Many recent press articles have used the term ‘fiscal cliff’ to describe the December 2012 budget events of tax increases and government spending cuts. Such a description is biased and underlies the author’s inherent priority of economic activity over fiscal health. Worse in many readers minds, I fear, the act of saving is demonized as the cause of poor economic activity. Nothing could be further from the truth. Read more
Tag debtor nation
When negotiating many people suggest that the participants start with common objectives. This advice, assumes of course, negotiating efficiency is valued. However, the negotiations for the debt ceiling increase remind me that it is common values, not objectives, that create efficiency in negotiations. The federal government, as has the California state government of the last three years, illustrates this point clearly. Read more
The article above is an example of politicians setting expectations, and creating an environment with the opportunity to fail–that is win the next election. However, the Obama Administration has been long short on explaining how they will cut the deficit. One report suggested their sights are set on 3% of GDP, from the latest estimates of 12.5% of GDP. Good Luck. Read more
Saw this article Geithner Says Administration Will Ensure Bank Access to Funding and could not help but make a quick note. Bulls??? Until the government knows how much money was lost, there is no way to ensure funding. The premise underlying the actions to date is that the US government can borrow more than the bankers lost (or more than the bank asset holders are going to welsh on in the future). I’m starting to have my doubts. Read more
How are our elected leaders doing? Too early to tell. The economic environment’s complexity will take time to convey the results. But in looking for the answers, my evaluation criteria are becoming clearer. Good stimulus activity has a futuristic effect. Taxable profits can be generated into the future when capital is employed in productive ways. However, poorly employed capital allows waste and inefficiency to persist. Telling the two situations apart requires a macroeconomic spending refresher. Read more
The Internet link above references a well written article by Chalmers Johnson. The article, aptly titled “Why the US has really gone broke,” helped me crystallize my thoughts, no my concerns, about the American society. When I assess the state of the nation, I see a frontier party headed down a hill with high expectations that a thriving ecosystem awaits. As the advance scout team describes what it sees ahead, rumors spread within the traveling party. An isolated valley awaits, where sunlight is blocked from the valley floor owing to the steepness of the valley walls. Water amazingly drains around the valley, leaving the soil nutrient poor and barely life sustaining. Nirvana is turning into hell.
Pride and arrogance can always lead people into perilous positions. The American society has believed the story—“The Greatest Nation on Earth.” Yet, we are a net debtor nation, who borrows money and then builds bombs and weapons, and maintains military presence outside its borders. Three highly unproductive societal choices. Military production offers negative consumption, because the good ultimately destroys other goods in the society, or worse people.
Imagine a household that borrows money and spends it primarily buying bullets and guns. With no investment in education, skills, or food it is not long before you visualize the household surviving by stealing. Friends, if you can call them that, are superficial. The family’s eventual outcome is obvious as their ability to service debt through weapons evaporates. Skill less with no resources, the household picks a fight and loses, dying with pride, but dying nonetheless.
This household might exist as an undereducated inner city household who only knows weapons, fighting, and fear as sources of self-esteem. However, as an alternative I’m suggesting it is the American society. We are the world’s largest debtor nation and its largest spender on military technology—a damning combination. We are beginning to borrow money for the basic services as shown by our crumbling health care system, energy dependence and bumbling effort to salvage New Orleans—a city devastated by natural disaster. And through the actions of the last thirty years, we have become more authoritarian with our foreign policy. Predictably the nations’ lenders, China, Japan, Germany, and Saudi Arabia will decide to invest elsewhere not liking what we do with their money—weapons, military, invade others, supply death.
Our country needs rejuvenation. Among the candidates for president, only Barack Obama speaks of revival. For to lead this nation out of this mess, requires
- Reduced military spending. We spend more than the rest of the world combined.
- Reduced debt, the yearly government spending deficit but also the total debt, and
- Alternative spending priorities that improve the standard of living, while also yielding “positive consumption.”
The Republican position is clear—national security derives from greater military spending. Hillary Clinton appears too short sighted. She can see no further, than to announce the next policy change to make one’s life better. The problem is, her vision prescribes incremental steps down into the treacherous valley, never looking far enough ahead to see the result.
When Barack speaks of his values, his “Audacity to Hope” he is leading us on the path to turn the behemoth ship around. He will not get us to the prosperous valley, but a victory by Barack, will spur our youth to innovate the thinking, challenge the values, and allow us to break the cycle of thinking that has governed since the sixties.
We should elect Barack Obama not for what he will do but for what he will start. Leadership at its best stimulates action and our talent, our youth needs jump starting.