Summer brings the posting on most blogs to a slower pace, as some like this site slow down, or for some, a pause as the go on vacation. The news of the July was dominated by a house divided upon itself, as those we charge with leadership and the expectation to rise above the bubbling mass of goo that most Americans have come to see in Washington; played chicken with our future in order to appeal to their hardcore constituency.
Usually, I refrain from taking any political side, but a post today by blog friend, author and geo-strategist Thomas PM Barnett perfectly articulated my feelings about the current state of our economy, and the lack of visionary leadership by all who are charged with keeping the country safe, strong and prepared for the future. Barnett's post starts off by commenting on a column by Thomas Friedman in the NYT's and excerpting comments from Kenneth Rogoff, an economist from Harvard who Tom paraphrases this way.
This led Barnett to bring the current crisis home, and describe how it affected him personally. His observation and feelings are shared by all of us Americans, who have struggled to maintain their mortgages, paid their taxes, hustled to recover income lost due to the downturn, and hold out hope that both parties will gin up some backbone to understand that we ALL, are plenty pissed off at everybody in Washington. See if his words don't sound like that angry voice in your own head?Rogoff's point is simple but very revealing: we've all known this crisis to be a financial one versus the usual biz cycle. Recovering from biz-cycle contractions is historically a quick affair, but recovering from a financial crisis is typically more the 5-7 years horizontal scenario. Rogoff's key insight is to state the obvious (for most of us consumers): the "recovery" of the business cycle has already arrived and it changed nothing for most people, because the hangover is a long-term credit contraction - i.e., the huge deleveraging.
I feel this personally in spades: built a nice big house in 05-06 at the height of the bubble (of course, I walked away from the old house with an inflated sum, so no complaints), so the house is priced in that way - as is my mortgage. At the time, no problem, because I'm getting paid in a bubblicious way.
Then the crisis. All of a sudden everyone says my labor is worth a whole lot less. Still love me and the work, just want to pay a lot less. Everybody is doing this, except my mortgage holder. He wants that to stay the same.
I'm lucky. Despite losing a ton of income over the past two years, I've scrambled and replaced the vast majority. I have to work three times as hard for 5 times as many customers, but I'm managing because I'm not reliant on any one job and I'm willing to hustle.
Tom goes on to point out, what many of us who work hard have come to feel like, the problem!So I do the right thing and don't strategically default on a mortgage, which is tempting, not because I can't pay it because I can - and am. It's tempting because, geez, why should I pay off this debt honorably across this long crunch while so many others get help or simply run away? Because when I do, I subsidize all their behavior.
Tom Barnett has been called many things, but the one that stands out, is of being an optimist about the future. When I read this next paragraph, it gave me pause that he glass was full and he had reached the point that he would not stand by and take it anymore.Worse, I have a White House that claims I'm the problem because I don't pay enough taxes and so it wants to soak me because that's an evil state of affairs. Funny thing is, I pay the Fed a whopping sum every year - about three times as much as my dad ever made in a year while he supported us seven kids. So naturally, when more than one out of every three dollars I make goes to the government, I feel like I'm supporting all sorts of programs for the needy, plus I'm doing the right thing by the mortgage, plus I keep up my charity donations, plus I pay 3 private grade school tuitions (saving the public schools) and two public college tuitions (eldest daughter and wife). I don't ask for any hand-outs from the government. Hell, I fund them and am glad to do so. But then I'm told I'm the reason why the government is so in debt (not enough taxes from the "rich") and yet I'm the dupe who continues honoring that mortgage from another era while paying for the bail-outs of those who can't. And you know, I don't feel like I'm the problem - or evil for doing all that.
His final words ring like the battlecry from the discouraged middleclass.But no, I have no optimism about the future of our economy right now. I don't how I could. I know what I know about globalization and America's long-term strengths, but I look at Washington and I see clueless politicians with no business experience spending all their time trying to tear each other down and I wonder why I must suffer these fools.
Read more:But most of all, I f--king hate the government right now for being such incompetent boobs. I would be happy to see them all lose in 2012 - and will vote that way.
Rogoff's "second great contraction" and why I'm mad as hell at Washington
With a growing number of Americans, 47% paying no federal income tax, against the shrinking 53% who do, and with the crisis at hand, raising taxes in some form is in the cards, but as Rogoff suggests, it must be on something other than personal income; like a tax on gasoline or a national sales tax. Otherwise if it is raised on those who earn over $250,000, then even the lowest should have to pay something, at least a few percentage points to give them a dog in the fight.