Wednesday, August 10, 2011

Fixing Our Financial Mess Will Be Simple But Not Easy

Our nation's debt and ongoing financial deficits are not difficult to understand and would not be difficult to solve, assuming the political leadership is prepared to act in accordance with their duties and responsibilities as servants of the people.

The Preamble to the Constitution reads in its entirety as follows:

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

Although the Preamble does not assign any powers to the national government, it reminds us why the Constitution was adopted by the Founding Fathers. Its words are worth remembering.

The Preamble is an aspirational statement of purpose about the importance of promoting the "general Welfare" of our citizens. The American people have consistently stepped up to reality, and our citizens have invariably made good choices when deciding between competing realistic alternatives with respect to improving that reality. We always have moved forward together, and we will do so again this time.

So today we'll discuss why, unlike citizens in most societies, we'll be able to decide our own future course. That's why I'm always optimistic about America.

As highlighted in the Preamble, We the People must work hard to deliver the "Blessings of Liberty to ourselves and our Posterity". And we also must strive continuously to achieve "Justice" and provide for the "common defence" through our Constitutional system of self government. To reiterate, the future is in our hands.

Let's use a brief comparison of two different types of governments to better serve to illustrate this critical self governance point. To do so we'll briefly compare our form of governance to that commonly prevailing in Europe. {For now we'll leave aside a comparison of totalitarian systems like Russia and China.}

We have a sovereign government known as the U.S.A., and it has 50 states such as Georgia, Illinois, Texas, New York, California and so forth. In contrast, Europe has no such single sovereign government. Its sovereign governments are in individual countries like France, Germany, Spain, Italy and so forth. There is no United States of Europe, either in form or substance.

Yet they try to act as if they were one government for financial purposes. Suffice it to say that even the adoption of a single currency such as the Euro can't and won't offset the lack of a single decision making political entity.

In sum, intergovernmental institutions simply aren't effective politically. The power resides in the various sovereign states. For additional evidence of the powerlessness of multi-national institutions, we need look no farther than the League of Nations, the United Nations or NATO. They each are examples of ineffective multi-national institutions.

As a result, the various sovereign states of Europe function similar to the way the U.S. did more than 200 years ago. Under the Articles of Confederation from 1781 until the subsequent adoption and ratification of the American Constitution in 1788, each of the 13 states was a de facto sovereign. As is the case in Europe today (Europe's Less Than Perfect Union), our country under the Articles of Confederation was initially incapable of effectively governing itself. That inability to govern was precisely why the Constitution was ratified in 1788. It continues as our form of government today.

To recap, today Europe consists of many sovereigns with no single governing body. We, on the other hand, have a united form of Constitutional government which consists of two distinct parts, principally 50 states and a single national government.

Our Constitution specifies where the various individual and institutional responsibilities and powers reside. Its preamble begins with perhaps the three most powerful words in the English language - "We the People" -, and proceeds to set forth the manner in which we'll govern ourselves through periodically elected and appointed representatives. The Constitution is the supreme law of the land, and it separates the powers of the national government into three distinct parts (legislative, executive and judicial).

We also have a form of limited government, especially at the national level. In that vein, the Tenth Amendment to the Constitution reserves to each of the individual states and the people the powers not explicitly granted to the national government. It reads in its entirety: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Europe has no such written governing document. Neither does it have a single political sovereignty that can make laws for its several countries nor for the European continent as a whole.

To bring all this governance stuff up to date and how it affects our current worldwide financial mess, let's first consider a sobering fact. Compared to America, Europe's financial mess is much bigger than ours today, and their embrace of big government has moved them much farther down the road to socialism, too. But let's set aside Europe for now and instead focus on our financial and governance problems and how we will proceed to deal with them effectively.

How will we solve our financial problems, and how easily can they be solved?

Let's start with one inescapable fact. What is simple is not always easy. That said, we simply need to muster the political will to solve our own problems, unlike Europe as a whole. There is no doubt that we have the capability to write our own script for the future if we have the will to face reality.

My bet is that the events of the past several weeks have shone a needed spotlight on the debt and deficits which will lead to an effective resolution of the American financial mess (A Downgrade Awakening). We won't solve it immediately, and we won't solve it quickly. In addition, it will be a loud and contentious debate, but it will happen in real time and in a manner that we the people will be able to register our opinions and raise our voices, too. And when the debate is over and the issue has been addressed comprehensively, it will have been resolved with a workable plan that will accomplish the people's objectives. Then our path forward will be both clear and appropriate. That's because the people will have spoken.

As a result, when compared to European and other sovereign states, we have the much easier task ahead of us. We decide what to do, and then we do it. On our easier side of the street, we also have a more prosperous society and smaller government, too. When compared to Europe, our job is actually fairly straightforward and simple.

Now that we know our current American economic growth, debt and deficits financial mess is ours to solve, it won't be all that hard to remedy. But we do need to fix it before it breaks.

Thanks. Bob.

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