We need to get a grip on reality. We don’t like the recession, fallen stock and house prices, unemployment, foreclosures, bailouts or deficits, and we’re mad as hell at politicians. There is much public anger voiced at elected officials who go to Washington and then don’t do what voters want. This is hogwash.
We are where we are precisely because elected officials did as voters wanted. Until we’re willing to acknowledge this, take responsibility and decide what tradeoffs we’re willing to make, we are not going to see long-term improvement in our economy.
I’m not optimistic. History is replete with examples of societies that failed to make hard choices and went into long-term decline. And the age cohorts that dominate voting in the U.S. right now don’t have a good track record in terms of willingness to make sacrifices for others.
But let’s at least be honest about how we got here.
We didn’t want higher taxes and voted for people who promised to cut them. Despite much rhetoric by both parties about cutting spending, no collective willingness emerged over the past 30 years to cut any program remotely large enough to close the budget deficits we ran over most of those years.
When we did reduce deficits in the late 1990s through a combination of tax increases initiated by the Bush 41 and Clinton administrations together with bipartisan support of modest budget discipline, we soon succumbed to the demagoguery of tax cuts and threw away whatever progress we had made.
We liked the idea that government was the problem, not the solution, and were happy to see real spending on financial regulation erode over time and to see financial institutions and markets increasingly free to innovate, sell and take on risk as they saw fit.
Everyone was glad the Fed had gotten rid of 1970s-style inflation but they were even more glad when a Federal Reserve headed by Maestro Alan Greenspan eased the money supply to counter any downturn or financial market failure but never saw fit to tighten it once the problem passed.
Homeowners liked seeing house prices go up and easy-to-get home equity loans and cash-out refinancings to pay off credit card bills or buy new toys. Investors loved double-digit returns in their 401(k) plans.
Now all of those politically popular policies have led to their entirely predictable conclusion, a financial market crisis, a recession and even higher budget deficits. And it’s our own fault, not that of people we elected who went to Washington and somehow betrayed us.
And now, like petulant toddlers, some people are throwing a collective hissy fit. They want smaller deficits without tax increases, but I have yet to hear from one individual who could take the federal budget and identify specifically what they would cut.
Instead I hear slogans. They don’t like bailouts. They don’t want waste. Some want “entitlement reform” but then complain when they don’t get a larger Social Security check or protest any health care financing changes that might reduce Medicare spending. But ask them what exactly they would cut that totals more than a fifth of current budget deficits and there is dead silence.
Instead of railing against the people they once were glad to elect, they need to sit down and think about their own priorities. And they should read a wonderful little book, World Economic Primacy: 1500 to 1990, by Charles Kindleberger, an insightful economic historian if there ever was one.
They will learn what happened to successive economically dominant societies whose peoples sought refuge in the willful collective self-delusion that permeates our country today. And then they need to get a grip on reality.
© 2010 Edward Lotterman
Chanarambie Consulting, Inc.