Unfortunately, nobody has a crystal ball. Perhaps China’s recent meteoric rise will cool off considering that their manufacturing levels just hit a 32 month low. Perhaps Europe will pull itself out of its own debt crisis and will restore a little bit of hope to the economic markets around the world. Perhaps the United States will experience a resurgence or a development of a new market or industry that will propel our economy back to the status that it had ten years ago. Perhaps OPEC will just open the spigots and the price of oil will plummet back to where it was in the 90’s (around $22 a barrel) and the global economy will leap forward on the strength of cheap energy.
Nobody knows what will happen to any of those issues. China is somewhat likely to experience some sort of a slowdown but that is natural given the nature of their rise over the past few years (incredibly fast) and what is going on around the rest of the developed world. It’s possible that Europe can pull itself out of this crisis although with every report that comes out of that continent, the prognosis looks bleaker every single day. There are always new market and new industries to explore but the only question is whether or not they can survive on the open market and whether or not the United States can get their first. Lastly, the chances that OPEC opens the spigot when America has gotten used to oil prices between $75 and $95 per barrel are just on the other side of zero.
So when you throw all that in the hopper, what does that mean for the United States? To be brutally honest and in need of some serious sugarcoating, it means that the US economy is in for some rough times and it’s somewhat likely that it will be a period of years until we’re well and truly out of it.
How did we get here? Well, it’s a combination of factors (as it always is). In 2001, the federal government had a surplus of $128.2 billion and the national debt was $5.8 trillion. Inevitably, after the boom of the 90’s, the early part of the 00’s was significantly slower. After posting growth rates (in real GDP) of better than 4% each year from 1997 to 2000, the growth in real GDP fell to 1.08% in 2001 and then 1.81% in 2002. While real GDP grew 26.6% from 1994 to 2000, from 2001 to 2010, it grew by just 16.8%. I know that I’m throwing a lot of numbers at you but to give you a frame of reference, most economists consider 3% growth in real GDP to be a healthy economy. While 1% growth may not be “unhealthy”, it is considered poor and usually does not coincide with job creation.
Even worse than the actual downturn has been the wild swings our economy has undergone. In the period of time from 1994 to 2000, the average increase in real GDP was 3.92% per year with the lower and upper limits being 2.51% and 4.83%, respectively. From 2000 to 2010, the average was 1.66% but that set swung wildly between gaining 3.57% (in 2004) and losing 2.63% (in 2009). If you have the option of growing your economy 20% in the next decade by either growing 1.8% each year or gaining 10% one year and losing 8% the next, you should always take the slow and steady approach.
So now we know that the economy has been a bit of a roller coaster in the past ten years. This isn’t exactly news. What is news is that despite the unstable economy, the government has very infamously increased our national debt from roughly $5.8 trillion ten years ago to $14.5 trillion today. Can we continue to rack up a larger and larger debt and pass it on to future generations without taking any steps to actually pay if off? That question strikes at the heart of what I’d like to address in this post; a sense of complacency and affinity for the status quo amongst American citizens and the formation of an aristocratic class in modern America.
COMPLACENCY
The recession that hit our economy in 2008 and 2009 was arguably the worst economic climate since the Great Depression and we are still recovering from it. While the majority of the wrong-doing was simply the result of a skewed moral compass, there are rumors everywhere that some of the wrong-doing was actually illegal as well. This, among other things, helped to shape my opinion of the Occupy Wall Street protests. Why would the banking industry change any of the things they do because there are a few hundred people camped (oops, not anymore) outside their offices? The answer is they wouldn’t. The only reason they would change the way they do business is if Congress enacted more laws to govern they way they lend money or if the US Attorney started an investigation into their lending practices over the past several years.
This led me to say that if the Occupy Wall Street movement ever gets serious about getting things done and not just making a lot of noise, they need to be protesting in Washington, D.C., at the Capitol building. Why haven’t they? Why isn’t the country in an absolute uproar over the banking industry, Congress’ near inability to avoid a debt crisis, and Congress’ inability to reach a deal that would involve modifications that amount to somewhere between 2% and 3% over the next ten years? The short answer is we’re complacent but there’s more to it than that.
The other part of the reason is for as bad as things are, they really aren’t that bad. It is true that in 2009, our inflation adjusted GDP actually decreased for the first time since 1991 but it dropped by only 2.63%. Since then, our economy has posted economic growth in nine consecutive quarters. Between 1929 and 1933, the United States lost 46.2% of its wealth or 26.7% when it is adjusted for inflation. We currently sit at 9% unemployment but that is nothing when you think about one in four Americans being out of work at the height of the Great Depression.
The reason that there aren’t more Americans in the streets calling for drastic reforms is simply because it isn’t that bad right now. The vast majority of Americans are still working, they are still getting paid, and they are still paying their bills. For the citizenry to mobilize and march on our government and demand changes, it will have to get a whole lot worse than it is now.
AN AMERICAN ARISTOCRACY
A simple internet search on the definition of aristocracy reveals five primary results (at least that’s what you get on dictionary.com). The definition that I think is most appropriate in the case I’m going to present is the second one; a government or state ruled by an aristocracy, elite, or privileged upper class. Historically, when the term aristocracy is thrown around, the line between the aristocracy and everyone else is drawn along monetary lines. Also, historically speaking, the wealthy were also the ones who governed the country or had the most influence over those who did.
The United States Congress is a different sort of aristocracy. They are not among the highest paid people in the country and if you compared their salaries to even professional athletes, the difference is staggering. A salary of $400,000 as a government employee means that you are more than likely calling the White House home these days whereas that same salary in Major League Baseball or in the NFL means you are struggling to hold onto a job. Before you start feeling sorry for our elected officials, many of them do come from family money and at the end of the day, their salary is much higher than most of the rest of us.
If not money, then what is the divide between the aristocracy and the rest of us? Is that even an accurate term to use? I believe it is and the divide is power. Representatives and Senators wield a truly tremendous amount of power and will do many things to hold onto that power. Many of them say that they are acting in the best interests of the country and their constituents but how true is that?
Let’s examine the case of the Super Committee and the entire debate surrounding the deficit and debt situation in this country. Republicans want to cut federal spending to reduce the deficit and Democrats want to increase taxes before any spending cuts take place.
For any concerned citizen, that should be the first red flag. Nobody is talking about eliminating the deficit; they are simply talking about reducing it. They are basically admitting that the national debt will continue to grow regardless of what the long-term effects of that might be.
In a perfect world, the two parties would come to some sort of agreement where they meet in the middle and everyone has to give a little of something. That is compromise and children learn that at a very young age. It is the only way our country can function with such large philosophical divides between the two dominant parties. Federal spending should be less and taxes should be increased to help cover the costs of Congress’ mistakes. In the long run, I can talk for hours and hours about the benefits or detriments of government influence in the economy but this conversation is not occurring in a vacuum. It is happening in a country with a $14 trillion debt, a $1.6 trillion budget deficit, and absolutely no plan to change either problem.
Clearly, we do not live in a perfect world and compromise has not happened and is not likely to happen. Why not? Put yourself in the shoes of a Representative or a Senator. If you are a Democrat, you can point to all the good that is being done by federal programs and you can point to how many people’s lives are better because of aid from everyone’s friendly Uncle Sam. If you are a Republican, you can point to the fact that taxes are quite low right now. You can say that lower taxes lead to a freer marketplace and the market can direct the economy instead of the government. Let us set aside for one moment that that is exactly how we get such a massive budget deficit. If you are that Republican, you won your election by promising to never raise taxes. If you are that Democrat, you won your election by saying that government benefits would never be cut.
What you have is a system in which nobody is willing to budge. Despite what they say, it is not in the best interest of the voters, it’s in their own best interests. A Republican who is willing to raise taxes and a Democrat who is willing to cut benefits are the same thing; unemployed. In the system we currently have, Democrats and Republicans can hold their party line and not move a single inch towards center and two things happen; they keep their jobs and the government spends far more money than they have to spend.
I’m not here to debate the merits of their respective positions. There are many federal programs that Americans would not be able to function well without in the short term. It is entirely possible that lower taxes could potentially spark economic growth and that would in turn create more tax revenue and get our government back on its feet. All of those theories look great on the drawing board but the fact of the matter is that nobody has ever seen an economic climate like we have now. Much like John Maynard Keynes after the Great Depression, economists will be breaking new ground and creating new theories in the wake of this global economic cycle.
Given all of this and given the budgetary process of the United States government, a balanced budget amendment to the Constitution is one of the most reasonable steps that Congress could take at this point in time. I’ve read the text of the proposed amendment that was put to a vote just over a week ago and the language is not inflammatory at all (you can read the full text at this site http://thomas.loc.gov/cgi-bin/query/z?c112:H.J.RES.2:). To paraphrase, it simply says that except for in a time of war, the budget must be balanced. There are other provisions but that’s the guts of it. There were no amendments and nothing that had anything to do with hot button issues such as religion or abortion. The amendment was defeated well short of the required number of votes for passage for two main reasons; Congress likes to spend money and they have no incentive not to and our deficit crisis is much like the common flu – it must get worse before it gets better.
Drastic spending cuts and drastic tax increases, both of which I view as necessary for the long-term viability of our nation’s economy, will hurt in the short run. Reduced spending will cause certain services to be reduced and that will make some people’s quality of life less. Increased taxes will perhaps mean that some small businesses will be irreparably harmed to the point that they have to close their business. This will spiral downward until we reach a bottom of sorts and then, things will start to get better. How long it will last and how bad it will get are questions that nobody can answer but I can tell you one thing with absolute certainty. It will last through the next election cycle and that is the single biggest reason why nothing is getting done with regards to these problems. The elections.
It is far easier to go into a conference room and face many of your constituents (some of whom are down on their luck and unemployed) and tell them that the big bad
It is nearly impossible to go into that same conference room and say, yes, I sacrificed some of your livelihood. I’m sorry. At this point in time, Congress has spent us into a corner and if we don’t act now, it will get far worse very quickly. I acted in what I believe are the best interests of the country as a whole. When was the last time you heard an elected official say that? Hmm, interesting, you have heard it before from the White House. So what’s the difference between the White House and Congress?
TERM LIMITS
The President is limited to two terms. The vice-president can spend far longer in the White House but always playing second fiddle. If he ever wants that chair behind the Resolute Desk in the Oval Office, the clock starts on his two terms.
Congress has no such limits. 7% of currently serving members of Congress (37 out of 534, the 1st Congressional District of Oregon is currently vacant) have been in their seats longer than I have been alive (27 years and change). Roughly 44% of both houses (44 of 100 in the Senate and 192 of 434) have been in their current positions for longer than 10 years.
If you examine the tenure of all of the current members of Congress, a disturbing trend emerges. The overwhelming majority of Congress (64.4%) has either been in place for more than 10 years or has been on the job less than 1 year. To me, this says that the American public is not taking the time to do their duty as voters. When faced with the choice of somebody new or someone who was elected last time and didn’t make things happen immediately, they are choosing someone new. When asked to choose between someone new and someone who has served their district for 20 years, they are going with the one they know. In a foundering economy, it should be the ones who have been there the longest that have the most to fear, not the least. Why are John McCain (25 years in the Senate) or John Kerry (27 years) so much better equipped to handle this problem than a 30 year old Ivy League graduate with a BA, MA, and PhD in economics? When we are examining the credentials of these Representatives and Senators, the fact that they were serving when there was last a budget surplus should not be a point in their favor, it should be a point against them.
You say that you were in the Senate from 1998-2001 when there was a surplus every year and our net budget surplus was $559 billion. That’s great, where were you the last ten years when there was a net budget deficit of $6.48 trillion? Were you just taking those years off?
This strikes at the heart of my underlying opinion. People should not go to Congress thinking that it will be a career. They should be willing to sacrifice their heart, mind, body, and soul for a period of a few years to make the country as good a place as they can and after that, they can go on the lecture circuit. I believe that I can speak for many Americans when I say that I don’t want Representatives and Senators making decisions based upon keeping their jobs. I can’t say they do categorically in their first terms, but in their second terms, presidents have relatively little pressure upon them and they can step back and see the bigger picture. This is what we need desperately out of Congress.
THE ONLY PROBLEM THAT MATTERS
There are many problems with my utopia but as the above heading might indicate, there is only one that matters; the system we live in.
235 years ago, we set out on a grand experiment in republican democracy. We have had our rough moments but overall, the experiment has gone very well. When the framework of our nation was first put down on paper, there was an overwhelming fear of a single monarchy-like figure. Thus, the executive branch was made the weakest, constitutionally speaking, and the legislative branch was made the strongest. Overall, again, I would say this has served us well but in this case, it has helped cause the illness that afflicts our great nation.
A balanced budget amendment would be wonderful. The only problem is that by far the most commonly used method to amend the constitution is for both houses to vote on it. Now we’re asking them to curtail the money that they get to play with on a daily basis… it’s not likely that that will ever happen.
In order to put term limits in place, the Constitution would have to be amended. As unlikely as it might be that Congress would pass a law putting limits on how much money they can spend, it is infinitely more likely than Congress willingly putting in place a law that limits how long they can wield the enormous amount of power they have.
The onus to keep a rein on Congress falls to you and me, citizens of the United States of America. If Congress is to blame for the current economic crisis that we are in, we are responsible because we enabled this activity. At the end of the day, we have the true power in this government. No matter how much money a special interest group gives to a particular candidate, if everyone pulls the lever for the other guy, the other guy wins.
We have a sacred duty. If we don’t like what is happening in Congress, we have to tell them. If they don’t listen, we have to tell them in a language they understand; do this or you’ll lose my vote. Don’t just vote for a candidate or a party because that’s what you’ve always done. Demand answers from the candidates or your Representative or your Senator and when they give you an answer, verify it, don’t just accept it.
Above all else, when you are choosing a Representative, or a Senator, or a President, try to think beyond yourself. The best interests of the country are not always in line with your own best interests. Put your ego aside and I beg you “…my fellow Americans: ask not what your country can do for you – ask what you can do for your country.”
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