Let's get right to the biggest issue facing us today. And it will be there facing us again tomorrow and for a very long time to come as well. It's a biggie, for sure, but it's one we need to address and solve in a straightforward and We the People manner.
How to create economic sustainable growth is the single biggest issue facing America today ...... and for that matter, the rest of the world as well.
The plain truth is, as I see it, that there are no easy answers to the growth problem. There will be no quick fix for what ails us, regardless of who wins the presidential contest in November.
It took us a long time to reach this awful three part condition of (1) enormous indebtedness, (2) a growing preference for big government solutions over free markets and (3) quantifying the unfunded entitlement welfare promises that have been made to the "middle class."
As a result of 1-2-3 above, we won't get out of this mess without fundamentally and radically changing our ways, both as a nation and as individual Americans. As Pogo said, it's a cultural We the People problem that needs our collective attention.
So while U.S. politicians are too busy seeking election this year to tell the truth, we will try to fill that void herein. All we're trying to do is contribute in some small way to uncovering and telling the truth about our fundamental problems and the decisions we're facing concerning our nation's future.
In the end, We the People's freedom is what's at stake, and a strong and vibrant free market economy is what has long provided the basic economic support system for that freedom.
The 2012 U.S. Presidential Election ... What It's All About
It's a Single-Issue Election is subtitled 'Barack Obama could not be more right: Economic growth is the "defining issue" of this campaign:'
"The terms on which the 2012 U.S. election will be contested have been set, appropriately by the incumbent president speaking recently at a community college in Ohio. Mr. President, the microphone is yours:
"Yes, foreign policy matters. Social issues matter. But more than anything else, this election presents a choice between two fundamentally different visions of how to create strong, sustained growth."...
Right now, with growth stuck below 2%, we're toast. With strong growth at 3% or better, there will be jobs. With long-term growth, Medicare, debt and the rest of the horribles that keep worrywarts awake at night are solvable. With strong growth, the U.S. will not have to cede world leadership prematurely to whichever Chinese functionary slugs his way to the top of their heap. With strong growth, your college graduate can move out of the house. With normal American growth, Europe may be irrelevant but it won't die, and a U.S. president won't look oddly small talking to the Vladimir Putins of the world.
Mr. Obama was exactly right in Cleveland when he said economic growth "is the defining issue of our time," that his and his opponents' views on growth are fundamentally different and "this election is your chance to break that stalemate." . . .
Put differently, this is a substance election. It's not about whether one "likes" Barack Obama or can't warm to Mitt Romney. Voters have to pick two competing growth models, which means paying attention to what the candidates are saying about economic growth.
It's true the Obama Cleveland speech had many familiar rhetorical distortions. One of the most revealing, though, is that "Governor Romney and his allies in Congress believe deeply in the theory that . . . the best way to grow the economy is from the top down."
Whatever that may mean, more interesting is the Obama counter-theory found here, what he calls "our North Star—an economy that's built not from the top down, but from a growing middle class."
There is no theory anywhere in non-Marxist economics that says growth's primary engine is a social class. A middle class is the result of growth, not its cause. Barack Obama not only believes in class-based growth but has built his whole growth strategy around it.
One word appears nowhere in the 53-minute Obama speech on economic growth: "capital." Human, financial, whatever. Capital dare not speak its name.
Most revealing is that the phrases "my plan" and "I have a plan" appear 13 times. A central role for planning often appears in emerging, underdeveloped economies, not in an advanced economy like ours in which the discovery and diffusion of productive new ideas is spontaneous, rapid and unpredictable. . . .
Mr. Romney has been giving fine speeches on "the liberating power of the free enterprise system." One hopes the Romney camp doesn't think everyone knows what that means. These are difficult and confusing economic times, and Team Romney should not underestimate the appeal of Mr. Obama's confused economic ideas if drilled daily into the electorate's soft clay.
If Mr. Romney hopes to win what Barack Obama is rightly calling a defining growth election, the governor will have to refute in detail the president's notions of how growth happens and then explain to voters the real-economy alternative.
Mitt Romney says, "I've done it." To win, he'll have to tell voters what "it" means."
What "it" Means to Me ... Obama's Wrong Keynesian Approach
A nation's economic growth results from two things: (1) more of its people producing goods and services; and (2) those same people being able to produce more and better goods and services in less time.
The private sector worker does the "producing." Not the "non-producing" people who are already retired, enrolled in school and not yet employed, unemployed or working in the public sector.
Thus, wealth creating goods and services are not produced by government workers but rather by those competing in the private sector. Government merely takes from the producers and spends or redistributes that which it takes to the non-producers.
Hence, we start our discussion of economic growth with private sector output. The government work force doesn't create economic output which can be traded for other economic output produced by others.
What is now commonly referred to as Keynesianism, aka stimulating aggregate consumer demand in lieu of supply, has dominated the recessionary policies of American and European progressives for many decades. Keynesianism simply means that demand creation by government spending will in turn lead to increases in supply or output, which in turn will lead to more demand and thereby grow the economy out of the recession. Sounds good but it doesn't work.
The Keynesian problem of today is the accumulated debt that's developed from stimulating all this demand over many decades. Politicians of all stripes have used Keynesianism as an excuse to "stimulate" economies during recessions and pile new debt on top of old debt. As economies recovered, the new added debt was never repaid. And when the next recession occurred, more demand stimulus led to more debt. And so on.
Now the world's accumulated debt is too large to ignore and ongoing demand driven programs such as President Obama's current proposal to hire more public school teachers with borrowed money have proved to be ineffective, to say the least. Borrowing to spend our way out of recession has clearly run its course and proved to be a failure, but the debt remains. And it's a very large pile now.
When the most recent large U.S. government $800 billion stimulus program was enacted in 2009, it was "sold" to We the People as the way to keep unemployment from reaching 8%. Well, we quickly surpassed the 8% level and beyond. Today it's 8.2% and really much higher if the millions of discouraged workers are counted.
In any event, we'll be lucky if the official rate of unemployment falls below 8% by the end of this election year. And 2013 won't see much improvement either.
Nevertheless, the President wants to do more of the same, create more debt and hire more public sector employees in a Keynesian effort to further "stimulate" the U.S. economy. Other than increase our debt load and perhaps win some votes for the Democrats, that's not going to work again this time either. But that's his way to "save" the middle class and the rest of us, too.
So the President has been doing the wrong thing and wants to continue to do that wrong thing. In my view, that's very much in line with the popular definition of insanity ---doing the same thing over and over and expecting a different result.
Romney and "it"... Romney's Being Much Too Cautious about Telling Us Like It Is
Our economic and related problems are huge. We are in a tremendously deep financial hole consisting of more than $15 trillions of dollars in recognized U.S. debt obligations. But that's not all. Not by a long shot.
To top it off, we have even bigger problems than that acknowledged indebtedness of $15 trillion. The U.S. cities, states and national government as well have an "underfunded indebtedness" problem which resulted from too large of a public sector and too many unaffordable entitlement promises made by our "public servants" to public sector employees on behalf of current as well as future taxpayers.
In addition, as individuals we also have built and bought way too much "buildings and the things that go in them" with the money we've borrowed to sustain our consumer demand driven economy.
What You Probably Won't Hear From Romney
To the rest of the world, the U.S. is simply the economic engine that must. If we don't get going, nobody else will either. Why's that, you ask?
Well, we've long purchased what the rest of the world exported, including Chinese products, German machinery, OPEC and Russian oil, and other commodities from other producers.
Approximately 70% of U.S. economic activity has come from consumer demand, and that U.S. consumer demand has been driven in large part with borrowed money. That's why we're the engine that must.
But now we can't. Today we've arrived at payback time or, at the very least, U.S. debt stabilization time. That payback or debt stabilization will of necessity slow even further the economies of other countries, and perhaps continue to drive down worldwide asset prices as well.
In my opinion, the possibility of deflation is much more worrisome than is inflation. But let's set that topic aside for now.
What Else You May Not Hear From Romney
At the same time, we have too few labor force participants as people are dropping out of the work force earlier and entering the work force later. And I'm referring only to the private sector. Without an increase in the private sector's labor force participation rate, we simply won't be able to afford to pay for all the promises we've made.
Accordingly, as a society we need to find a way to entice some very qualified and competent public sector workers to join the private sector work force. Then we need to replace those public sector workers with volunteers, retirees, new work force entrants or some combination thereof.
If the private sector doesn't produce enough growth, there will be no money to pay the public sector employees' salaries and retirement benefits. Or other necessary public services either.
Summing Up
What "it" Means to Me ... Romney's Too Cautious
In other words, "it" to me means that we need an all out effort and recognition by both We the People and our fearless "public servants" that the private sector of the economy has to find a way to grow meaningfully by restructuring. In the private sector, we'll require more qualified and competent people, younger and well educated people, more innovative people and more risk taking people. We can get many of those workers by loosening immigration, but it would be nice to get more capable and youthful American workers into the private sector act as well.
To get us from here to there will require a total revamping of both U.S. priorities and incentives to encourage greater private sector labor force participation and risk taking.
At the same time, we need to understand that the importance of the public sector doesn't necessarily equate to an unaffordably expensive public sector. The public sector simply has to shrink its cost base radically.
Thus, public sector voluntarism needs to become pervasive unless, of course, we want as a society to double or triple our taxes to pay for the current size of the public employee salaries and already promised but underfunded retirement benefits.
And if we choose to continue down the unsustainable track we're on, we all need to understand and accept the straightforward fact that this big government approach will result in even weaker future economic growth as taxes to pay public sector workers and their benefits will remove more money and resources from the private sector of the economy. To see that future, all we need to do is look at Greece, Spain, Italy, Ireland, Portugal and others, including England.
Finally
The U.S. economy is struggling to keep its head above water at a growth rate of ~2%.
And we haven't begun to seriously address the unfunded obligations amounting to approximately another $100 trillion.
But not facing up to what needs to be done will only make our problems even worse.
We need some really serious straight talk ... among ourselves ... and among our city, county, state and national U.S. politicians ... as well as among the so-called leaders of the rest of the free world, too.
The can kicking period of the past several decades, at least in my view, is over.
So together let's get on with facing today's ugly reality, and then setting about creating a much better reality for tomorrow.
We owe that to each other and to our kids and grandkids.
Thanks. Bob.
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