the Williamsport, Penn. traditional American values that have I read with interest that your critics are built this exceptional nation. John Allen of INVISTA has coordinated the donation blaming Charles and David Koch as F.J. Foley II and delivery of more than 700 used computers to the reason the “progressives” are having the Dominican Republic. These computers will help such a problem in winning the hearts of Dominicans develop marketable skills. America. Due to the attacks on your company, If this is true, as an American who is my family will research your companies concerned with the freedoms of our and attempt to purchase or recommend Discovery January 2010 | Volume 16 | Number 1 country, I thank you for doing what anything you sell. Editorial Board Questions? Comments? Reprints? you are doing. Philip Ellender Contact: Rod Learned We appreciate your courage in stand- Rich Fink 316.828.6136 My greatest hope is that we as Ameri- ing up to the demonization of all of our Mary Beth Jarvis [email protected] Jeff Gentry cans will wake up in time. country’s producers. Dale Gibbens Publication Design: Charles Koch Deanna Bauman Bob Schneider Stephen Tougias Jim Mahoney Koch Creative Group Topeka, Kan. Raleigh, N.C. Dave Robertson www.kochind.com ©2010, Koch Industries, Inc. Koch is an EOE. M/F/D/V 2 International News Sète - This port city serves markets in southern London - There are half a dozen Koch companies, including Brussels - Koch Companies Public Sector now has and eastern France and along the Mediterranean. Koch Carbon, with employees in or near London. employees in Europe as well as Canada and the U.S. Sète – Koch Fertilizer Trading Sarl has to add value to our expanding global for European and other international signed an agreement to expand a fertil- customer base.” government and public affairs work. izer import terminal in Sète, France. Brussels – In years past, if a Koch com- On behalf of INVISTA, Georgia-Pacific, The new facility will serve markets in pany had an issue to discuss with local and other Koch companies, Dubois can southern and eastern France as well as policymakers, it would send its own tap into internal and external resources, the Mediterranean. representative. Three or four different including INVISTA’s government affairs The agreement calls for SEA-invest representatives might call on the same staff members in South America and Sète, S.A. to build a 25,000-metric-ton legislator during the course of a year. Asia, and outside consultants in regions storage facility for exclusive use by Koch From the policymaker’s point of view, around the world. This helps leverage Fertilizer Trading. Construction should this approach must have seemed dis- knowledge of a wide range of global be complete by the end of this year. jointed. Why not have just one Koch policy issues that affect Koch compa- Koch Fertilizer will be able to market a representative? nies’ business strategies. number of products from the expanded With the formation of Koch Compa- Katarina Elbogen, based in Germany, terminal, including urea, CAN, ammo- has begun serving the communication nium sulfates, phosphates and potash. nies Public Sector, LLC last year, that’s exactly what has happened. and public affairs needs of not only These products can be transported to INVISTA, but also other Koch compa- KCPS is one of several shared services and from the port via barge, truck and nies with a European footprint, such as organizations owned by KII. Others rail shipments. This agreement is the Koch Chemical Technology Group and include Koch Aviation; Koch Busi- first of several international agreements Koch Supply & Trading.

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