The current state of the US economy is, in my judgment, a result of the convergence of social, political and economic forces that have been building to this point. If that is the case, the abysmal condition of the economy is not simply a temporary downturn but rather indicative of a more serious malaise.
One of the factors that have been implicated in the current economic situation is the so-called sub-prime mortgage crisis. How exactly did this happen? There are a number of underlying reasons operating here. The serious lack of government regulation allowed unscrupulous lending practices to grow without impediment. The exceedingly wide gap between those who have in our society (an exceedingly small percentage of the overall population) and those who do not has created a significant underclass. The members of this economic sector of the population are so strapped for resources that these dubious sub-prime loans seemed terribly attractive. Lastly, the greed-driven financial institutions sought to capitalize on these loans. The end result was destined to be the collapse we now have experienced.
Although this particular downturn may be reversed over the short term by government and financial manipulation and through the imposition of control mechanisms over the financial institutions, there are endemic difficulties that are not amenable to a quick fix. These are outlined below.
Nine trillion dollars worth of national debt has been accumulated over the nation’s history. Seventy percent of this debt can be attributed to three Republican Presidents: Ronald Reagan, George H.W. Bush and George W. Bush. These are presidents that are noted for their “conservative” credentials. This fact is ironic to the extreme. This debt will haunt not only this generation, but many generations to come. The interest payments on this debt are enough to curtail economic development.
The Iraq Wars I and II have essentially drained what will inevitably be trillions of dollars from our national wealth (The Trillion-Dollar War by Joseph Stiglitz and Linda Bilmes). This together with the seriously overblown military budget has denied a significant part of the domestic economy of the funds required for such important services as national infrastructure improvements, health care, education, housing and environmental protection.
In addition, the fact that we are no longer a producer nation and depend on foreign-produced consumer goods has led to an extreme imbalance in trade, especially in regards to China. As a result, the Chinese are pouring billions of dollars into our economy to service our massive debt through the purchase of government bonds. This has put us in a position of extreme weakness. Similarly, on account of our dependence on foreign oil, the Saudi government is also propping up our national economy by helping to service our debt.
The Congress and the Presidency for years have unscrupulously drained the Social Security surplus to the extent that when the huge bolus of individuals from the baby boom generation enters retirement, the government will have to repay that loan and disrupt further the national economy. The other alternative to this would be to cut back on social security benefits for approximately seventy million people. In addition, the Medicare program faces analogous difficulties. If serious cutbacks in Medicare are made, this will impact the health care of millions of elderly Americans in a society where there is no universal health care and nearly fifty million people already have no health coverage. Such a situation would have a dramatic impact on the quality of life of a staggering number of individuals.
The factors that have been cited above have been enshrined in our methods of doing business and can only be reversed through a major realignment of our values and our institutions. If we continue to allow greed, opportunism and profit to dictate our behavior both domestically and in the world at large, our prospects for the future will worsen rather than improve.