2013-05-26: America: What Happened?
I recently read (and reread) Boomerang (by Michael Lewis, of Moneyball fame). It confirmed some things I have observed for some time.
You see, I currently reside in California. Over the past few decades, I have observed a curious pattern: some level of government (state, county, city, community college district, school district) will discover some temporary revenue bump (often an illusion brought about by accounting tricks). This new revenue will then be committed in perpetuity to creating or expanding some program. Predictably, the revenue will evaporate in a couple of years and the government agency will have an almost existential crisis, but employees and citizen beneficiaries will demand that the program continue without any reduction.
Further, in California, almost all funding is funneled through Sacramento (meaning the state government, not the city and county of Sacramento themselves). This means that paving the street in front of your home usually only happens when the state grants your city or county the funding to do so. It means that the local school builds a new building or hires more teachers only when the state grants the district the funds to do so.
This does not even touch on the California giveaway contract with its prison guards' union. In the absence of the other factors, this alone would eventually bankrupt the state.
What this means is that California and all of its political subdivisions (as Lewis observed after interviews with former Governor Arnold Schwarzenegger, San Jose mayor Chuck Reed, and Vallejo City Manager Phil Batchelor) is heading full-throttle toward the biggest bankruptcy in the history of the world. Not only that, but its citizens are likewise stuck in a structurally broken economy.
If you live in another state, do not let this inspire gloating. California is the state in the worst condition, but most states are heading the same way. Furthermore, the federal government is also heading toward an eventual bankruptcy. This profligate spending at all levels of government and personal finance threatens the ability of each and every United States citizen and resident to feed, clothe, and house himself/herself.
The sad thing is, we know what we need to do:
- Bankruptcy: make a clean break with the past -- We have too much debt. We cannot tell people to spend twenty, fifty, or one hundred years paying back these debts. We cannot tell people to pay 50% or more of their income in taxes for two or three decades to help governments at all levels pay off their debts, either. An official day of Jubilee would be best, because this would cancel all debts.
- Pay reset: employees are going to require a pay floor (e.g., "minimum wage") that enables them to feed, house, transport, educate, and clothe themselves with enough on top of that to enable them to build a future. On the other hand, CEOs whose compensation (pay and benefits) is more than ten times that of their lowest-paid full-time equivalent employee are stealing from their employees and stockholders. Pro-corporatist talking points aside, Adam Smith's 1776 book The Wealth of Nations tells us that the increase (profit) belongs to those whose labor produced it, less a fair return for owners (stockholders).
- Savings-based economy: the US economy will have to change from one in which we spend everything we can get on present consumption to one in which we spend only what we have to on present consumption, in order to build up the resources for future consumption. This means, for example, that savings accounts will have to pay more than their current 1-2% APY, and that most of us will have to pay our credit cards off each month or give them up entirely.
- Production-based work: many of our highest-paid residents are entertainers and athletes. While there is value in entertainment, including professional sports, we must value the work of the people who collect our garbage and pave our streets and grow our food and make our clothes and stock the shelves at our local grocery stores more than we value the croaking of a Hollywood-annointed singer or the fancy footwork of an NFL running back.
- Personal spending reductions and saving: On a personal basis, #3 means saving 10-25% of earnings. This means deep spending cuts, including eating at home instead of eating out. It may mean cutting out unneeded services (e.g., viewing over-the-air "peasant" television instead of cable or satellite television, or using lower-tier DSL instead of higher-priced [but faster] alternatives, or going back to a single shared landline phone instead of individual mobile devices for each family member). It may mean putting a vegetable garden in the backyard. It may mean giving up that fancy car and replacing it with an econobox model. It may even mean moving to the low-rent side of town, especially if that reduces weekly driving miles.
- Jail the bankers: No matter how we try to avoid it, fixing our economy requires a massive commitment to criminal prosecution of financial misconduct. That includes people at the highest levels of management in banks, savings banks, mortgage lenders, mortgage brokers, title & escrow companies, real estate brokerages, insurance companies, insurance brokerages, investment banks, payday (and "borrow against your car's title") lenders, and the regulators whose lax "wink & nod" enforcement policies allowed the misconduct to happen. All of these organizations and the leaders thereof played a part in causing the economic crisis of the present and future.
- Corporations are not persons: they should have no right to redress of grievances (that is, no right to lobby, contribute financially or otherwise to political campaigns, or influence public policy. As long as LOOACs (large, out-of-area corporations) with essentially unlimited funding and lifespans are allowed to influence public policy, governments will not be able to do anything which does not benefit those corporations. If America is to recover, it must make changes, including changes that are not corporation-friendly.
America and Americans (also known as "USians") came out of the Great Depression and Second World War with a world-leading economy. We squandered that on ever-increasing consumption, ever-expanding government, increasingly influential corporations, and continuous wars. What happened, America? Why did we let a period of prosperity and influence be wasted this way? Why did we rush headlong away from being a model that others wanted to follow to being a watchword: be careful lest you become corrupted like the United States did?
This is not a Republican versus Democrat thing, because neither of them (when given control of the White House and Congress) made the changes necessary to prevent us from digging the debt hole even deeper. Therefore, we should not expect either party (or any member thereof) to rescue us. They have not and they will not. Both parties are owned and controlled by special interests, primarily corporations and corp-alikes (whether for-profit, non-profit, or advocacy [using legal/educational/political/PR means]). Both left-wing and right-wing are together corrupted, like conjoined twins that hate one another.