Spend Your Way To Patriotism

It is now the American way to buy what you need and want rather than make something you need or to do something for yourself. Rich Americans (and some less rich Americans) don’t clean their own homes, they don’t shovel their own driveways, they don’t mow their own lawns. Most Americans don’t grow their own food or make their own clothes.

Americans don’t even think for themselves anymore. We have Rush Limbaugh, David Brooks, Maureen Dowd, Arianna Huffington, William Kristol, Thomas L. Friedman, and many more telling us what to think and doing our thinking for us. Susan Jacoby’s excellent Washington Post article The Dumbing Of America details this phenomenon very well.

"The mind of this country, taught to aim at low objects, eats upon itself." Ralph Waldo Emerson offered that observation in 1837, but his words echo with painful prescience in today's very different United States. Americans are in serious intellectual trouble -- in danger of losing our hard-won cultural capital to a virulent mixture of anti-intellectualism, anti-rationalism and low expectations.

What we do know how to do, and we are very good at it, is to spend lots of money and amass a huge amount of debt. Now, I happen to think this is a very bad thing to do and that it is the main reason for the economic problems we are now having. Of course our wise leaders, George W. Bush and the members of Congress, think the solution to these economic maladies is more spending and more debt. Some even call spending patriotic. Elizabeth Alexis ponders this solution in her article entitled Tax rebate plan: Good idea?

If we were merely dealing with the aftermath of a housing bubble, it might not be such a big deal. But housing is just one part of the story.

The dramatic rise in home prices and financial market “innovations” have masked over substantial economic problems. A frightening number of American families are spending more money than they earn. This underwater group includes a lot of boomers who should be socking it away for retirement. If families had to publish financial statements like companies do, many would be in the red.

Part of this is a spending problem. The economic statistics for consumption are almost unbelievable. There has been a 10% swing from saving and investment to spending.

We have made it patriotic to go into debt to buy stuff . Our natural competitive streak also applies to keeping up with our neighbors.

I believe that paying people a decent wage would go a long way towards strengthening our economy. So did Henry Ford: “There is one rule for industrialists and that is: make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.” And from Answers.com:

Ford had been criticized by Wall Street for starting the 40 hour work week and a minimum wage. He proved, however, that paying people more would enable Ford workers to afford the cars they were producing and therefore be good for the economy.

Here is more from Elizabeth Alexis:

Part of the problem is an income problem. We have been transitioning from a manufacturing based economy to a service based economy. This is a trend that started in the 1950s as factories became more efficient and accelerated in the last 10 years with globalization. At this point, the number of workers who make their living in a factory as a percentage of the US work force is almost trivial. Some of this was inevitable and a positive event and some of it is the result of totally laissez-faire industrial policy.

In addition, the balance of power between management and labor has swung far away from the worker. Again, labor flexibility and mobility is a positive but a winner-take-every-little-scrap economy with a diminishing safety net is ultimately not very stable. You need a strong middle class who can save for their future without fear that one medical event will set them back. You need a domestic market that can buy your goods and services without having to take every penny of equity out of their homes. Etc etc.

These are challenging waters to navigate and sensible policy-making has vanished. We appear to be moving away from our problems rather than in the direction of solutions.

Elizabeth Alexis thinks we could do better than “throwing money at the problem”:

The point is that throwing some money at the problem does nothing to solve the real problems at hand. It merely postpones the inevitable. The rebates will just about cover the shortfall in American’s need for cash this summer.

There are many things we could do with $150 billion that would start to address some fundamental issues in this country. Health care, basic research, alternative energy, the profound cycle of poverty in the inner cities, encouraging manufacturing innovations.

There is also a strong possibility that this slowdown will look different from ones in the past. Because the manufacturing jobs lost in the last recession never came back, there won’t be the immediate drop off in jobs we have had in previous recessions.

A huge boon in construction and deficit spending took us out of the last recession. This time construction will be part of the problem and the ability of the government to finance aid package after aid package will be limited. Our best guess is a long slowish period. In this case, the best use of tax dollars would be to start making some longer term investments and hold off on a desperate move like rebate checks. Legislators want to avoid the pain, especially in an election year, but we may need an uncomfortable period to make the hard decisions that will get this country back onto solid economic ground.

However, our “Briber-In-Chief”, our Congress, and the American people would rather try the easy way out of our dilemma, not the best way. Here is Henry Ford once again: “Time and money spent in helping men to do more for themselves is far better than mere giving.”