Fareed Zakaria, one of the best observers of the global landscape, suggests that if we curb some of our bad borrowing and spending habits we may emerge better and stronger from the current fiscal crisis:
If we wanted a bigger house, a better TV or a faster car, and we didn’t actually have the money to pay for it, no problem. We put it on a credit card, took out a massive mortgage and financed our fantasies. As the fantasies grew, so did household debt, from $680 billion in 1974 to $14 trillion today. The total has doubled in just the past seven years.
I’m not as optimistic as Zakaria that after the current crisis ends we’ll return to the what appeared to be a vibrant economy because of the other issue he discusses – failing to address the herd of elephants in our finanacial room – a 10 Trillion and growing budget deficit with an annual deficit that continues to skyrocket after the disasterous spending recklessness of *every administration* since Reagan with the possible exception of Bill Clinton (when we did not borrow nearly as much as we had been, I think largely thanks to the huge increasee in Tax revenues that came from the positive investment climate.)
My take is that our economy has been challenged for some time, with prosperity manufactured to some extent by simply pushing expenses forward to our kids. McCain’s call for a balanced budget in four years is admirable in this respect, and it is unfortunate that so few truly think that is realistic. It is actually realistic but would require massive cuts in military spending- the sacred cow of fake conservatives who are (correctly) willing to slash entitlements but (stupidly) think that military money is spent wisely (news alert fake conservatives – it is NOT spent wisely and this is *totally* well documented). Not only have we been living on debt as individuals, but we’ve been living on debt as a society. This is not sustainable for the long term, and we may be seeing the early signs of the massive challenge we’ll face if the world starts to lose faith in the US economy.
That won’t happen anytime soon, but unless we bring debt and spending into focus both individually and collectively it’s going to happen eventually. It’s easy to predict we won’t change our habits all that dramatically, but hopefully enough for a soft landing as we come down from our lofty heights as the world’s key economic and power player.