PAT TAYLOR: A Ticking Bomb?: We Can't Borrow Our Way to Prosperity
Look back at the headlines of the past week. Incredible. Events seem to be swirling faster than we can comprehend.
There has been an endless parade of bailouts, handouts, market crashes, layoffs, deficit spending, mortgage foreclosures, and endless speculation on inflation, recession and depression. Not to mention two long-standing wars draining our military and our national coffers. You can spiral toward a real depression just thinking about it.
President-elect Barack Obama wants to govern from the center. He's named a couple of Republicans to the Cabinet. He's speaking as if he's representing -- or trying to represent -- the majority. Those further to the left have been disappointed in his choices. The Right has felt neutered, scrambling to find power levers to pull and be important going into the new administration.
We have watched and listened as Obama made promises and laid out plans. There will be a tax break for most working Americans. There will be a couple of million government jobs opening up to rebuild America. We'll devote billions to alternative energy. We'll fix the roads and bridges and schools. We'll jump-start the economy.
Where is this money coming from? Not from tax revenues. We're going to borrow it. To the tune of $2 trillion at last count. That's about $6,667 per soul in this country. In one year. It seems like every time the estimate is voiced, it's another $500 billion larger than the last estimate.
Our leaders in Washington have been spending money like a bunch of drunken sailors on shore leave. There seems to be no sense of the long term, no sense of a need to balance priorities, no compromise. No call for sacrifice. Just borrow for what we need now and get out of the hole we're in. Borrowed money has become the drug of choice, because there is no taxpayer pain involved and no one protesting in the streets. Let the grandkids figure it out.
If there is to be hope, it is toward the middle of the road. That's the only chance for making hard choices instead of just throwing money at problems. We see where the bailout money went to the banks. Or don't see. Nobody seems to have a clue where the first hundreds of billions went! Are we supposed to have faith the forthcoming spending will be any different?
I fear our country is in the mood for a meltdown, and not just around the lunatic fringes. At the very core of what was once known as the American People. More than bailouts, we need to find common ground among ourselves and find a purpose.
If the new president spends his time on paybacks to special interest groups at the expense of the whole, I think he will find our patience very thin. He needs to steer a course that will support the most good for the most people. That means working with both sides of the aisle. We are tired of politics as usual.
A quiet, uneasy feeling has grown inside for a long time that this country is headed toward a time when we will no longer be able to govern ourselves effectively. There are many reasons for it. For starters, we've doubled in population in the past 50 years to about 300 million today. That growth has brought with it overwhelming changes in society; in demographics, ethnographics, social mores, religious practices, economics, technology in the workplace, and just about every other phase of life. Books have been written about each aspect of the changes.
An article in The Week magazine recently put it better than anything read to date.
The article, entitled "Why We Hate Us," explained that the result is that everyone has become part of a counterculture. That is, we have become a nation of soloists to whom "what matters most is Me: the sacred, discovered, reinvented center of the universe. It is selfism."
Everyone abstractly rebels against the mainstream because it is the enemy. Cultural norms just get in the way of self-attainment, according to Dick Meyer, who wrote the article. In this world, everyone makes up his own rules.
How do you govern a society in which "there is no longer much vibrant, living tradition and community to be born into, to inherit, or to bequeath"? How does the country know itself when its people spend their lives in isolation with cell phones stuck, literally, to its collective ear and MP3 ear buds blocking off the outside world?
How also do you get people who are self-absorbed to care about what happens to our grandchildren's future? Take the national debt as one example. We could use the environment, or energy or any of a number of subjects, but the numbers speak for themselves.
The national debt will reach nearly $13 trillion at the end of this year. Obama expects the nation to have a $1 trillion deficit this year alone. There is no end in sight. The Gross National Product is estimated at $15 trillion per year currently. So the debt stands, or will, at almost the same amount as one entire year of production. That doesn't represent the tax revenues from the GNP. That represents the whole thing.
Does Anybody Care?
The scariest part of this is that the speed of debt increases each year. In 1974, the national debt was under $500 billion. Back in 1993, when George W. Bush took office, the national debt had grown to about $5.7 trillion, most of it coming while Reagan and George Sr. were in office. Under George W., the years 2003-07 have seen the largest deficits ever recorded, more than $500 billion a year, totaling $2.78 trillion, capped by our very first $1 trillion red ink in 2008, adding up to almost 40 percent of the total.
That's before one penny of the bailout money was paid out. And most of these were years with a great economy. So much for the Republican claim of the party of fiscal responsibility, not to mention W's legacy.
Does anyone care about deficits? Is anyone paying attention? Are we so self-absorbed in our little daily lives that we don't see the time bomb ticking down the road? Or has it gotten so complex that most of us can't make sense of it any more?
Here's why we should care:
If my household were to take on unsecured debt -- and that's what the feds have -- that equaled my annual household income, there wouldn't be a bank anywhere that would be interested in lending me money. We approach a point in time where our largest creditors, China and Japan, may start looking for another place to stash their cash. Lately they've been willing to lend the U.S. money, even though short-term returns were nearly zero.
That won't last, which means that the deeper in debt we go, and the riskier the loans become, the more foreign lenders will demand on a return. There won't be enough liquidity to go around, so interest rates to average folks are almost bound to go up significantly.
A Scary Ticking Sound
Government can attack the problem by turning on the money machines. Print more money. Hundreds of billions more. Inflation is caused in large part by increases in the money supply. The more money that's circulating, the less it's worth.
The fact that cereal costs $4 a box now isn't because greedy cereal makers are trying to run us in the poor house; they try to capture the loss in the value of the dollar and cope with higher production costs. Inflation is manufactured at the U.S. Treasury, not at the grocery store. But one way to lessen the impact of the deficit is to make the money supply larger, so the deficit looks smaller in comparison.
Tax breaks have been promised all around. For the average working family, for small businesses, for farmers, for senior citizens. For everyone except for those greedy rich people. And other promises, too. If you don't have a job, you can find one with the government. Billions for infrastructure. Need a few million for an experiment in wind energy? There will be billions up for grabs. Can't find a job? We'll double unemployment benefits. Need an education? We'll have programs allowing you to go for almost nothing.
Remember, government doesn't make anything. It's not there to create wealth.
Where is all this money coming from? We're going to borrow it from China. Communist China. Then we're going to give part of it out as a stimulus check to every household in the country and hope you go out and buy some stuff made in China. We can spend our way out of this recession. Does that make sense, or is it just me? We tried that at our house, and it doesn't work.
Let's hope to God they are successful in Washington. Let's hope Obama is able to mend fences between the parties and work to move the country forward on a positive track. Let's hope he can give us a sense of us again, like we felt most recently after Sept. 11, 2001.
Let's hope he can re-establish credibility around the world. Let's hope he's got some really, really smart people who put things in place that make the financial systems in this country make sense again, so one can go to college and expect to find a job after graduation. Let's hope we put some restraints on the kinds of activities that brought on the current crisis. Finding a source of clean alternative energy would be wonderful.
I just keep hearing this ticking sound. I don't know where it is, but it keeps getting louder and it makes me nervous. Covering up this nagging concern with a blanket of cheap borrowed money isn't going to make it go away.
Pat Taylor is the Advertising Director for The Pilot. Contact him at firstname.lastname@example.org.
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