Thursday, February 24, 2011

The Party's Over, and People Don't Get It

That's what I wrote on the board in one of my classes the other day, as we were watching the story about Wisconsin's budget problems. Like other states, voters there are reluctant to raise taxes, and this leaves the state with no other alternative than to cut spending, including areas where they'd really rather not. One of the places Wisconsin would prefer not to cut is in education; another is from the pensions of public employees who've worked so hard to get a decent income in their retirement years. To do so would just be so wrong! But as I often ask: What's the alternative?

Not much, it seems. Mostly we just hear that Wisconsin can’t do that, without hearing what they CAN do. I don't know if reducing the power of unions, and reducing public employee salaries and pensions are the only way or even a good way to deal with these daunting state deficits, but I do know this: The financial problems that the states, and the federal government, face are .... absolutely disastrous. Probably worse than in the Great Depression; perhaps the worst this country has ever seen. And people just don't get that yet. You explain how THERE'S NO MONEY, and drastic cuts HAVE to be made; they listen, shake their heads in agreement and then go "yeah, but what's this got to do with me? where's my raise? why can't I retire at 55?"

Most Americans hear about the $15 trillion dollar federal deficit, California's $26 billion deficit, and the like, and just sort of say "Well so? Fix it! Cut government waste, tax millionaires more, you know - just fix it!" Or else they figure the "problem" is just a phony one, or will just sort of go away by itself.

But it's not even remotely that simple, and there are no fixes that won't involve serious amounts of pain for almost all Americans, for many years to come. The bottom line is that almost all of us are going to have to live with smaller paychecks and smaller pensions, work longer, and get less in the way of government services and support. No use whining about it or marching around with tired old 60s-era “hey, hey, ho, ho, government cuts have got to go” chants, because that’s just the way it’s going to be. Here are a couple of reasons why this is inevitable.

First is politicians’ decision to kick the can down the road for 40 years or so. I remember back in the mid-1970s when I started in the investments business; conservative analysts were alarmed by the federal government spending more than it took in, year after year. The nation's debt was rising at a then-alarming rate, while the value of the U.S. dollar was rapidly eroding. We have to stop this now, they said, or else our children and their children will pay a heavy price down the road! Congresses and Presidents came and went, but nothing fundamentally changed. To fix the problem required raising taxes and/or cutting government spending - two equally unacceptable policies. Anyone who pushed either option would likely be voted out of office by angry voters: "You raised my taxes!" "You cut spending on my favorite program!"

So Congress borrowed more money instead, kicking the can down the road, letting the next Congress deal with the problem. Disturbing annual deficits in the tens of billions of dollars in the 1970s became shocking deficits of hundreds of billions in the 1980s and 1990s (except for a few surplus years in the late-1990s), and then insanely high deficits that eventually exceeded $1 trillion a year by the late-2000s. Each time, as Congress refused to make the tough decisions (cut spending and/or raise taxes), everybody said: "If we don't fix this now, it's today's children who will pay the price." Nobody pretended to not understand that their inaction would put the burden of their decisions on the back of future generations; the presumption was always "well, we didn't fix it this year, but next year we will!"

But it was a cruel hoax, a deceit. Most politicians knew in their heart of hearts that they couldn't solve the problem, that they didn't have the nerve to take the tough actions needed to do so. And besides, by the time the problem got totally out of control - they'd be long gone. Someone else's problem!

Well, the shell game is winding down and the future is now. The debt is so big, the economy so unable to deal with it using conventional means, that the party, the game of musical chairs, is about over. Today's Americans, especially the young ones, are getting presented with the bill for all the living high off the hog of the past 40 years. Not right away. Not all at once. Not always in obvious ways. But it's clear that it's happening; it has to happen. And most people don't get it.

My wife and I were in
Mission Valley the other day, and couldn't believe the parking lots. They were all full, with people waiting for someone to leave so they could park. In this bad economy. When Internet shopping is taking more and more business away from physical stores. Still - stores were packed. People were buying stuff right and left; lots of it overpriced, frivolous stuff. Paying $11.50 to watch a movie, and then $13 for a large Coke and popcorn.

Many of these same people will quickly tell you how the economy sucks right now: prices are up, jobs are hard to find, and government is cutting its services. But they've still got their cells with unlimited texting, their $30,000 SUVs that get crappy mileage, still eat out twice a week, still consider shopping at the mall a sensible hobby. These people don’t get it.

Meanwhile, there is the other
America; the 10% or 20% or 30% of Americans whose lifestyles have already taken a huge hit. They lost their jobs, lost their homes, lost their meager savings, don’t have health coverage, and after a couple of years see no light at the end of the tunnel. Or they’ve got a job, a home, lousy health insurance, but no pension to look forward to and are just barely scraping by. They don’t understand all this talk of the economy improving, don’t understand how the stock market has almost doubled in the last two years, don’t understand how so many others have money to just throw away at the malls.

So here’s the second thing. Many of those people are part of the old economy. Despite all the calls for Buy American, the old ways are gone. If you used to work at a lumber mill or a manufacturing plant; if you used to earn a good living with just a high school education and a skill set that isn’t really needed anymore; if you had a non-essential job and somebody found a way to get by without you, then you’re a casualty of the new economy. Globalization changed things, and there’s no putting the genie back in the bottle.

The changes in the American workplace were inevitable and, in a way, we should be happy about how things are working out. Because if you think about it, a big reason that Americans were able to live so high on the hog, even after we started getting a little lazy and feeling entitled, was because we were still one of the Big Dogs, benefiting from old colonial and imperialist realities.

We had lots of military and political muscle, long-standing commercial arrangements the world over; bargaining advantages of many types that gave us a huge edge over so many other countries. We had the U.S. dollar, trusted basis of the entire world’s financial system. We had good education, great inventions, good roads and hospitals and phone systems. Free markets and strong laws to protect entrepreneurs and foster civic strength. Meanwhile, the majority of people elsewhere lived in the third world, in desperate poverty, with little or no education, no military or political muscle – nothing. Or they lived in communist countries, essentially dictatorships where their futures were seldom promising.

So it was relatively easy for us to live off the fat of the land (the world) during the 60s, 70s, and 80s. But that really started changing about 20 or 25 years ago, with the fall of communism, with China’s adoption of free market policies, and with advancements in technology, communication, and transportation. Now, everyone can see what life is like in rich western countries – and they want that. Now, everyone has access to technology and information and can use them to level playing field after playing field. Now everyone has an incentive to work hard, to create, to build wealth. The Chinese work harder and much, much cheaper than Americans, so they make everything. Meanwhile, the Indians work harder and cheaper than Americans, so they’re starting to do everything (think: call centers, surgery centers, accounting services). Meanwhile, they, and other parts of the former third world, are jumping ahead of us in education, in modern infrastructure, in the things that will allow them to inevitably catch up and perhaps even surpass us.

We should be happy for them, shouldn’t we? Shouldn’t we feel bad that for decades we had the great lifestyles, at least in part because of policies that exploited poorer countries? We won the Cold War; we brought down communism! Shouldn’t we be proud that – with our help in many cases – many countries are now following our lead, and catching up? Shouldn’t we be glad that they’re now starting to have decent lifestyles, even if it means that we’re living a little less high on the hog? Hmmm…. I don’t think most Americans are quite that gracious about it.

But shouldn’t they be? I mean, the poorest Americans still aren’t starving to death. Most of them still get a decent education, have a roof over their heads, have personal freedom and a chance to make something of themselves, are free from having to worry about ethnic cleansing and bloody revolutions. So what if our GDP per capita (basically – average income per person, per year) falls from $45,000 to $35,000? We’re still well off; still in better shape than 95% of the world’s population. Can we really begrudge other people in the world the chance at bettering themselves? Do we really think that all those high paying jobs are our God-given right, for perpetuity - that nobody else should be able to take them from us?

I think the answer is yes. Americans had it all, for so long that they think that having it all is their natural right. We benefited from our world dominance, and from the buy now/pay later philosophy of our government for so long. It’s a lot harder to give up the good life when that’s all you’ve known. Americans, proud and hard-working for so long, now feel, more than anything else, entitled. But the party’s over. And that sense of entitlement is going to make it harder for people to accept what is essentially inevitable.

20 comments:

The Suburban Bushwacker said...

Another great piece, I've been visiting america regularly for twenty years and you're description of denial in the face of decay pretty much sums it up.

England on the other hand has managed to turn a drama into a crisis and were now in full plummet.

The bit I didn't understand was
'We won the Cold War; we brought down communism!'

I know it's an oft repeated mantra - but how and when?

SBW

Jon Strebler said...

I guess the short version, SBW, is that from the mid-40s to the early-80s, the US and its allies battled the USSR and its allies for military and economics dominance. By the late-80s it was clear that Soviet-style communism simply couldn't keep up. The USSR and Eastern Bloc countries collapsed, politically, and turned to democracy and market economies - which was "our" side all along.

So did the West "win" the Cold War, or was it more a matter of the commies "lost" it? Fair question, but either way democracy/free markets have been the unchallenged default modes for almost all of the developed world for 20 years.

The Suburban Bushwacker said...

Jon

I would be more a subscriber to the 'commies lost it' school of thought!

I always enjoy reading your analysis , just wish you'd post a bit more often
SBW

Jen P. said...

Strebler,
YES and I believe you were trying to tell us this as far back as 2002 when I was your student. I'm in London now, where people are dealing with the same problems. A lot of friends are heavily involved in the anti-Cuts movement. I'm sympathetic in so far as it *is* an ideological choice WHAT gets cut, so I'm behind that. But...there ain't no money. And Britain's problems are tiny compared to America's shocking, mindblowing, deficit.

I was talking to my Mom just last night: how her parents rode an awesome wave of economic prosperity, how now life's a bit harder for my parents, and how I'll probably never enjoy quite the financial success (or at least with quite such 'ease') as they did. Nonetheless, I don't think I'll be starving to death or fighting my fellow citizens for food after the zombie apocolypse. Life is just going to be less cushy for my generation in America - which is fine, but people have got to accept that.

Oh, and also find ways to live/work abroad. I'm coming home for a bit, but I think Latin America/Asia might be next.

Thanks for a thought provoking post!

Jen Paton

Anonymous said...

I agree with you when you wrote people say: “Well so? Fix it! Cut government waste, tax millionaires more, you know - just fix it!” It is easy to say “just fix it”. But I don’t really think people understand how it’s not that simple. Obviously the politicians of every state and the government want to solve the problem but it’s a lot more difficult that just raising taxes. The truth is the millionaires are the ones who create jobs for people. If we tax the rich, what is their incentive for creating jobs if half of their money will be taken away from them? Yes of course they will still be better off than the majority, but I doubt anyone would want to create jobs if they knew most of their money wouldn’t even be theirs for spending. I also agree with you when you say: “…there are no fixes that won't involve serious amounts of pain for almost all Americans, for many years to come. The bottom line is that almost all of us are going to have to live with smaller paychecks and smaller pensions, work longer, and get less in the way of government services and support.” People don’t want to lose their luxurious lifestyles, but sometimes we have to make sacrifices if we want to improve living in the future. If we don’t make any changes soon, my generation and the generation after me will be the ones suffering. “If we don't fix this now, it's today's children who will pay the price. Nobody pretended to not understand that their inaction would put the burden of their decisions on the back of future generations; the presumption was always "well, we didn't fix it this year, but next year we will!” Politicians need to stop shaking their heads at every single idea and actually make something happen. For years it’s been all talk and no action. Or they have pushed the issue for the next politician to worry about. We don’t have the liberty anymore to keep pushing our problems into the future, sometimes has to be done.

-Haley Davis 3B

eddie said...

Mr. Strebler I really enjoyed this piece. I agree with you with many of your key points that the "party" is over.
America has over spent on many things and have just pushed the pile to the side for too long.
It is time to cut back and dig into the mess we created.

eddie said...

Mr. Strebler i really enjoyed this piece. The "party" is over because America spent money that they did not have and pushed the problem aside for too long.
We need to fix it, but the question is how? It is easy to say to just cut back spending, but essiantly that is what must be done. Cut back anywhere you can. After you cut back for a while it can be possible to go back to your original ways. In my essay I show a real life example.

I really enjoyed this.

Elizabeth Kenyon said...

I really liked this essay Mr. Strebler. It really grabed my attention and I wasn't expecting you to go in one direction. I think that we should praise India and China for their accomplishments. Everyone has to go through good times and bad times. Right now we are going through bad times and we shouldn't on their parade because we are having bad times. In regards to budget problems. It makes me upset that we can't make decisions and get things done. Our economy is will keep getting worse and worse if we can't get things done.

Anonymous said...

I agree with the points you made in this article. Obviously "the party" is still going on despite the fact that most people SAY they know the party is over, since the people who claim to understand the budget crisis are still spending mass amounts of money at the mall and at the movie theatre. The best alternatives that I see are to: a) cut spending to retirement facilities, pensions and caretakers for elders since the sad truth is that they will be gone soon and the younger generation will be the new face of America; b) the obvious but not so easy option is to simply cut everywhere and everyone, including the government and the citizens, this way no one can blame the deficit on someone else or leave the problem for someone else to solve; and c) to elect a President who will not lie to us telling us he will lower taxes but rather will take matters into his own hands despite the negative remarks he will receive. He needs to be able to tell the population that the party is over and it's time for everyone to face some cuts. That's the only way things are going to get done.

Reno

Anonymous said...

I agree with the points you made in this article. Obviously "the party" is still going on despite the fact that most people SAY they know the party is over, since the people who claim to understand the budget crisis are still spending mass amounts of money at the mall and at the movie theatre. The best alternatives that I see are to: a) cut spending to retirement facilities, pensions and caretakers for elders since the sad truth is that they will be gone soon and the younger generation will be the new face of America; b) the obvious but not so easy option is to simply cut everywhere and everyone, including the government and the citizens, this way no one can blame the deficit on someone else or leave the problem for someone else to solve; and c) to elect a President who will not lie to us telling us he will lower taxes but rather will take matters into his own hands despite the negative remarks he will receive. He needs to be able to tell the population that the party is over and it's time for everyone to face some cuts. That's the only way things are going to get done.

Reno

Jordan said...

These were some very good points you made in this essay. What people don't seem to get is the fact that these budget cuts that are occurring are going to help our country out later. While the other side is that they leave multiple disadvantages for the current generation, we soon might not have to keep using them if the economy is in better shape.

What I found surprising about this essay is the fact that we have been in a critical (if critical is the right word for it) state with the economy, and we have only just heard about how bad it's getting about two or three years ago. This just shows how Congress has not been doing its job right. Our government should really stop waiting for the next people in line to save the day. As the title says, it's time for the country to realize that the party is over.
Jordan S. 1B

Andrew Weaver said...

I agree with all the points in this essay. There is simply no more straightforward and honest way to break the news to Americans than what is said in this blog. The party is over, and America is going to have to pay its bill. The problem is, nobody wants to, and it’s going to be a very painful one to pay. There is nothing we can do but face reality: we have to pay it off.

Kayleb Kirby said...

This blog is about the recession and how it affects everyone. It was brought up on the news about Wisconsin’s budgets problems and them not wanting to cut out of education, and not wanting to cut off pensions, but the fact of the matter is they are going to have to give up something. In the blog it states that, “THERE’S NO MONEY” and that is what needs to be plastered on protesters’ faces to make them understand. There is no money and I’m not one who agrees with cutting out of education, and I agree that citizens having to pay higher taxes is no better but people don’t understand that you have to sacrifice something.

We are in a $15 trillion dollar federal deficit like you said, and I completely agree that cuts need to be made. And as you said before, the situation isn’t a cold for America it’s like cancer. The deficit keeps growing and growing, and what Americans need to understand is that in a cancer situation you have to sacrifice your health in order to get better, whining and just wishing it away won’t do anything.

What should’ve happened was the government should’ve fixed while it was a smaller problem back in the 70’s. However in your essay you state congress kept borrowing money instead of fixing the problem, and now we are going to have to pay the heavy price, literally. I think that the government and congress have the hardest job. I know that there are more than a handful of congressmen that have children and they don’t want to cut money out of education anymore the common American. Even though, they want to fix the problem, they are well aware that unless there is a change in most Americans ignorant mind, it’s not going to happen.

For as many people as there are suffering there is a good amount who is living quite comfortably. I completely understand your view on people who are talking about the economy and how horrible it is but they don’t even know the half of it. My father knows first hand, in the past year my dad has been laid-off 3 times. People are losing money, jobs and homes everyday and there isn’t much that America can do now other than to spend more or save more. As you said people will have to lose their entitlement, the party is over.

Kendra Romero said...

I really liked this essay, and I agree with the fact that we Americans need to feel a bit of pain in order to keep on moving forward.We cant always have the best without giving something up, which is something that we should look up at China and India for. I think both countries, in fact, all countries, deserve to the right to improve.I also like the ideas of these advancing countries since it might create some competition, and maybe motivate Americans to stay away from their entitled dreams for a while.

Alex said...

“The Party's Over, and People Don't Get It” is an article that is, once again, started over a class time discussion over the news. This time, Wisconsin is being used as a representation of the current status we find ourselves in the education world, which is very poor. Being very brave, the author claims that the problems in education are worse than that of the Great Depression, which is a claim that will have to be supported through many details. The common people are shown to be stupid and ignorant to the facts about the economic situation because they do not want to have to deal with it because they don’t think it affects them.

Anais said...

When you wrote this on the board, I felt like it really made me think, and I hope it did the same for others. I felt like you were telling us to prepare ourselves for what has happened, and what will affect so many of us in the near future. With unemployment numbers not getting any lower, people have to work harder and harder for a job. Additionally, with many people deciding to go to college after high school, and who dont have the money to do so seem to get the short end of the stick, because their parents cant afford it, and they have to take more loans than expected. I feel that I agreed with a lot of the points and ideas that you brought up throughout the essay, and I think it relates to the essay you wrote about looking at the other side of things because people in this generation still feel that sense of entitlement, instead of that of privilage.

Miranda said...

For he first time in 50 or more years, Americans are facing the restructuring of wealth around the world. Unfortunately, the American government is not in a position to improve all of the issues that the country currently faces. This means that higher education and other methods to improve America's global standing will continue to be put on the back-burner.

DaddysGrl07 said...

A pretty good essay, on all accounts, I think. I think the really big problem with America today-and especially teenagers, including myself-is that we do tend to feel entitled to something, whether we've earned it or not. If we had earned it, it would be another matter entirely, but for the most part, what we feel entitled to isn't anything we've earned, its something that we feel we have a right to to begin with.

Joanna Garcia said...

I completely agree with the idea of denial presented in this essay. This is vividly expressed with examples of different types of people in different economic situations. Even when there is a serious recession and the economy is in bad condition people will continue to spend. Although politicians tend to be villainized by the general public and the medias the reason why the economy is in the fragile state it is, we hardly ever think of the consumerism in America that involves spending what one does not have instead of what they actually need or should spend. The personal anecdote of seeing so many people at a shopping center paints the picture of denial in people, who like to blame politicians, but not themselves. I understand the point the essay is trying to make, spending beyond their means. Consumer spending does boost the economy, but people do not have the money to be spending at the movies like they used to.

Unknown said...

For the last sixty-plus years America has managed to sit at the top of the pile, but what no one seems to understand is that that pile below us is relevant. For every nation that has more products coming in than going out, there has to be one doing the opposite. For years that was china. They did the labor to supply us with products we were too lazy or entitled to make for ourselves. And we drained our economy, on social security, on tax cuts, on foreign goods. We got used to living off our post world war surplus. We got fat and lazy, and that’s fine, but it’s someone else’s turn now.

and maybe that's good? is it really fair to claim it's our right to be the rich ones?