I’ve been trying for a week now to rationalize what I heard coming from the president in his State of the Union address last week, but no matter how hard I try to make it come out as a sane recitation of the past and realistic forecast for the future of the United States, it just doesn’t work. Surely, he must have been joking.
No one with his education and experience–although none of it in the realm of business or economics–could possibly believe that the public is so ignorant as to put any stock in what he was saying. I’m sure that the frequent applause given by the faithful in the audience was in response to the audacious comedy of it all; on one occasion in particular, when he mentioned a three-year-freeze at irresponsible spending levels which wouldn’t even start until next year, there was an audible gasp followed by some soft laughter just reeking of disbelief. And if that hadn’t been the case, I would have to believe that the entire assemblage had gone mad, and that couldn’t possibly be true, could it?
If that speech, start to finish, was not intended to be a joke, then what we witnessed was the display of such arrogance as I have never seen – particularly coming from the president of the United States. I could not find one thing that Obama said, if taken seriously, that was anything more than hypocritical double-speak, a bald-faced misstatement of fact, or an attempt to set absurd expectations for our economy. No, I’m sure that if the assembled dignitaries had not assumed that it was all in jest, they would have either jeered him off the stage or gotten up and left the chambers rather than giving him standing ovation after standing ovation. I have this feeling that they had the inside “skinny” on his speech all along and they were applauding his ability to deliver it with a straight face.
My only concern is that it is taking him so long to come back on stage and say: “I was only kidding. Now let’s talk some sense. Things are bad and they’re only going to get worse unless we undergo a painful paradigm shift, so be prepared to tighten your belts.” Really, I’m starting to get nervous. Can it be possible that he actually took himself seriously? Nah, that can’t be. This is America, and things like that don’t happen here, do they?
Now I’ll get serious.
Although there was a very comprehensive dissection of Obama’s speech last week here at America’s Right, in which Obama’s actual words were sifted through a screen of reality, I would like to take one particular point–Obama’s promise that “we will double our exports”–and look at it a little more closely.
Among all of the other half-truths half-promises and doublespeak, that particular comment was one of the most ridiculous and vacuous mouthings imaginable, coming from the president no less. Do you know what would have to happen for the U.S. to double its exports? The reason that we continue to experience a trade deficit of more than $30 billion every month is because we’re not competitive – particularly in terms of consumer goods. The only way for us to become competitive in this segment would be to cut our manufacturing costs by at least a third or manipulate the value of the dollar (i.e. print lots more of them) so that our exports are cheaper to buy in foreign markets. But that would backfire on us in a very short period of time because our creditors are also our competitors and they wouldn’t take that sitting down. Plus, I don’t think that our Asian creditors, upon whom our economic viability depends, would be very happy to see their dollar-denominated securities shrinking in value as a result of cheapening the dollar. I would expect them to retaliate–or should I say compensate–by either calling in their loans or raising the interest rate, so forget that as a viable strategy.
As for cutting our costs sufficiently to make us competitive in the manufactured goods trade, that particular course of action would be a tough sell because it would inevitably impact wages and overall standard of living. And who is going to have the intestinal fortitude to propose that? Certainly not the politicians who depend on the unions for support.
Couldn’t you just see President Obama getting up in front of the public and saying, “Folks, I promised to double our exports over the next few years and the only way we can do that is to lower our standard of living across the board.” Not a chance. In fact, we’re complicit in that farcical statement because it is our absurd expectations for an ever-higher standard of living that has driven us, individually and as a nation, into a smothering blanket of debt. We have been selling off assets for decades to maintain a standard of living that we have not been able to afford, and there is no end in sight.
Unless I’m reading the U.S. Treasury’s web page wrong, just the interest on the national debt last December alone was $104 billion. This is unsustainable, even at the present rate, and yet even today the House of Representatives is voting to raise the national debt ceiling again, with the Democrats trying to be clever by hiding it in a rules vote. So, the questions remain — where will all of this take us, and how should we prepare for the inevitable?
First, even if the unemployment rate is cut by two or three percent, the jobs created won’t produce enough tax revenue to fund the social programs being proposed by the Obama administration and, at the same time, bring down the national debt, at least not without large tax increases on middle-income and wealthy taxpayers. Republicans like to tout tax reduction as the silver bullet for stimulating growth and increasing tax revenue, but the Bush years should have disabused us of the notion that we can fight even one war, say nothing of two, without implementing a “war tax” commensurate with the cost of fighting the war. I’m not an economist, but it is only common sense that wartime expenditures must be treated as incremental to normal (i.e. non-war) economic function.
Personally, I believe that the public should accept higher taxes, along with a demand for substantial reduction in social programs, during wartime for the sake of our children’s future. It is unconscionable to burden future generations with the debt that we have accrued by wanting to “have it all.” Personally, I fault the Bush administration for trying to maintain public support for the war in Iraq by lowering taxes and increasing the national debt.
Secondly, most of the job growth over the foreseeable future will be in either the non-wealth-producing public sector or the government-subsidized private sector, the latter including those “green jobs” the president is so fond of blathering on about. It’s important to understand that the term “job” only has positive monetary meaning to the person being paid for doing it. A “job” working for the public sector may well have a negative effect on the economy–at least in the short term–simply because it draws down the wealth created by the coupling of human energy (intellectual as well as physical) with raw materials without making an off-setting contribution in some other form.
Fundamentally, an economy depends on those “jobs” that are required to satisfy the first priority of human beings as defined by Maslow’s Hierarchy of Needs: food, clothing, shelter, etc. All other job categories are built on the shoulders of these “primary industries.” As an example, I spent my career in technology industries, but such industries exist only as a means of increasing productivity or enjoyment, not because they are necessary for life (even though some of our products increased it substantially). So my point is that it is quite possible that an acceptable steady-state rate of employment will, of necessity, require an unacceptably high rate of taxation simply because there won’t be enough wealth-producing jobs available to provide the funds required to sustain entrenched government programs. Something has got to give. It’s as simple as that.
So we’re back in the soup again; higher taxes, fewer jobs, less competitive with foreign producers — all leading to a forced lowering of the national standard of living. Thanks to our own self-delusion and the hypocrisy of our politicians, we as a society are not likely to suffer this kind of a reversal of expectations without tremendous upheaval. In other words, it will take bringing our economy down to the point where the choice is between satisfying Maslow’s first order of needs or extinction, and the will to survive will win out. We’ve let our own unreasonable expectations cloud our vision and give license to the politicians to lead us down the primrose path to economic disaster – that is, if we don’t make some fast and painful course corrections.
Our best hope for survival is to personally take whatever measures we can to insulate ourselves from the economic–and quite possibly, civil–upheaval that I believe is inevitable within the next two to three years. In other words, do the exact opposite of what brought us to this unhappy point: de-leverage yourself, minimize your lifestyle requirements (I call it “purposeful adequacy”) and invest in knowledge so that your competition for employment isn’t in some factory in China or India. Become as independent as you possibly can, and forget that old adage that, when faced with inflation, take on as much debt as you can presently handle and then pay it down with cheaper dollars. This assumes far too much, as the recent housing market collapse has demonstrated.
But by all means, don’t take President Obama’s prognostication seriously. Surely, he must have been joking.