Beinstein column: Finding hope amid the fiscal insanity
Household debt (mortgage, student, auto and credit card debt) has now eclipsed 2008 levels. Our national debt recently hit a record $22 trillion. Corporate debt is also at record levels, eclipsing $9 trillion.
And neither political party seems prepared to really address just how broke we are.
Romanticizing the Great Depression is a fool’s errand. But it did teach that generation the value of a dollar. Now, we don’t seem to appreciate things as much.
This, of course, became official when President Richard Nixon went off the gold standard in 1971. But this sentiment of loose money only seems to further permeate our society.
The Federal Reserve hikes interest rates 25 basis points, and the markets throw a tantrum. Except for a few fringe thinkers like Peter Thiel, questioning the country’s second-greatest source of debt, student loans, causes tremendous hostility in the mainstream.
So what exactly are we supposed to do about this debt? A high savings rate can negate government debt — look at Japan. And a government surplus can help alleviate a negative savings rate. But, when both the individual and the government are at record levels of indebtedness, the whole house, by definition, will have to come down. The GDP growth we have now is mostly attributable to consumer spending and government spending; it simply cannot sustain itself. And, at roughly 3 percent, our growth rate is pretty low compared to other times.
If the government repeats the actions of 2008 and loads up the Fed’s balance sheet with more overpriced assets, the U.S. dollar won’t draw any confidence in international markets. That, in turn would only cause interest rates to go up that much more. And imports would become dramatically more expensive, causing tremendous grief every time we go to Walmart or Target.
At one point, we must live with less. We can’t keep stealing from the next generation. This will mean less expense on Medicare and Medicaid, Social Security, defense and other discretionary spending. We, in short, have to tap into that American spirit of resourcefulness.
All of this sounds terrible, but it’s absolutely true. In school, we always liked the teacher who gave us A’s for little work and we hated the teacher who loaded us up on homework and gave us tough marks. But as we grow older, our feelings change.
It’s the teacher who actually cared about us that we admire, and not the slacker teacher who seems to have only stolen from the taxpayer.
The same is true of federal budgets and spending. We need a teacher who will get us in line, not one who buys us off with cheap debt and empty promises. Over the long haul, of course, people should remain terribly optimistic.
The breakthroughs in artificial intelligence, 3-D printing and energy will dramatically lower our cost of housing, transportation, utilities, food, health and all the rest. If given the right framework to work within, we could really replicate the extraordinary growth we had after the Civil War. It was a time in which we had record patent applications, jaw-dropping breakthroughs in oil, steel and car production, and great transportation gains in railroads and canals.
We can make this life and our work really exciting again; it’s within our grasp. And as we continue to try to achieve full racial and gender equality, we can tap into the potential of all our citizens, unlike in the late 19th century.
The blessings of technological improvement can be shared with the world. If government, NGOs, and the private sector all collaborate, these scientific gains can help abolish extreme poverty and make a real dent in general poverty in the developing world. Dirty water, huts, the lack of sanitation and toilets — all of these defining features of the Third World can go away.
Hope is on the way, but we must be patient. We’re Americans, and sadly it often takes a crisis to solve the big problems. But when we do, there’s nothing we can’t accomplish. Let’s pray for the best.
Alex Beinstein is a millennial who grew up in Aspen, lived in Carbondale for a while and now writes from Washington, D.C. His column appears monthly in the Post Independent.