Why are we being punished for being good?
Have we weathered the economic meltdown? Have we survived? How are you doing? Is it over?
Unemployment continues to rise. Foreclosures continue to increase. Foreclosure rates are expected to increase. Small- and medium-size businesses still can’t borrow to expand or even purchase inventory. The Wall Street casinos are up but America is not.
Is it over? Obviously not. When will it be over? Don’t hold your breath.
Have you watched your spending? Have you been more careful in using that charge card? Have you been paying down on that card, those cards? Hey, you’ve been good. Congratulations. You are part of the problem.
Our basic problems began in 1973. Remember the oil embargo? Remember stagflation? Remember WIN?
The oil embargoes of 1973 and 1979 brought severe and sudden stress to our economy while we were still paying the price of the “Guns and Butter” policy of the Vietnam War. Instead of behaving sanely, as Brazil, we elected St. Ronny.
When all of this began, in 1973, we reached the all-time peak of family income earning power in real, uninflated terms. With the exception of a small increase in the 1990s, it basically been downhill ever since.
With the Reagan Administration came the Chicago School of Economics, the Laffer Curve, Trickle-down Economics, polluting trees and our favorite veggie – Catchup. They told us we could have a great party and never have to pay for it. The secret was credit.
In 1981 we were the largest exporter of manufactured goods. Now we are the largest importer. In 1981 we were the largest importer of raw materials. Now we are the largest exporter. In 1981 we were the largest creditor nation. Now we are the largest debtor. We have become the very definition of a third-world nation.
Our economy is consumer driven. If we consume, the economy rolls right along. If we rein in, even just a bit, the economy falters.
The Japanese miracle of the 1960s and 1970s was fed by a savings rate of a little more than 20 percent. Our own major periods of economic expansion saw savings rates of 20, even 30 percent. The Chinese savings rate has been in that same range of late. Other success stories, such as Korea, are based on the same. It isn’t a secret. It never has been. High rates of savings makes good economic sense for national economies.
We are now saving and the result is that our consumer-driven economy is stalled. Saving isn’t quite as pleasurable as spending for most folks. It just makes more sense.
The Reagan people had a different idea. Make everyone feel good by letting them use credit to live the good life. Don’t worry about paying it back. Other countries would be happy to sell us everything they could. Then, they would become so dependent on our spending, they couldn’t call the loans. They didn’t dare make us pay our bills. That would mean they would have no customer for the products of their growing economies. They would just have to keep selling us stuff and holding our IOUs.
The government could also throw a wonderful party, on credit. Let our grandchildren pay for it. In the meantime, the politicians that gave you your every desire would benefit from your appreciation. One of the most expensive gifts they gave us was a military that costs more than those of all other countries on Earth combined. Boy, did we feel macho.
Reagan called himself a conservative. Milton Freeman called himself a conservative. Authur Laffer called himself a conservative. All of the politicians who flocked to Ronnie’s banner called themselves conservatives. Actually, none of them had the foggiest idea of what the word meant. Calling themselves conservative didn’t make it so. They were frauds. They were imposters. They were Fagins. Conservative was just a useful label.
We enjoyed the party. We looked at the numbers they wanted us to look at. We ignored the fact that two-income families were now earning less in real terms than single-income families used to enjoy. We bought but didn’t actually pay for things we hadn’t realized we needed. We heard others complain of their jobs being shipped overseas. So, that’s bad but it really wouldn’t hurt us.
We couldn’t ignore but did manage to give only cursory attention to the fact that Saudi Arabia, China and others technically owned us. After all, they couldn’t do anything about it without destroying their own economies. Let them eat rice cakes, with oil.
It is obvious that we had to increase our savings rate. We have to control our spending. But doing so means less need for the things and services people sell. That translates to fewer jobs. We cannot get around the fact that it means delaying the recovery. That means the misery this country is experiencing is far from over.
Surprise! We have to pay for our profligacy. They lied to us. We have misbehaved and have to suffer the consequences.
We could rev the economy up as Wall Street is revving up their ‘numbers.’ That would shorten the misery, for now. It would make it worse the next time though.
The necessity is for us to survive. That means jobs. But, the private sector can’t provide them, certainly not enough of them. That leaves the government. That means that the government has to create jobs. They built sewer systems. They built roads. They built much of the infrastructure that, after more than 70 years, is crumbling all around us. Should we ask the private sector to be real nice and replace our infrastructure, since they eventually would be unable to function without it?
My dad survived for a period because of the WPA. It gave him a breathing spell. He then figured that everyone had to eat and, with the WPA, there was at least some money in people’s pockets, so he started his own grocery store. It wasn’t being a History professor. It wasn’t his dream, but it meant he survived, even thrived, and provided for his family. Without the WPA you might not be benefiting from my blog.
If and when we ever get the economy rolling again, it can provide the means to pay off the debt, if we insist the politicians actually learn. It isn’t easy. It isn’t quick. It isn’t punishment for being good. Rather, we must behave ourselves for an extended period, to atone for nearly 30 years of partying.
p.s.
My apologies for such a long period since my last post. Illness, a funeral and travel kept me occupied for some of the time. Frustration at the national comedy and anger at a sewage dump named Kiffin left me unmotivated for a while. I think I’m getting back up to speed.
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It won’t come to that but it’s the direction we’re headed.
Those cell phones, ipods and laptops haven’t been paid for. The Chinese only got IOUs.
Unemployment is 10.9%. That is people applying for and receiving those checks. It also includes those signed up with state employment offices. It doesn’t include those who have given up. That number is around 20%.
The middle class is disappearing. No modern developed country can exist as such without a middle class. The way things are going we need to hope Haiti prospers. We may need their help in the future.
You say, “That means the misery this country is experiencing is far from over.”
I say, good.
McDonalds and Burger King are booming. The better restaurants have a 2 hour waiting time on Friday and Saturday. Every child over the age of 7 has a cell phone, an Ipod, and a laptop. We are in the process of sending a gazillion dollars to Haiti. Every family has at least 2 cars , 5 or 6 bedrooms, 2 or 3 bathrooms.
Oh, the humanity!