The USA is at a tipping point where spending reductions and legal reforms must be made or we will have a more severe economic crash than we have experienced since 2008. Due primarily to increases of our money supply (monetary inflation) to support government spending, the US Dollar (USD) has lost over 95% of its purchasing power since 1913, and faces further losses caused by recent spikes of money supply increases (due to ‘Quantitative Easing’ by the Fed) if we don’t reduce spending soon. The GOP ‘Path to Prosperity’ sounds good, but only asks for minor spending cuts while saying nothing about our failing monetary system and costly military bases and wars (only military ‘inefficiencies’!).
The world views us as a failing empire and other major nations are making preparations to replace our dominance in financial and political matters, including the USD’s status as the world’s primary ‘reserve currency’ (any seller or lender will accept and keep it), which allows us to create new money to pay our bills! (and we abuse it!). In 1968, then French President Charles de Gaulle called it our ‘exorbitant privilege’. This article shows how we can reduce our arrogant excesses and avoid an economic and political crash.
The Original USA Attitude
The USA has evolved in government and geography in many steps. When the thirteen colonies in America won their independence from England upon signing the ‘The Paris Peace Treaty of 1783’ on September 3, 1783, they were referred to as ‘..free sovereign and independent states..’ In order to better coordinate their activities and defense, they created the ‘Articles of Confederation‘ on November 15, 1777, then the ‘US Constitution’ on September 17, 1787, and the USA was born! Both of these documents; 1.Treated the States as sovereign entities, and 2. Were a specific list of limited powers and duties granted to the central government by the States and people. The concept was (and is) that if the power to do or legislate something is not granted therein, the government has no authority to do it, except by amendment.
The settlers came to America seeking freedom and took great care to not grant too much power to their new government. It was viewed as a servant created to only protect the rights of its citizens from violation by others, not to ‘manage’ the economy or people. Key words are ‘protect rights’, and ‘by others’. Under this legal system you can do whatever you want if you don’t violate the equal rights of others (of course ‘non-legal’ social issues such as honesty, courtesy, etc. still apply). The rights are limited to one’s natural rights (such as free speech, property rights, freedom to travel and associate, etc.) that are free and you are born with. They do not include; 1. So called ‘legislated rights’ (or ‘entitlements’), all unconstitutional, that have been created by improper government, and 2. Goals and desires such as health-care, education, housing, jobs, etc. A guide is that ‘nothing can be a right if you expect someone else to pay for even part of it’. Sounds good for the start of a new country, but it hasn’t worked out as planned!
Personal responsibility was emphasized in early America. Families and private charity, with voluntary donations, took care of the needy. But over time, politicians seeking votes have created ‘benefits’, ‘subsidies’, and other favors for people, businesses, and activist groups that have created dependence on the government and have become viewed as ‘normal’, and ‘the American Way’. FDR launched the ‘paternalistic’ style government in 1933 as his solution to the Great Depression, which was caused by excess money from the Fed (see below). Private charity has waned as the government became the source of funding (easier than seeking voluntary contributions).
How the USA Government Grew and the People’s Attitude Changed
First, let’s look at the major events that enlarged and molded today’s USA:
1. 1861, the Civil War; Postured the federal government as superior to the states.
2. Wars of aggression to add land and colonies; 1812-‘War of 1812’; Attempted to acquire Canada; 1839-‘Mexican American War’; Invaded and acquired the northern half of Mexico, now most of the SW 6 states; 1898-‘The Spanish American War’; invaded and acquired Puerto Rico and Guam, bases in the Philippines, then ‘annexed’ Hawaii. For details on our wars of aggression, see link 8 at part 8-A, in the left margin of my site Forward-USA.org. Land acquired by negotiation was; 1803- Rights to French ‘Louisiana’,1822-Florida Territory, and 1846-‘Washington Territory’ by a treaty.
3. 1913, Federal Reserve System; The Fed; created by and for politicians and bankers to provide a near endless supply of money and credit to serve them.
4. 1917, US entered WW1 and became a world power, and the US Dollar a reserve currency (held by banks, and used for international transactions)
5. 1933, President F. D. Roosevelt launched the Social Security System, the FDIC, ended private ownership of gold, and many other social and economic programs; The start of ‘paternalism’.
6. 1941, US entered WW2, became the world’s top power, and the US Dollar the world’s official reserve currency (redeemable in gold at $35 ounce, between nations); The start of world domination and Empire-USA.
7. 1965, President L. B. Johnson launched Medicare (A & B), and Medicaid.
8. 1971, President Nixon ended connection of the US$ to gold. Money creation and prices have soared since then; The start of extreme excessive spending and debt by the people and gov’t.
The above events created a huge Federal government with worldwide ‘interests’, all unconstitutional. Now more people work for various levels of government (22.5 mill.) than in all manufacturing (11.5 mill.). This is about the opposite ratio of 1960. (To be fair, the productivity of the average American factory worker has tripled since 1972, so total manufacturing output should not be measured by the number of people employed.) Most people now view government as ‘mother’ and ‘manager’. This creates dependency and reduces initiative and personal responsibility. Immoral gang-theft-by-vote (targeting any person or group with money) is accepted by most as a normal way to raise money. Our nation has become ‘Empire-USA’. Politicians now see the world as their domain, and the ‘military-industrial complex’ pushes (and bribes Congress) for more foreign wars and occupations to feed their business’. The massive problem we now face is that all empires in history have failed due to; 1. The expense of constant remote wars for control and resources (oil, etc.), and 2. The decline of productivity at home, and demands for benefits (food, housing, pensions), by the people. This is the USA we see around us today; A failing empire! For more on empires, see link 1 at part 8-A, in the left margin of my site Forward-USA.org.
A Plan to Restore Government to Its Proper Role
This plan shows how to restore control to the people, abolish unconstitutional spending, conduct, and laws (including the Federal Reserve System and undeclared wars), and end abuse of the ‘interstate commerce’ and ‘general welfare’ clauses in the Constitution, thus allowing USA citizens to enjoy more liberty, peace, prosperity, morality, and justice. All changes shown below should be made as soon as possible (1 to 5 years max.), depending on the size and complexity of the issues. The plan is non-partisan because both leading political parties are equally at fault. All $ figures below are from the Congressional Budget Office (CBO) in April, 2011.
The Fiscal Year (FY) 2011 budget started on October 1, 2010, and called for spending of $3.708 trillion (tn), about 24% of GDP, with an expected deficit of $1.65 tn. The flailing in Congress over a budget for FY 2012 (which started October 1, 2011) concerned relatively minor reductions in spending compared to the forecast deficit and accumulated debt (about $14 tn, which is 92% of GDP!!; China is 18%). All financial experts agree that a country is in big trouble when its debt exceeds its GDP. “Progressives’ (people who seek more government spending and control to solve social and economic problems) complain that ‘cuts’ to their projects are cruel, but ignore the greater pain caused by the economic crash that their unsustainable spending and government intervention in the economy has caused. The economic problems since 2008 are just a start. As a speaker to these Progressive groups I have asked if anyone supports ‘gang-theft’, and none say they do. Yet they all support immoral gang-theft if done by voting to target and tax anyone with money such as ‘the rich’, ‘inheritors’, or ‘corporations’, even if gained honestly and with taxes already paid. This is very convenient compared to soliciting voluntary contributions, but very immoral and counterproductive, and one of the signs of decadence in a failing empire. Of course the business groups and politicians that support invasions, wars, and occupations for economic and political gain (Iraq, Afghan, Libya, etc. for oil and control) for Empire-USA are an equal or bigger part of the moral and economic problem we have.
The legal limit on our national debt has been increased by Congress in twelve steps from $5.5 tn in April, 1996, to $10.62 tn in July, 2008 (grew $5.1 tn in twelve years; $425 bn average per year). We exceeded the legal debt limit of $14.29 tn set in February, 2010 (grew $3.67 tn in 2.5 years; $1.5 tn average per year, triple the rate of the prior twelve years!!). Due to the Wall Street bailouts in 2008, and the Fed’s program of ‘Quantitative Easing’ (pouring new money into the economy), the annual rate of debt growth has increased faster in the last few years, and is expected to grow even faster in the years ahead!!
Given these dire circumstances, the ‘cuts’ now planned in Congress do not come even close to avoiding a crash of our economy and the US Dollar. In January, 2011, Sen. Rand Paul introduced his plan with $500 billion in spending cuts to be enacted over one year. This is the biggest total proposed by any Congressman, but it is still not enough. It does not address our failing monetary system (the Fed), and calls for only a small reduction in military spending, the foundation of Empire-USA. A major restructuring of our government’s activity is needed. See details of Sen. Paul’s plan at; (http://www.randpaul2010.com/wp-content/uploads/2011/01/500Bcutsbill.pdf), and an overview at; (http://www.randpaul2010.com/wp-content/uploads/2011/01/Overview-500-billion-cuts-2.pdf).
Sen. Paul and I support a ‘Balanced Budget’ amendment to the Constitution (see item 3 on P. 6 below).
A Summary of My Plan
1. Monetary System: We now have what is known as a ‘fiat’ monetary system, where the value of paper money (Fed notes) and coins is the ‘face value’ declared by the government, and must be accepted for payment because of ‘legal tender’ laws. The paper notes are not redeemable in a commodity with market value such as gold, and the coins are made of cheap ‘base’ metals such as copper, aluminum, nickel and steel (not even a portion of ‘precious’ metals such as gold or silver). This system allows the government to create paper and ‘digital’ money ‘out of thin air’ and funds the wars and corruption we now have (without the politically sensitive use of tax increases). When the Fed was started in 1913 it issued ‘Silver Certificates’ that were redeemable in silver coin by anyone. This ended in 1968. The use of silver in coins ended in 1965, so the ‘pre-65’ coins are now valued at their silver market value and a premium depending on condition. The redeemability of Fed notes for gold by other nations was ended in 1971 by Pres. Nixon (because we were running out of gold)., and creation of new money has soared since then. As a result, the USD has lost 82% of its value (purchasing power) since 1971!
We have abused our money by excessive creation of new dollars, and other nations (who own 32% of our debt) now fear their holdings of dollars will lose most of their value as we crash. China is the most exposed (with about $1.1 tn of US debt), with Japan and S. Korea next, all due to acquisition of dollars from their exports to us. The IMF and our own rating agency Standard and Poors have warned the world that the US economy and dollar are in trouble. Other nations, led by the BRICS (Brazil, Russia, India, China, and South Africa - Japan too), are holding formal meetings to consider alternatives to the dollar. China is ending many restrictions on use of its currency (the yuan, or renminbi), so it can be used in world trade and investments. The US may opt for a new currency via the IMF to pre-empt collapse of the US$, and claim (lie) that the new fiat money (Bancor?) is a big improvement.
We must end excess expansion of our money supply. My solution is to immediately abolish the Fed and legal tender laws, allow free-banking (no license or location limits, just full disclosure of assets and liabilities), allow private mints, make all current Fed Notes redeemable in gold by anyone on demand (and create no new notes, physical or digital), and use gold in coins. This is the classic ‘Gold Standard’. It prevents the government from creating money ‘out of thin air’, ends the moral hazard (doing risky deals because you expect to be bailed-out if they fail) of ‘lender of last resort’ to banks, makes bailouts ‘unfundable’, and has always resulted in more prosperity and fewer and smaller wars and business cycles. There will be no ‘run’ to get rid of Fed Notes because they will be redeemable in gold the day the new system is announced. The amount of gold per current Fed Note dollars would be set by dividing the amount of gold we own (8,134 metric tonnes; subject to audit) by the number of dollars issued (M3, about $14 tn), which yields two ten-thousands of a troy ounce per dollar, or $50,000 per ounce. After the new system starts, prices would be shown in weight of gold (such as one-half ounce for a car). I predict that once the US converts to gold, all nations will, or Sellers won’t accept their trash fiat paper; Good! Of course, it follows that we should resign from the meddling groups such as the International Monetary Fund (IMF), World Bank, Bank of International Settlements (BIS), and the G-20, all of which only exist to patch and pamper the world’s fake money system. For more detail, refer to the links 6, 7 and 11 at part 8-A, in the left margin of my site Forward-USA.org. Bravo to Rep. Ron Paul (father of Sen. Paul) for his work for sound money since 1978. His books, and bills to audit the Fed (HR 459), and end legal tender laws (Competitive Currency, HR 1098) have led the way.
2. Spending, and Taxes
In fiscal year 2011 the federal budget was $3.708 tn (24% of GDP), but they expect to spend $1.65 tn more than they take in (the annual deficit). Our $14 tn total debt, and the interest on it, are growing rapidly. Debt held by the public is about $9.7 tn. Unfunded debt for future entitlement costs is over $100 tn!!
a) General Domestic Spending: This is now 32% of the Federal budget. The changes below will save about $500 bn per year (50% of current budget). We should; 1. Eliminate unconstitutional cabinet-level departments (Education, Energy, Agriculture, Homeland Security, HUD, ‘Health, Education and Welfare’, etc.) and just retain parts of Commerce, Defense, and Treasury, 2. End all programs such as National Endowment for the Arts, National Endowment for Democracy (NED; this is often used to illegally fund and organize revolutions in other countries; shame on Dick Gephart, Judy Shelton, and the other parasitic staffers!), NPR, Peace Corps, AMTRAC, Import-Export Bank, AFDC, Food Stamps, Unemployment Pay, 3. End Pell Grants and Tuition Loans for college students and grants to professors (they flood the college industry with money and allow excessive spending and tuition increases by colleges), etc., and 4. Reduce FDA, and EPA to advisory roles, with enforcement by states. Welfare programs such as AFDC (Aid to Families with Dependent Children) actually lead to more broken families as some fathers leave when they qualify for AFDC or rent subsidies. These programs are justified as serving the ‘disadvantaged’ or ‘underprivileged’; notice the ‘victim’ orientation of these terms. Conversely, Progressives view successful people with good incomes as ‘privileged’ or ‘lucky’ and say they should be forced to pay higher rates called their ‘fair share’, better called ‘a penalty on success’! All of these programs are unconstitutional, and must end. Some are desirable, but should be funded by voluntary donations. ‘Privatization’ of many current government functions (roads, schools, utilities, transportation, etc.) is a proven way to cut costs.
Costs have soared as employer negotiators ‘caved-in’ to union demands for higher wages and benefits such as health care, work rules, and pensions. The employer negotiator wants to avoid a strike that will affect his next bonus (or for government, they want the votes and donations of the union). Union negotiators have been aided by laws that control membership voting, and paying dues.
b) Social Security: This was 20% of the FY 2011 Federal budget (started Oct-2010), thus $727 bn, and growing yearly. The present system is a welfare program for seniors, paid to them by current workers. Seniors have no equity (ownership) of the amounts they have paid-in to FICA in their working years (and contributions by their employers) and the government can stop paybacks (checks from the gov’t) to seniors at any time. It is a devious plan and must be reformed before it fails (goes broke due to more recipients than payers) and hurts many people who are planning for it, or already dependent on it. My transition plan is to; 1) Keep the present plan in force for people age 55 or older, make paybacks proportional to amounts paid in (now immigrants get nearly full pay, with a low history of pay-ins), extend start date of payback to age 70, and grant equity ownership for pay-ins made, 2) Reduce payback amounts as needed (due to reduced program income), with five years advance notice, 3) End ‘contributions’ by employers, and 4) Require people age 18 to 55 to join the new plan or go ‘on their own’. Either way, they will get credit/payment for their prior pay-ins, and interest.
The current program is immoral because it depends on robbing the younger generation for ‘contributions’ (pay-ins) sent directly to current ‘recipients’ of paybacks (there is no ‘fund’), and is unsustainable because costs are rising while ‘contributors’ are declining in number and income.
My proposed new program, ‘Redick’s Private Pension Plan’, is similar to the plan in Chile since the hugely successful new version started in 1981 (see; http://www.cato.org/pubs/policy_report/pr-ja-jp.html, by José Piñera, who as Chile's Minister of Labor privatized the state pension system, is President of the International Center for Pension Reform and co-chairman of the Cato Institute's ‘Project on Social Security Privatization’; Cato.org). My Plan is optional (individuals join if they wish) where citizen contributions would be invested by private investment fund firms chosen by the citizen, and the citizen would own the account equity. Growth in value would be tax free. A government regulatory body would set some broad investment diversification rules, to avoid high-risk or politicized investments by the fund managers. The contribution amount (weekly or monthly; a percent of pretax pay, or other personal funds) would be chosen by the citizen based on his choice of retirement age. This would encourage middle-class and low income people to start an account, which they would normally view as ‘only for the rich’. This program has proven very popular in Chile (90% of workers joined!) due to the ownership aspect, which fosters personal responsibility. There are many side benefits such as increasing capital available for investment (by the pension fund firms) which reduces unemployment, plus better social and economic conditions in Chile. Go to the Chile link above for more details.
|Introducing the NEW .999 fine one ounce|
The ‘private’ and ‘personal’ aspects of my Plan will lead to more personal responsibility in our society, including more work, saving and good relations with the family and friends who will help care for the aged. Poverty cases can be served by private charity. The attitude of ‘the gov’t owes us everything’ and ‘it’s OK to take others people’s money to pay for my benefits’ will fade. Thus, my plan is both moral and sustainable.
c) Medicare and Medicaid; This was 22% of the FY 2011 Federal budget (started Oct-2010), thus $846 bn (and growing yearly). The changes below will save about $300 bn per year (35% of current), with Medicaid funding shifted to the States.
End both programs at the federal level over a five year transition period (to allow people to make changes) and replace it with my free-market plan shown at ‘Section A2, then item 1-f ’ at part 8-A, in the left margin of my site Forward-USA.org, and at this link, http://www.activistpost.com/2011/03/how-free-market-choices-can-solve-our.html
This plan emphasizes use of Health Savings Accounts (HSA), owned by each person (and usable in any state, or as a bequest at death), and funded by state government, employers (at their option), and donations. The person uses the money to ‘shop around’ and pay doctors, clinic plans, or insurance firms directly. This has proven to reduce costs and increase personal responsibility, such as avoiding obesity, alcohol, and smoking. People are stingy with spending their HSA funds, so abuse and unneeded tests and drugs are reduced! Making all licenses optional brings patient choice and competition to the current pricing cartel held by the AMA (American Medical Association; they pay Congress well). We now have only ‘Cadillac’ level medical service. This plan will allow nurses (or Physician Assistants) to open their own clinics for lower-level problems, at about one-third the cost per visit! If you prefer to pay about $200 to see an M.D. for a sore thumb, fine, go to one. Some people say that others are too stupid to select non-MD services, but I say ‘Mind your own business and let others manage theirs’. This attitude of excess regulation and licensing (to protect and restrict us, and limit competition) is a key reason how government and health costs have gotten too big and oppressive!
d) Defense and Foreign Spending (including foreign aid, the CIA, and all US military activities and bases): This is now about 19% of the FY 2011 Federal budget, thus $712 bn per year. The changes below will save about $500 bn per year (70% of current). We must; 1. End Empire-USA and our self-appointed role as the world’s policeman (or Boss and Bully?), 2. End the illegal and immoral wars and occupations of Afghanistan (for access to build a pipeline to Turkmenistan, and land for bases), Iraq (for its oil, land for bases, and defense of Israel), and Libya (for oil and to expel China) in an orderly manner, not to exceed one year, 3. Offer reparations for our share of war damage and murdering of their people, 4. Close all foreign bases, and resign from the UN (embassies give adequate contact with other governments; the UN is a cesspool of politics), NATO, and other mutual-defense treaties, and 5. End all ‘foreign aid’, most of which should be called ‘bribery of foreign leaders’. In general, mind our own business, use purchase negotiations rather than war to get oil, and end special treatment of Israel and any other nation that has political favor and power in the US Congress (often due to bribes and threats to Congress persons). In accordance with the reduced missions above, we must reduce; 1. The number of military personnel and facilities, and 2. Development and production of contractor-provided military equipment and services. Medical treatment and other benefits for military veterans (not contractors) should be continued; those troopers were the victims of our warmonger politicians.
e) Debt: Net interest on the federal debt was 6% of the FY 2011 Federal budget, thus $225 bn per year. This is based on artificially low interest rates (more Fed manipulation). In March, 2011, annual rates on ‘Treasuries’ (Treasury Bills, Notes and Bonds) varied from 0.18 to 7.95%, with a weighted average of 2.99%. Both federal and personal debt has soared in recent years; Loose money stimulates loose spending! Our $14 tn total federal debt, and the interest on it, are growing rapidly. Debt held by the public is about $9.7 tn. Unfunded future debt (for entitlements) is over $100 tn!!
There will be a big increase in our over $225 bn annual interest cost (higher rates, more debt) if we continue to run deficits, but my plan for reduced spending will reduce risk for our lenders and help prevent an increase in rates. If we don’t start reducing spending and debt, our interest rates could triple or more, and cause an economic crash similar to what we have seen with the PIGS (Portugal, Italy, Greece, Spain) in Europe.
f) Unconstitutional and Abusive Laws and Programs: The list is too long to show here, but key ones to end are; 1) ‘’Signing statements’ by Presidents that change the law or project involved, 2) ‘Legal findings’ and the Military Commissions Act of 2006 (MCA) that allow torture and detainment of suspects (terror and other) based only on an accusation by an informant or government official, 3) The Patriot Act and TSA, 4) The Williamson Act of 1968 that made hostile takeovers difficult and helped incompetent and corrupt corporate officers and Directors keep their jobs and abuse their shareholders (excess pay, etc.), 5) the Exchange Stabilization Fund (ESF), created by FDR to distort the precious metals market, 6) The ‘Real ID Act’, 7) All minimum wage laws, 8) All laws related to the counterproductive War on Drugs (it creates more sellers-pushers and users), including Asset Forfeiture, 9) End Presidential power to start wars by ‘Executive Order’ without Congressional approval (or within 60 days of an imminent attack; part of this problem is that the cowards in Congress don’t want to go on record as being for or against a war), indeed end the ‘Imperial Presidency’ and all of its Executive Orders - past and future-, most of which are unconstitutional or illegal, and none authorized by Congress), and 10) The Fannie Mae (stock code FNM) and Freddie Mac (FRE) ‘bankers’ that allowed retail banks to run amok selling bad-credit, no-doc, and liar mortgages, and then sold them to Wall Street bankers who mixed them with other debt, falsely labeled them AAA (with the help of corrupt rating firms), then ‘packaged’ and sold them worldwide, which was a big part of the crash of 2008!
g) Income and Property Taxes (all levels of government; city to federal): Our complex tax laws are often immoral, and always costly to comply with and enforce. Many taxes and deductions are part of the government’s social and economic planning (which they shouldn’t be involved in at all), and often do more harm than good, including the famous cases where major firms and wealthy people pay no taxes! I recommend a flat tax (around 15% would probably work) with no deductions, and zero capital gains tax. The flat tax is in fact ‘progressive’ since high earners will pay more per person than the poor (that should please my Progressive friends!). ‘User Fees’ should be used wherever practical. This would apply to now free services such as libraries, community pools, highways (more than now), and replace taxes for schools (tuition rather than property tax), etc. Property taxes are an easy political target since; 1. Owners are known because they must register their deeds for protection, and 2. They are usually in the minority, so are prime targets for gang-theft-by-vote for a variety of taxes, without relation to their use of the services they are taxed for (such as schools).
3. Pass ‘Referendum’ and ‘Balanced Budget’ Amendments:
a) The Swiss have been very successful in controlling government abuses and excesses by use of their referendum laws which allow then to; 1) remove legislators from office (recall), 2) pass laws that they want but can’t get the self-serving legislators to pass, and 3) repeal laws that they don’t like. This keeps the legislators alert to comply with the voter’s wishes. I suggest a similar set of rules be invoked, and
b) A Balanced Budget amendment will give us a powerful tool to limit spending. Politicians will like it because they can claim; ‘we want to give you more, but our hands are tied!’
If started in early 2013 (FY 2014), the above ideas and solutions will reduce total annual spending enough to create a budget surplus by late 2015 (FY 2016). This will allow us to start paying-down our debt, and end the threat of a declining monetary system (by then on the gold standard I hope), and economy. The alternate is to keep spending and destroy the US Dollar and our economy!
My plan will restore the government to our traditional economic and moral values, bring peace and prosperity to our people, and help others around the world. I recognize that Congress will not approve my entire plan, but it is important to set goals so that each element they do approve is part of an integrated plan.
For more ideas and essays, refer to my writings at www.Forward-USA.org, and my books Monetary Revolution-USA and Rebuild America Now, both on Amazon.com.
Let’s get started before we crash. We owe it to our children and future generations!
By David Redick (BS-Eng. MBA-Econ.), a businessman and political activist.
Read other articles by David Redick Here
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