The Real Problem

At the present moment in historical time, the United States government, and both political parties, are seeking, with a kind of quiet desperation, ways to shore up the financial system of Wall Street, and with it the national and even the global economy.  The bailouts, recent and contemplated, stagger the imagination in their scope.   The problem?  Overwhelming debt based on risky corporate decisions, compounded by an alphabet soup of derivatives, swaps, and other schemes that make Enron’s in-house deceptions look like children messing with play money.  The government is now taking on responsibility for huge amounts of debt, and everyone is talking about how much of this is going to become a liability for the taxpayer.

It’s time to talk about the one issue that no one is mentioning.

The best leadership (and the worst) is always by example.  The United States Government has set a terrible example, and the markets have followed:  it has put itself in increasing levels of debt, with no plan in place to repay the creditors. The guiding fiscal philosophy articulated by Vice President Richard B. Cheney that “deficits don’t matter” has been applied by large institutions, and unfortunately by many smaller entities including households, to their own situations. It’s that simple.

Until we do the hard thing that was done in the waning years of the Bush I presidency, and come up with a bipartisan plan to balance the budget (even if it violates someone’s sacred “read my lips” pledge), and go further and return to the action of the Clinton administration (in cooperation with a Republican congress) by coming up with a workable and working plan to begin in the present tense the task of paying down the national  debt, all we have done is kicked this ball further down the field, and the next thing you know it will be the U. S. Treasury that people will be talking about with comforting (?) words like “too big to fail.”

When the Bush II tax cuts were put in place, some responsible members of Congress recognized this state of affairs and required assurances  be made, specifically for some of those giveaways to the wealthiest among us (call it income redistribution) to expire beginning in 2010; otherwise some of those who voted to thus eliminate the surplus (remember surpluses?) would never have signed on.  Thus, any call to “make those tax cuts permanent” represents a deliberate breach of promise, and a betrayal of the trust of the American people, because no one can show how, with such an action, the debt will ever be repaid.

Until the United States gets its fiscal house in order, and enacts policies like we had in the 1990s, when there was prosperity, low interest rates, surplus budgets and no threat to Social Security in the process, global financial markets will be understandably and justifiably nervous.   This is the reality that will face the next President of the United States, and the incoming Congress.   Somebody is going to have to show some real spine.


2 thoughts on “The Real Problem

  1. The real problem is that our economy is built on buying, not producing. This might not be a problem except that after 70 years of this, our wealth is such that the majority of folks pretty much have everything they need.

    A few decades ago we also reached a point where the majority of people in this country pretty much had everything they want. So now for the past 10-15 years we’ve been at a place where our economy is dependent on getting people to WANT more stuff, stuff which they really don’t need. So we build bigger houses that need to be filled with more stuff, and we tell people they really need and want this when in fact our parents and grandparents were perfectly happy without any of it.

    It’s a very empty, soul-sucking way to live. But it’s been hugely successful. People have gone into debt to buy bigger homes and new furniture and bigger cars because everyone says that’s the way we do things. It was an unreasonable way to live, but we bought it hook, line and sinker. We’ve been trained to pay for everything we want on credit, and now we pay for everything we NEED the same way: our groceries and our medical bills go on the credit card, and we take out loans to buy our kids’ college education. It’s the American way, the way we’ve been trained to live and operate for the past 40 years, and now those chickens are coming home to roost.

  2. Your point is completely on target, that we live in an economy that runs not on money or wealth, but on debt. My point in the above is that the mentality that promotes this starts at the top. The national debt — indeed, the international dependence on credit — is the mother of all economic bubbles. We need to move from a debt-driven, growth economy, to a production-driven sufficiency economy. I have more thoughts about the biblical roots of bankruptcy, and the Jubilee Year as a strategy for eliminating the negative effects of permanent debt, which I hope to write about shortly.

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