I don’t write about politics and economic policy on this blog any more. It used to be my main subject, but a few years ago I decided to leave all that ranting behind me.
But I read something this morning that I felt I had to share. Not to score any political points for one side or the other–I truly don’t care about that. But rather to illustrate how our societal obsession with overconsumption seems to have drowned out reason at all levels of society.
In 2008 economists finally acknowledged that we were in a recession. During the 08-09 period U.S. GDP shrank by over $200 billion. As we all know, this triggered an extraordinary set of political and fiscal moves (by both parties and both administrations) including massive deficit spending in amounts previously unimaginable, as well as unprecedented “quantative easing,” the Fed’s euphemism for the printing of new money. The panicked policy makers flooded the American economy with trillions of borrowed and newly printed dollars over the years that followed. Even now the federal government is still spending over a trillion dollars a year more than it takes in, making the eye-popping deficits of the Bush years seem almost insignificant.
The result of all this new debt and depreciated dollars? We have attained 2-3% growth in GDP since 2009, causing economists and policy makers to declare victory. The recession is over, they say. The multi-trillion dollar helicopter drop worked.
But did it really? The increase in GDP since the turnaround has been cumulatively a shade under $800 billion. But to achieve that gain, we’ve saddled ourselves with an incredible $4.2 trillion in new debt. As I read recently, essentially we borrowed 5 times more than we grew, then claimed victory.
Imagine running up an additional $50,000 in credit card debt over a few years during which your income increased $10,000. Is that progress?
Conjuring up illusions of economic growth with money borrowed (stolen?) from future generations solves nothing. Avoiding a hangover by trying to stay drunk accomplishes nothing in the end but a worse hangover.
We are the richest nation, by far, in the history of the world. Yet we seem unable to live within our means. Prudence, frugality and thrift aren’t even considered virtues any more. Our virtues are growth, consumption and aquisition. A measure of success is how many credit cards we have.
What ails us is too much consumption and too much debt. We cannot cure that ailment by increasing consumption and debt.
What we desperately need to do is start living within our means. Unless we do, a hard rain’s gonna fall.