The Real Problem

At the present moment in historical time, the United States government, and both political parties, are seeking, with a kind of quiet desperation, ways to shore up the financial system of Wall Street, and with it the national and even the global economy. The bailouts, recent and contemplated, stagger the imagination in their scope. The problem? Overwhelming debt based on risky corporate decisions, compounded by an alphabet soup of derivatives, swaps, and other schemes that make Enron’s in-house deceptions look like children messing with play money. The government is now taking on responsibility for huge amounts of debt, and everyone is talking about how much of this is going to become a liability for the taxpayer.

It’s time to talk about the one issue that no one is mentioning.

The best leadership (and the worst) is always by example. The United States Government has set a terrible example, and the markets have followed: it has put itself in increasing levels of debt, with no plan in place to repay the creditors. The guiding fiscal philosophy articulated by Vice President Richard B. Cheney that “deficits don’t matter” has been applied by large institutions, and unfortunately by many smaller entities including households, to their own situations. It’s that simple.

Until we do the hard thing that was done in the waning years of the Bush I presidency, and come up with a bipartisan plan to balance the budget (even if it violates someone’s sacred “read my lips” pledge), and go further and return to the action of the Clinton administration (in cooperation with a Republican congress) by coming up with a workable and working plan to begin in the present tense the task of paying down the national debt, all we have done is kicked this ball further down the field, and the next thing you know it will be the U. S. Treasury that people will be talking about with comforting (?) words like “too big to fail.”

When the Bush II tax cuts were put in place, enough members of Congress recognized this fact that there had to be promises for some of those giveaways to the wealthiest among us (call it income redistribution) to expire beginning in 2010, or some of those who voted to thus eliminate the surplus (remember surpluses?) would never have signed on. Thus, any call to “make those tax cuts permanent” represents a deliberate breach of promise, and a betrayal of the trust of the American people, because no one can show how, with such an action, the debt will ever be repaid.

Until the United States gets its fiscal house in order, and enacts policies like we had in the 1990s, when there was prosperity, low interest rates, surplus budgets and no threat to Social Security in the process, global financial markets will be understandably and justifiably nervous. This is the reality that will face the next President of the United States, and the incoming Congress. Somebody is going to have to show some real spine.

A turning tide?

I retract my paranoid speculations, admit I was wrong, and rejoice at the resilience of the electoral system, for all its flaws, in America. Turns out that RoveCo has collided with the law of diminishing returns, and the sleeves turned out to be as short as the coattails. Our President’s absolute refusal to contemplate the possibility of a political defeat in the mid-term elections appears to have been cut from the same psychological cloth as his refusal to expect anything but military victory in Iraq. Chances are he has as much as of a plan for dealing with a Democratic house as he did for dealing with an occupied country: none. But I’m in a hopeful mood this morning, and I now fervently hope that in both categories the realities on the ground will educate him in the direction of doing something practical, more realistic, less grandiose, in response to (as Don Rumsfeld* might say) the situation he has, not the situation he doesn’t have.

*(whose resignation was in the works, even as I wrote those words)