A Dark Future

Americans are hooked on progress. We’ve grown to expect that tomorrow will be better than yesterday, and that a bright shining future awaits, just around the corner. Faith in "opportunity" and "getting ahead" is an ingrained part of our culture, as are centuries of believing we can overcome any setback or obstacle. However, we may be at the beginning of an entirely new era that will change those expectations. It’s not just the present financial crisis and its effects either, as the crisis facing us today are running neck and neck with other challenges that including an aging population, failing infrastructure, runaway health care costs, falling employment, and an astronomical national debt that imperils our economy and our society. Our next president will have to face the most daunting economic situation in decades, and perhaps the worst since Franklin D. Roosevelt took office in 1933.

Still, while the American economy has a history of defying the “worst case” predictions of the pessimists, we should note that we’ve never been in quite this sort of situation before either. Usually an economic downturn can be reversed by engaging in a “splendid little war” for a year or so which seems to work wonders for big business and particularly for the arms industry. Today, that isn’t working at all, although we’re engaged in two “little” wars. Our national debt has reached levels never before experienced by any nation in history, well beyond our citizens ability to pay it off, and we’re now going beyond the national bankruptcy stage! Unemployment is heading for record levels, not because John Q. Citizen doesn’t want to work, but because American jobs are being sent overseas. The flood of illegal immigrants seems to be slowing down though, with illegals now returning home in search of work! The average age of our workforce is rapidly heading for retirement, and it’s getting harder to find a “husky young lad” who’s willing to work. The last time I looked, farm prices were depressed to the point it wasn’t economical to even harvest a crop, although because of record high food prices there are hundreds of thousands of Americans going hungry every day! Irregardless of the temporarily low price of oil, our energy costs are astronomical and show no sign of coming down. The “Big Three” automakers are on the verge of going broke while the annual income of any one of them far exceeds the gross income of most of the world’s nations. The banking industry seems to think its fine for them to be thirty dollars in debt for every dollar they hold in assets, while the “bailout” programs appear to be doing little more than adding fuel to the fire. All in all, we’re looking at a dark and dismal future.

Admittedly, I don’t really know what to do about our economic straits either, but I’ll bet there’s a whole herd of economists running around with bright ideas, and no two of them will agree on anything. Our government certainly doesn’t know what to do either, else they wouldn’t be looking for solutions from the very people who caused the problem in the first place! Armed with credit cards, Americans brought home endless iPods, cell phones, and SUV’s, ignoring their declining incomes and shrinking savings. Banks lent huge amounts of money to homeowners with dubious credit, convinced that real estate prices could only go up. Essentially, big business and Wall Street have failed us, aided by a government that insists on a massive tax and spend agenda that the American people can no longer afford. I would suggest that our government go on a severe austerity campaign, and it probably wouldn’t hurt if the American people did much the same thing.

The Great Depression lasted a bit more than a decade with unemployment averaging 18 to 24 percent. Rural areas were hard hit, but the farms were still producing (and people were still working on those farms) so at least country folks could feed themselves. Life in the cities was a bit different though, with most factories closed or severely cut-back, the urban areas saw those high unemployment rates, little money in circulation, and found that it’s rather difficult to grow a kitchen garden in an apartment house. The problems were real, the times were hard, but the nation pulled together and survived. Today’s economic situation is quite similar to 1929 in many ways. Our current economic melt-down is again driven by greed and fear more than any real shortage, and it shows no sign of slowing down either. Everyone dumps stocks while they can because everyone believes that everyone else will sell, forcing the prices down. But it ignores the real power behind the mayhem, "deleveraging", which I understand is economic speak for cleansing the financial system of too much debt. That is going to severely affect the little guy who’s up to his ears in credit card bills! Nor is this strictly an American problem, as our troubles have exposed a global network of business and bank dealings that have the entire world economy skating on thin ice. If government can’t get a handle on things shortly, about the only people who will escape relatively unscathed will be the poor folks living in third world countries! (Living at a subsistence level does have its advantages I guess.)

For the time being our left wing government is living in a fool’s paradise. All the fine sounding plans to save the world from global warming are going to be expensive as all get-out, and we can’t just order industry to do something about it without paying for it in one way or another. Energy independence? Yup, that would help… if we start producing our own oil. Sure we could switch to “Green” cars, but what will it cost to convert our entire energy distribution industry to an environmentally friendly system nearly overnight? Free, socialized medical care? Uh-uh, if congress passes that, the taxpayers are going to get stuck with yet another huge bill! We know that three programs for the elderly dominate the federal budget: Social Security, Medicare, and Medicaid. These programs now cost over forty percent of the annual budget, and as baby boomers retire it’s liable to double. The one and a half trillion dollar (currently estimated cost) bailout might make things look like government is going to save the day, but is it going to solve anything in the long run? Probably not if we consider that the Dow Jones industrial average held at under 1,000 for most of 1982, averaged about 2,500 by 1989, and almost 10,500 in 1999. But did that huge increase reflect a truly increased valuation, or were we just playing a numbers game with the Monopoly money issued by the Fed? Feeling wealthy in those boom times, Americans borrowed and spent well beyond their abilities to repay… now it’s time to pay the piper, and we don’t have the wealth to cover the tab. The United States will remain a wealthy society I’m sure, but we’re about to have a head on collision lack of valuate and government spending for everything from retirement benefits to defense issues. “We the People” are going to have to make some hard choices pretty soon, and make sure the government abides by them.

So, what do we, as individuals, do about this mess? Well, I for one have been on an austerity campaign ever since I retired. Now I guess I’ll have to look for even more fat to trim. If I can cut back on the expenses by even a few percent perhaps I can save a few dollars more for that proverbial rainy day. I’ll have to keep reminding myself that "Luxuries" soon become the "necessities" that I surely can’t afford.