Atlantis Alumni

Sunday, September 28, 2008

Let me paint you a picture.

The Wall Street Corporate Welfare Package is almost ready to go. It will feed the American addiction for fast fixes to complex problems.

Remember, we don't even know the right questions yet: how much will it really cost, where did the Wall Street collapse come from and how will it really effect normal, middle and low income people?

So let me paint you a picture.

The American Economy is like a table. It gets held up by quite a few legs and is fairly resilient and strong. Think of a hardwood table made of Amish barnwood from Pennsylvania. They are built incredibly well and last hundreds of years.

We have this piece of legislation to save Main Street/Wall Street that seems to be getting "bipartisan" support. Thus John McCain and Joe Lieberman should be having epileptic fits right in the middle of congress. Bipartisan is a new, favorite word for politicians. I have to think it means compromise for both political parties with a great outcome for politicians but a huge loss for normal citizens like you and I.

The American Economy has many legs however 4 major support legs are actually on fire. The top of the economy is us. Taxpayers.

The first leg is the most obvious, Wall Street. I don't buy the whole concept put forth by pundits that Wall Street was innocently participating in a pyramid scheme that was bound to collapse. I read some of the mortgages that were percolating to my mailbox starting 5 years ago. They were shady, they continue to be shady and it was obvious to me than that the model wasn't sustainable. Financial companies could not keep issuing these mortgages without an eventual collapse.

I have the benefit of having worked with large financial companies for the last 13 years and I can absolutely tell you nothing happens by accident or without full knowledge and disclosure within the organizations.

Don't be fooled; attempting a quick fix for this problem won't fix our entire economy, it may not even fix this problem. The United States needs to define the problem first and consult some intelligent people before we solve it. There's no quick fix, no easy answer. $700 billion is a straight piss away of cash.

The second leg of the table that is burning is the cost of fuel. The Republican controlled government (plus Joe Lieberman) ushered in higher petrol costs and Americans are getting comfortable with the $3 to $4 prices. We were shocked into this. The problem is the doubling of petrol costs trickles into heating oil, natural gas. You name it. Cost of food, clothing, every consumer good essentially needs to rise to offset the cost of increased manufacturing and distribution cost. Oh yes, the cost of raw goods, like say, plastics also goes through the roof. $700 billion for Wall Street will have zero impact on the cost of gas.

By the way, the second burning leg gets more expensive as we delay looking for real alternatives to be used nationwide INSTEAD of gasoline. Drilling offshore is an expensive short term solution that won't solve our energy dependency needs. Nor does anyone want spent fuel from a reactor sitting in their backyard (oh ya, nuke power plants can get kind of messy and still take some time and money to build). This is a national security issue becaue our power grid is so critical and so is our national supply chain. Maybe we should be looking at some other alternatives like modernizing railroads.

The third leg on fire is the fleeing of jobs across borders. This might be obvious to some, especially those that have trained their replacements in another country. Welcome to maximin theory folks (maximizing profits and minimizing costs). When your job flees to South America, Eastern Europe or Asia, let me know if that business school training still makes so much sense and feels soooo good. I doubt it.

Jobs are critical at all levels of our society. They give people a sense of purpose and there is honor in labor well done. The revenue generated by people at work is key to our economic ecosystem. When our neighbor is out of work it hurts everyone. For every dollar your neighbor spends it keeps a couple of other people in the community employed and producing. Forget growth, we can't survive without a high employment rate.

The fourth leg that is almost burnt to a cinder is the war. Regardless of whether it was right or wrong, we can't afford it anymore. The government has gone from a substantial surplus to a substantial debt. To keep pursuing it fiscally is insane. Let me spell it out:

We don't have enough money to continue the war.

We just don't have it. And McCain is very wrong about cutting further into the government budget. As was said in the debates, if earmarks are $18 billion and represent government waste (which is not necessarily true by the way) and we assume another $5 billion to $10 billion can be cut, that still pales in comparison to the cost of the war. The war is nearing a $trillion$.

It doesn't take an accounting genius to see that we have a huge fiscal crisis at home and we're spending like crazy in multiple wars simulataneously. By the way, most war historians will tell you that opening multiple wars on different fronts is a "bad" idea. Historically, how many wars have been won that were fought with no allies on multiple fronts? Folks, as much as anything else; it's a resource issue. We don't have the resources to do this. And by the way, it also has the added benefit of being wrong.

We also have a nice fire under the tabletop of the US Economic Table. It's called health insurance. It's so important that it isn't really even a leg, it's part of our base in the economy. Without delivng too much into a discussion that is already well under way; our healthcare system is severely out of whack for everyone but the most wealthy. Healthcare is largely un-affordable for most Americans. No news there. But with the other 4 fires we have in our economy, how long will it be before people that get sick or need major medical help won't be able to pay? How long before the healthcare industry is looking at a major bailout?

Oh yes, and there is the nasty little turd someone left under our table that has come to be known as the auto industry. Years of willfull ignorance on the part of overpaid Detroit auto executives just took a dump under my burning table. It will take roughly $25 billion to get the stain out of my carpet along with the damage done to the table from the fire. And by the way, that $25 billion clean up bill comes with no guarantee whatsoever that jobs for Americans will get saved. Fancy that.

Ok, so we have a pretty large table with four of the main support legs on fire and smoldering at the base. Perhaps this isn't the time to do a quick fix? Maybe we want our government to step back and look at this, maybe do a quick study on the problem with some of the great minds we have in this country? Maybe we need a plan, not a fix.

I'd like to have as much of the fire out as possible before I put anything else on this table.

One thing is for certain, there aren't any easy answers and our table is still on fire.


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