Monday, July 25, 2011

U.S. Economic Problems: The President, The Congress, Us

As we try to solve our current economic and budget problems, perhaps the biggest roadblock is the mindset in the political and economic centers of power: they're either trying to put Humpty Dumpty together again (but minus an arm and a leg) --- or they're advocating radical surgery designed to eviscerate him, and plan to feast on the yolk. No competent doctors have treated the patient.

Let's first make a proper diagnosis.

The current situation has many causes including a housing bubble, financial vaporware, inadequate regulation, tax cuts, trade imbalances, military spending, consumer spending, and many more, all tied together via complex interactions and feedback loops.

Consider the graph diagramming the housing bubble. There is an obvious set of links connecting nodes for the banksters, poorly-vetted loans and securitization thereof, and inadequate regulation. But we should also ask ourselves: Why did so many individuals/families --- be they the sub-prime mortgage crowd, or members of the middle class, or the serial flippers --- take part in the irrationally exuberant speculation? (Yes, some such speculation is nearly always implicit in the purchase of a major asset at a price significantly above its historical trendline).

The answer to that question gets to the heart of our problems. I believe that beyond the perfectly-understandable desire to own their own home, many of these people simply wanted --- no, needed --- a small slice of the pie. They looked around, and saw decades of inequity and decline: massive Wall Street profits from speculation and vapor capitalism; corporate CEOs raking-in obscene pay packages while cutting worker salaries and benefits, or worse, offshoring work and laying them off; the demise of defined-benefit pension plans; the evisceration of unions; repeated warnings about Social Security and Medicare shortfalls; rapidly-rising costs for essentials including healthcare, education, and fuel. Many people knew that they needed to do something in order to grab themselves a small piece of the American Dream, before it disappeared completely. And if speculation mostly worked for Wall Streeters, why shouldn't it work for them too? So that's where many additional connections join our bankster graph, with the additional vulnerabilities and instabilities that, depending on connections and feedback, a large network may suffer. That's how --- to choose just one factor, and just one result --- increased income inequities predisposed us to a banking crash.

Think of the banking crisis and our many other problems as "blowback" (if I might borrow that term so well used by the late great Chalmers Johnson) --- Karmic blowback onto a system that has spent the past three decades pulling the rug out from under the poor and the middle class. Unfortunately, those same citizens have now been shafted twice, the second time as collateral damage inflicted by that blowback. Most obscenely, we're about to be given the big one a third time, victimized by a political system that will cut benefits to those who need them most, decimate our infrastructure, and refuse to raise taxes on the rich and the corporations.

Three strikes and we're out, the end of the American Dream. All that's left is a bunch of people on the make --- no, not for a hot Saturday-night date, nor for wealth, just for some measure of basic financial security. Those of us who through prudence and a great deal of luck are not yet impoverished don't know how long that'll last; those doing worse don't know when it'll get better. We're just hanging on, often with both physical and psychological insecurity. Maslow's hierarchy of needs? Many people are barely at his lowest level (if even there). And let's not fool ourselves into thinking that entrepreneurship will solve our problems, as some have suggested. In today's economic climate, new businesses are less likely than ever to address essential needs; startups are frequently based on what can be started with minimal capital and little hired labor, and often provide frivolous services to a shrinking pool of people able and willing to part with money.

What is to be done? The truth is self-evident. We need an intelligent and moral transformation, the restructuring of our society away from militarism, speculation, inequity, and the mindless consumption of consumer products --- and towards ecologically-sound, infrastructurally-beneficial, humanistically-enriching, morally-defensible goods and services: items such as education, medical treatment, social justice, conservation, clean energy, mass transit, other infrastructure development and repair, the arts, literature, music... .

Despite the unique opportunity afforded by the financial crisis, that clearly hasn't happened. It hasn't even been attempted. The Republicans, in their obsessive defense of the so-called "free-market" and opposition to taxes, rabidly oppose the prioritization and planning (and yes, tax-funded government investment) that would be necessary to improve our nation. The Democrats have either lacked the courage to confront the Republicans on these issues, or may have made a seriously-flawed calculation that short-term results (i.e. before the next election) are more important than long-term transformative improvements that might take more time to kick in. A darker explanation is that most politicians --- Republicans and Democrats --- simply aren't on our side. Their most-influential patrons don't really want substantive transformation; they want a restoration, not the reformation that is needed.

This nation is caught in a maelstrom of greed, irrationality, and incompetence. Unless we act properly, in a true progressive manner, we'll keep swirling down, our demise inevitable. In such a current, going with the flow, even with a flotation device, won't deliver safety; it'll just take a bit longer for the end to come. There is no substitute for unabashedly progressive action.

Fred Drumlevitch


  1. "Their most-influential patrons don't really want substantive transformation; they want a restoration, not the reformation that is needed."

    I liked this little nugget from your post. Welcome to blogging. I've always enjoyed your NYT comments and am glad to see you expanding on that.

  2. Them Republicans is dumb.

  3. Valerie Long TweedieJuly 28, 2011 at 5:27 PM

    This is a very thoughtful commentary on what has been going on in our country for the last twenty years at least. Your blog is a welcome addition to the blogosphere.

    As you pointed out, it is a real shame that America didn't see the financial crisis as a wake-up call to get our values back on track. We didn't have a strong movement to support and protect the small businesses in our neighbourhoods, to consume less junk we didn’t need made by what amounts to slave labour, to consume less of the energy products that are our excuse for forcing our presence on countries that hate us. We didn’t come closer to one another as a community and stick up for one another – including the weakest and most vulnerable among us. We didn't use common sense to go back to the regulation of our biggest industries for the good of our citizenry. Instead, we chose to act like a bunch of spoiled children, blaming each other for the terrible state of affairs, yet unwilling to make even the smallest sacrifices for the greater good. There are so many things that we could be doing to move our country in the right direction, but suggestions and opportunities of political activism are, for the most part, met with only mild or passing interest or cynicism that whatever efforts are undertaken, none will matter. We have gotten lazy in our acceptance of the status quo, even as the status quo seems like a downward spiral, and passive about our eroding quality of life and our future prospects. I feel that apathy and infighting are our country’s biggest problems. And while these two qualities define our eroding Middle Class, the oligarchy uses this opportunity to get richer and more powerful.