Sunday, March 20, 2011

Solution No. 1: Living Within Our Means As A Nation

In my last post, I listed ten things that we Americans will come to regret in the fairly near future.  I also said that I would try and list some possible solutions to our serious national dilemma.  So here goes.  (If you want to see the solution in one sentence immediately, scroll down to the sentence in bold.)

We have been on this 'road to perdition' as a nation for about 40 years now, with the trend lines that I sketched out in the last post pretty well in place (plus others that I didn't mention, like the eclipse of the labor movement, or the rise of the 'junk food/fast food' industry and the resulting health problems like obesity and diabetes in youth).  But most people didn't see it happening, though a few did.  (I began to see it about 10-12 years ago.)  And our leaders have almost totally failed us, again with a few rare exceptions. 

One of those exceptions (who has gotten credit for other good things but not for this) was President Jimmy Carter.  In the late 70s, he saw the energy/oil crunch coming and pushed this country toward energy conservation and renewable energy.  But sacrifice of any kind was not in our game plan, so when the Reagan Administration took over, with its new 'conservative' view of things, it totally reversed Carter's efforts at energy reform.  So we went back to our old profligate ways in that realm, that have basically continued to this day.  And, it's sad to say, most Americans remain in denial, though I think there is clearly a growing sense that something is seriously wrong.  You see this in the rise of national pessimism about our future as a nation, especially since the beginning of the Great Recession in the fall of 2008.

The question is: is there a point where we as a nation will reach the point of no return?  Where the damage that has been done within our nation by bad habits, corruption, selfishness, and blindness has gone too far?  I liken it to a patient who has had a heart attack and is lying in ICU.  Will he die because the damage is so great, or is there a chance he'll recover and go on living.

To be honest, I don't pretend to know the answer to that question, because no one really does and we won't know until one or the other takes place.  So all we can do is look for possible and realistic solutions, and then hope and pray for the best.

The problems are so big that it's hard to know where to start.  And to make matters worse, there is no consensus politically on these solutions.  In fact, the political system is so paralyzed right now that common sense solutions to any of the problems I mentioned are unlikely to be approved.  It needs to be said that President Obama has tried to nudge things in the right direction in several ways: by supporting new plug-in hybrid vehicles, like the Volt, in order to reduce petroleum dependence in our car fleet, and by the construction of a high-speed rail system.  But in my opinion, they are 'too little, too late'.

And frankly, most of the problems remain 'below the radar' of the American public, who tend to be preoccupied with various American 'spectacles' and celebrity hijinks, brewed and served up by our corporate mass media  And when they do get interested in politics, they are diverted from the real problems by ideological demagogues, which look in all the wrong directions for answers.

So, to repeat, solving the macro problems facing America in a reasonable and timely way is unlikely, to put it mildly.  But it is nevertheless worth listing some possible solutions that might work, if they could be put into place by some miraculously appearing political coalition of new founding fathers and mothers.

Let me begin then with the issue of debt.  Right up front, I will say that I agree with the general 'Tea Party' sentiment that we must start to 'live within our means' in all aspects of our national life, public and private (though it certainly didn't originate with the Tea Part, but goes back as an honored tradition of our country that we've forgotten).  All debt and deficit spending, again public and private, must come under scrutiny and be pared down drastically.  Conversely, savings and investment must increase.  This will require really difficult, indeed almost impossible, political decisions.

For 40 years now, we Americans (of the 'non-rich' class) have been living on debt, using borrowed money from both domestic and international creditors, to keep our standard of living from falling, as they otherwise would have done from the loss of jobs and wages, trade deficits, artificially low interest rates, etc.  Credit has been easy to get, with borrowed money available for almost any purchase (autos, houses, big screen TVs), and credit cards were pushed on us from every direction. 

Our international trade deficits have been increasing as we export less (and thus manufacture less) and import more of almost everything except maybe haircuts and pizzas.  Most people don't understand this aspect of our economic dilemma, and how it undercuts our economic strength and our strong currency.  And of course, to some extent, this has been aided and abetted by countries like China, Japan, and Saudi Arabia that have continued to loan us back those dollars they got from us, so that we could continue to import their goods (which in turns weakens our manufacturing) in what becomes a vicious cycle, undercutting our economic strength and hollowing out our industry.

Our governmental debt has exploded, first of all, because it has become dogma among conservatives that taxes must always be cut and never raised.  This is especially true for the wealthy, whose tax burden has gone down while their income and wealth has skyrocketed.  And now more recently, because of the Great Recession and the desire to stimulate the economy, along with the bank and corporate bailout, the national debt has risen to historically unprecedented levels.  The costs associated with Medicare and Medicaid continue to grow at an uncontrolled pace, threatening to overwhelm the rest of the budget.  Add to this the growing expenditures of our military and intelligence agencies, and you have a federal budget completely out of control.

The housing bubble of the last ten years has been devastating in terms of debt.  For years, American families used rising home equity to finance all kinds of expenditures, but the collapsing housing market led to falling housing values, underwater mortgages, foreclosures, and banks holding worthless housing securities.

How is it that we have allowed this to happen?  Those contrarian folks (from all political persuasions, by the way) who tried to point out the obvious were ridiculed until just a few years ago as weirdos and 'outside the mainstream'.  Most mainstream economists/Wall Street analysts seemed to feel that debt really wasn't a problem--we would just 'grow' our way out of it.  Our public leaders, even those claiming to be conservative, did nothing but add to the problem when they controlled the purse strings.  Vice-President Cheney, a conservative's conservative, once claimed that budget deficits really didn't matter, as he invaded Iraq, a war that had (and continues) to be paid for with borrowed money.

How blind we have been, as we have spent money like maniacs!  And how unprepared we are to make the political and economic decisions necessary to begin to get a handle on this problem.  Not only are we not prepared to pay our loans back, we can't even stop the deficit spending itself!  (The budget deficits alone, stretched out into the future, are in the 'trillions' of dollars a year.)

The only possible solution is cut back all areas of national spending drastically, while at the same time, raising taxes on those able to pay them.

In addition, we can raise the national income by decreasing imports while increasing exports, stop thinking we have to or can solve all the world's problems with our military machine, reform our health care system (or in other words, solve the other nine problems I identified in my last post, all of which worsen the national debt).

The only problem is that we're not even close to having the political will to institute this reform measures.  Indeed, I don't think we will be able to find the political will to solve this until we suffer a kind of financial and economic collapse (think 2008 x ?), which will be the equivalent of national bankruptcy.  Then we'll have to get our act together because we won't have any choice, but in the process, we may lose our democracy and whatever affluence that the middle class has left. 

I guess that would be my prediction for our economy in the next decade or two.  Sorry to be so pessimistic.  But then again, I prefer to see it as simply being realistic.

And really, in our heart of hearts, we've known this all along, because ancient Wisdom tells us that there is a serious price to be paid for being a prodigal, nation.  Which, if you're not familiar with the story from the Gospel, means that we're going to be wallowing in the mud and eating pig's food for a while.

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