Growing our way out of the economic crisis, boot straps vs. bailouts

[alw 0]

The term "bail out" has seldom carried the importance in our vocabulary that it does today. While many focus on Wall Street and Washington, the real targets for the bailouts being discussed are harder to pinpoint. Yes there are corporate excesses and yes there were shady loans, greedy investors, and sleazy politicians yet those maladies have been with us always. Today the cause is deeper and the fix more challenging but both did not or will not happen fast.

Since 1975, practically all the gains in household income have gone to the top 20% of households. The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Yet since the turn of the century income has had little to do with consumerism. Easy credit and lack of accountability have allowed the lower tier earners to consume at a pace in excess of their income. To make up for the income gap government has continuously "bailed out" these overconsumers with tax breaks and shored up their ambitions with promises.

These actions are not attributable to liberal or conservative, Democrat or Republican. Each in their own way has contributed according to their political leanings but all for one purpose, to garner votes. The Republicans give away tax breaks to the overconsumers to stimulate spending. In this way the ranks of the overconsumers grow in the margins year on year. The Democrats reward the overconsumers out of what they espouse as "fairness". With the same effect as trickle down economics the gap between the haves and the have-nots is blurred while the real gap between the underconsumers and the overconsumers grows.

Now, we see the true problem and the true subject of the bail out - the overconsumer. Income has little to do with this as there are overconsumers in every strata of the economic sector. Yet, the one that is placing us in today’s precarious position is the one who has lived well beyond their means and been told it is their right to do so. Once again government plans to step in and give them a big hug and tell them that it will be OK. But this time it may not be OK, in fact this time may be the very last. For us to continue down the road of addressing the symptom and not the problem could very well lead to a total global economic collapse.

If it comes it will be global. Just as a town dies when its industry collapses so will the world falter when it's predominant economy falters. Although Europe likes to compare itself to America, the analogy is lacking in that adding many individual countries’ GDP doesn't make a cohesive economy. Reliance in the American economic machine is still very, very high and the tentacles of the world’s economy to deeply embedded.

What then might be a solution? What is the national equivalent of a Betty Ford Clinic for the American addiction to overconsumption? To begin with, just as government led the way to the problem they must lead the way to the solution. The people must realize that they too have a problem and they must be willing to fight it, rather than fighting each other. Conventional wisdom suggests that America always pulls through a crisis and comes out stronger on the other side. But America only does that when they pull together. Americans must demand leadership from government, not salvation. They must punish indecision and bad judgment at the polls and have the strength to resist an empty promise of a better tomorrow for the surety of knowing a better yesterday.

Consider these examples. The losses in the transmission and distribution of electricity in the United States of America would power the entirety of Spain with some to spare. The USA imports two-thirds of the oil it consumes while consuming one-fourth of global consumption. If the USA used one-tenth of its 2005 consumption it would save the same amount of oil Mexico used in that same year. In America we can make personal sacrifices that would go unnoticed to us and yet what we would give up would be treasure to some in the rest of the world.

As in leaner times, Americans must learn to tighten their belts, live within their means, and pull themselves up by their own bootstraps. We must be willing to accept the fact that number two or even number three is not a bad place to be. We all must pay our fair share and not expect the ones that got it right to bail the rest out, though they will in the beginning and likely do so willingly. They will because they know that we are in this together and they just want the rest to acknowledge that fact.

ALW 2008

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