Tuesday, February 10, 2009

The economy is our fault, stupid

I'm going to set partisanship aside for a moment as I try to consider and reconcile some of what I heard last night in Pres. Obama's speech and the various reactions to it. I believe some important points are getting lost in the hype: The economic mess we have on our hands is actually not the result of "Republican" or "Democrat" policies exclusively. Is it the result of a combination of things:

- trade deficits that have fed our national deficit;

- the seemingly insatiable appetite for people to want to appear more prosperous than they are, leading to them spending more than they can afford on a lifestyle they haven't earned;

- willingness (and in some cases, encouragement) by lenders to work out programs that allowed consumers to borrow against their homes at 125% of the home's value to "pay off" their unsecured debt, which only allowed them to build up more debt;

- lack of education and responsibility on the part of first-time homebuyers about all the costs involved in owning a home. Saying that you can buy for less than rent isn't exactly true after you factor in insurance, maintenance, taxes, utilities and various other expenses that go with owning a home. I think most first-time homebuyers were utterly unprepared for this, especially if they did not come from a family that owned their own home;

-protracted intransigience on the part of labor unions unwilling to recognize that the world is a very different place now, and their focus on extracting as much as they can from the companies for which their members work is not a good strategy for long term economic health. Instead, they should be taking a cue from the entrepreneurial sector and looking to workers in other countries (who may actually need their services much more) to imcrease their membership - and their funding sources. Grow and diversify.

The single biggest cause of this recession, however, is us. We can blame regulators, financiers, Congress, political parties, advertising executives and everybody else until we're blue in the face, but what we really need to do is look in the mirror. We, the consumers, let our own desires to look more prosperous, feel better about ourselves, 'one up' our neighbors, or whatever our motivations, get in the way of making sound spending decisions based on the reality of our ability to pay rather than what we could get away with or push off down the road. All of the programs that we are now criticizing Wall Street for creating and government for not regulating only exist because there was enough consumer demand for those programs to make them profitable. That's how the free market system works. If we weren't clamoring for free money, no money down programs, no payments for a year programs and the like - they wouldn't exist. Our own greed got us into this mess.

Wall Street didn't drive us - we drove it. To abdicate that responsibility is the height of immaturity and denial on our parts. We have to be accountable. We have to accept the notion that we can't have everything we want, exactly when we want it, just because some marketing firm says "You're worth it". We have bought into the false idea that we "deserve" things - because we work hard one day, because we watch what we eat during the week, because we live stessful lives. The fact is - we only deserve what we legitimately earn, after we've earned it.

So now we have Communist nations holding more than 25% of our debt, our domestic real estate is devalued to the point of attracting the only foreign investors who have any money right now - who happen to be part of a culture that wants to see ours completely dismantled - and we are led by a President and a Congress who believe that appeasement of enemy dictators and federal government spending are the best ways to fix things. I would be far less worried about Barack Obama if Nancy Pelosi and Hary Reid were not running Congress. But they are, and we are headed for an absolute train wreck because of it.

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