Government reactions concerning the state of the economy and the budgets are almost hysterical these days. How can small-town people from California know anything about how to deal with the impending financial crisis or, indeed, to understand it?
It is doubtful anybody really understands--economists aren't much good at predicting the future. When outfits like Merrill Lynch and Citibank, money managers and financiers of great sophistication, lose billions of dollars in one quarter, how can we be expected to understand or cope? The numbers are staggering and nearly incomprehensible. For example, if you were to count to a billion and could say one number every second, and if you did it continuously 24/7 without break, it would take slightly more than 31 years to count to a billion.
Some historical context might be good to understand where we are.
For years, "tax and spend" politicians ruled the day and were viewed as profligate irresponsible folks. Mostly they imposed high taxes for human services that they thought we needed. The vast networks of freeways, the higher education at little or no cost, the Social Security and Medicare for the elderly, and the vast public works were pretty much paid for. They believed in pay-as-you-go as much as possible, wanting deficit spending only when needed to prime the economy. Conservatives howled at any deficit spending at all.
Then everything changed with the tax revolts and the Reagan revolution. We were inflicted with the "borrow and spend" ideas of modern conservatives--ideas that the first President Bush properly called "voodoo economics." The idea that we could drastically cut taxes while spending like there was no tomorrow, especially on every kind of armament, ruled the day. We hoped that the decrease in taxes would so invigorate the economy that debt would be wiped out with no pain. It didn't work.
Since 1980, the federal debt has soared. On the state level, the borrowers and spenders also hold sway. They balance budgets with no new taxes, but increase spending by the fiction of massive bonded debt.
All this has resulted in some things we know for sure: The United States has become the biggest debtor country in the world our total national deficit is in the trillions and increasing by hundreds of billions per year. This money is borrowed mostly from foreign central banks. Our balance of payments deficit, the difference between the value of what we import and the value of what we export, is in the negative to the tune of approximately $1.5 billion per day our government spends about $475 billion on defense each year, more money than is spent on defense by all of the rest of the countries of the world combined. This despite the facts that our opponents in the war on terror, perhaps 200,000 fanatics, have no army and do not own one tank, airplane, or naval ship.
Common sense tells us that you cannot continue to run up these debts and put the payback responsibility on our grandchildren. Unfortunately, our politicians are not much help. For example, Mr. Romney in a speech in Florida recently laid out his solutions for our economic mess. He proposed a stimulus package of billions of dollars (never saying who we would borrow that money from), he proposed tax cuts for businesses and the middle class, and, at the same time, proposed increasing the military by 100,000 troops. More of the same borrow and spend. Unfortunately, the other politicians all seem to have some version of this same approach. No one is asking for sacrifice.
Why do we allow our politicians to do this? In fact, we don't allow it--we demand it. Our politicians are a reflection of ourselves, our culture. We are a borrow-and-spend society. We want instant gratification. We want to buy things now. We want wealth without work. Witness our addiction to gambling, whether it be Las Vegas or the stock market or real estate or the lottery. The idea of "saving up" to buy something is, in our society, antiquated. Despite the fact that our infrastructure is crumbling, numbers in poverty are rising, and health care is in a shambles, we seem blissfully unmoved. We also are a culture that is riddled with fear.
We small-town Americans can do something about this problem. We can change us. We need to spend less, borrow less, and save more. We need to throw off the mantle of fear and remember that this society is courageous, powerful, innovative, and often compassionate. We are largely open, educated, and aware, and, if called upon, will be willing to solve these problems.
The alternative is some sort of financial cataclysm that will force us to beg our leaders for these solutions.
James M. Duenow is a San Luis Obispo attorney. Send comments to the editor at firstname.lastname@example.org.