23 Aug 2013 Why America’s Economy Languishes
Why does America’s economy continue to struggle so many years after the Great Recession? Why is this recovery so anemic compared to former recoveries?
Economists would point to a number of reasons for our flagging economy including; a weak global economy, a broken political system unable to address high spending, high taxes, high debt, high regulations, service economies do not recover as fast as a manufacturing economies, and a host of other technical reasons.
But there is something much more fundamental at work. Quite simply, America’s economy remains weak because we as a nation are weaker and more dependent than ever before.
While America continues to be home to thousands of energetic people with abundant animal spirits and innovation sufficient to reignite the worst of economies, our country seems to be overcome by a dense fog of social and political toxins that obscures restrain, and sicken all but a precious few who manage to break through. We are stymied far less by economic causes than by social and political causes.
The reasons typically cited for America’s problems include greedy corporations, selfish, short-sighted politicians, high taxes, disparities of wealth, unproductive policies, and rising detachment. But these are only symptoms of a more significant disease.
A glaring example of our social decline is the financial crisis of 2008 which was “caused” by the sub-prime collapse which in turn “caused” a global recession from which we cannot seem to escape. Much has been written on the causes and the culprits, but most miss the mark by not going deeply enough.
How could it have happened? How could such toxic products be assembled and sold by such smart people in investment banks, ignored by the ratings companies like S&P and Moody’s that were supposed to grade their creditworthiness, and missed by the regulatory agencies that were supposed to oversee them? Most are content to blame the other side with well reasoned arguments, but few truly address the real causes.
Tim Keller, a highly regarded Christian pastor, thinker, and writer speaks to the heart of the question of why it didn’t occur to so many smart people to question what was going on.
“The reason is that our modern and postmodern idols work against our inclination to ask such questions. They tell us that if the practice is legal and if everyone is doing it, the only fundamental question is: Can money be made?”
Keller quotes The Economist cite of Milton Friedman’s famous dictum that business managers have one and only one goal: to maximize shareholder value. The Economist writer argued that the market itself rewards integrity and punishes dishonesty. Not this time – why?
American ethics, morals, and values have been in steady decline for decades. Truth has been reduced to the concept of relativism. And when truth becomes relative, then so do ethics, morals, and values. More and more people are guided, not by what is ethical or moral, but by what is legal. The trend explains our burgeoning legal system.
Americans have grown weak and soft by being over-nurtured. The process begins in the home as too many fathers have abandoned or shirked their responsibilities to raise up responsible and confident men and women. Mothers are left to do what they do naturally; provide comfort and nurture.
Society’s dependence upon comfort and nurture is becoming a national tragedy. One need only talk to a few voters about what they view as important and listen to the rhetoric from politicians who pander to America’s growing dependencies on governmental funds and programs.
Now here’s where, in my view, America’s current social dependencies and economics conspire to hold us in the economic quagmire we find ourselves today. We’ve touched on the social causes that underlie the Great Recession and demonstrated that they are deeply rooted and cannot be reversed quickly if at all by political policy.
First some background. During the heat of the 2008 sub-prime inspired financial crisis, President George Bush brought to bear the full force of the government’s fiscal might through a program know as the Troubled Asset Relief Program, or TARP. It was designed to rescue banks and major corporations from collapse, arguably saving the economy. While many disagree with its scope, most agree that without swift and substantial government intervention the economy likely would have fallen into depression.
The newly elected President Obama and his Democratically-controlled Congress brought a different perspective than Republicans for addressing the challenges of the Great Recession. Their early measures reduced the scope of TARP by a third then in 2010 and then they enacted a $787 billion package known as the American Recovery and Reinvestment Act of 2009. Its purpose was to stimulate job growth immediately and secondarily to provide temporary relief programs for those most impacted by the recession and to invest in infrastructure.
While the impact remains difficult to assess, it is known that the individual cost of creating jobs by the program ranged between $500,000 to $4 million per job. There also has been more than a doubling of the food stamp rolls to 47.6 million people. TARP and ARRA would be the last two significant political attempts to help the recovery after the Republicans took control of the House in 2010 embroiling the Congress and Administration in an ideological stalemate.
That our country has become more dependent on the federal government since 2008 is not debatable. The question is how have America’s current social dependencies and economics conspired to hold us in this economic quagmire?
For the first time in American history enough of the electorate now places its own short-term concerns above the longer-term concerns of the country. We have allowed our system of government to erode into a democracy ruled by short-sighted polling at the expense of our Republic which was designed to elect and appoint leaders and statesmen capable of making decisions for the long-term best interests of the country and its citizenry.
Since 2010 our Congress and President have proven incapable of working together to alleviate the economic problems that thwart our economy. With the political engine broken, in stepped Chairman Ben Bernanke and his Federal Open Market Committee with more conviction than ever to do what they could to get the economy moving. The day after the 2010 election the Fed announced Quantitative Easing 2. Since then they have followed with Operation Twist, and QE3. In their totality these measures have done this country as significant a disservice as the Democrats and Republicans we so often blame, and its NOT their really any of their faults – its our own.
While the first program was arguably necessary to stem a tide of panic in the banking and financial market systems that would almost certainly have toppled our economy, the programs that followed QE 2, Operation Twist, and QE 3, provided a sort of anesthesia that thwarted the natural market and political processes that would have lead to faster recovery.
Every two years we hold a peaceful revolution in this country to vote for; new congressmen every two, a new president every four, and new senators every six. Ben Bernanke and his Fed through their salving efforts have undoubtedly made this economy seem better than it actually has been for the past four years – two political cycles. If it really is “the economy stupid” as Bill Clinton’s campaign strategist James Carville famously exclaimed, then it is highly likely that a deeper recession would have occurred and angrier voters would have more effectively motivated remaining elected leaders get this nation’s systemic problems fixed.
If the economy, the free market, and the political system had been left alone to behave more naturally, granted with more acute, but shorter lived pain, with truth told instead of placating lies, and with encouragement rather than false hopes, we would no doubt, find ourselves in a much wealthier and happier state as a nation.
Truth is not relative, it is a constant compass. Hard and inspired work lead to individual happiness and collectively to the wealth of nations. And suffering serves to make us stronger. A nation cannot flourish without the acceptance of and adherence to these truths.