Did you see the Big Three on CNBC last week? Al, Tom and Dave? Like the Tea Party, they spoke the hard truths: get used to the New Normal (unemployment at 8-10%), and America following the road to its date with a Roman Holiday.
Greenspan noted that Fed borrowing is crowding out private investment and companies will sit on their money and not hire. He was especially hot on cutting the deficit, saying that it doesn’t happen for political reasons. Of course government has a role, and a big one, but billions are wasted on pork and re-election actions. He said piecemeal won’t work, we must come together, politicians and citizens, and create a comprehensive budget of less spending that impacts everyone, poor, rich, middle, business, politicians, defense, the same. How to do that? Create an aggregate budget. Bring it up. It will fail. Then, rather than pass what you can piecemeal, bring back another comprehensive budget. Get across the point that this is how it will be, everyone will be treated “equally harshly.” “The way we do it now will not work.”
Obviously quite a different approach. Is this a moment when the Tea Party can have an impact? What can we do to convert this economic mess into a plan that will achieve consensus?
Greenspan noted a fundamental problem with the European Union: a currency arrangement in which you are pooling the cultures of different societies, and trying to control them with a rule (all members are required to keep deficits at 3%). Sounded good over tea, didn’t it? “It’s over.” Greenspan does not believe each country can achieve fiscal responsibility. Can we? Only if you get back to capitalism, creative destruction, which allows the inefficient to fail. If you save everyone, business and individual, it all flattens out and gently declines.
What did Tom Friedman say? America is off track. We used to be efficient as entrepreneurs, manufacturers and marketers. But, under the guise of helping people (read: getting re-elected), we have put government into that process big time. Since governments can’t run things well, especially the further they are from it, we have no strategy on how to cut or invest, and entitlements have put a floor under any need to invest and grow. We have replaced doing things that were exceptional with talking about how exceptional we are.
To do? The deficit must come down. The problem? At this moment when we are most polarized, we need a society and a politics that allows people with different opinions on some things to come together on the main common goal. America is not too big to fail! We need to get back to where we were at our best. We are living a dream. We won the cold war, relaxed, and just want to live large.
Stockman reviewed job losses and said the New Normal will be in place until we are competitive in the world. What can the Tea Party do to get our voters to realize that our education system does not create people who can compete in the world, but it does create people who will be in debt for a long time? Do our pension and healthcare systems allow us to compete with India and China? Do you see this as a Perfect Storm? Construction, and all that comes with it, was our thing, and it was way over done and is not coming back.
There are four unsustainables: 1) No middle class job creation, 2) massive deficits (we are the guy next door, living on his credit card), 3) printing money as a policy is lunacy, 4) politicians will let the deficit grow, a bond auction will fail, life as you have known it, will end.