No one quite knows what is going on.
by Victor Davis Hanson
Interest rates are at rock-bottom levels. But banks are reluctant to lend — both afraid of shaky borrowers and loathe to get tied down with low-interest obligations if inflation roars back. “They” say inflation won’t return, but the people know that it will, since expanding the money supply by two trillion dollars per annum, as interest rates are near zero, does not seem a stable scenario.
Millions of Americans are dutifully paying their under-water mortgages each month, but getting peeved when they hear of all sorts of new programs to ensure others do not. Indeed, the message seems to be that the government cares for the hyper-wealthy or the very poor, while merely talking about the middle class, as it wages war on those who seek to be rich.
No one is getting much of a return on cash in the bank. But most are still paranoid about investing in Wall Street, given the hit that their 401(k)s took last September.
Real estate should be a good investment, but cash is scarce, and no one knows where the property bottom actually is. So those employed with income and capital are more likely paying off debt or hoarding cash for an emergency to come, than buying and hiring.
California property should be a good buy, given dramatic drops in home prices. But with 3500 upper-middle class dissatisfied leaving a week, and 2500 rather poorer arriving, it seems at some point there simply will no longer be an affluent, big-income, big-home, pay-lots-of-taxes upper stratum left.
We should be in a natural cycle of rebound, but it looks instead like what the Democrats used to call a “jobless recovery.” The President has hosted a job summit, and jawboned businesses to expand. But most are terrified of an array of new taxes and regulations, and are instead hunkering down. Caricaturing surgeons and the Chamber of Commerce didn’t help. Talk of new cap-and-trade taxes hurt. So did promises of higher payroll, local, state, and federal tax bites.
We know the federal borrowing (nearly $2 trillion this year) cannot go on much longer. Yet we seem to want to get as much cheap money at 1-2% interest as we can still from the Chinese. The result is that the more the administration and Congress talk of fiscal responsibility, the higher they set the new debt ceilings.
Enjoy It While It Lasts?
There is almost an end-of-the-century/‘after me the deluge’ madness in the Congress. With rock-bottom congressional approval ratings, a President with freefalling polls, and a public angry at almost every piece of proposed legislation — from socialized healthcare to cap-and-trade — Congress’s mood seems to be “let us race to cram through this statist agenda and get it institutionalized before we all get thrown out in 2010.”
We went from Duke Cunningham, Jack Abramoff and “the Culture of Corruption” to Charley Rangel, Chris Dodd, and John Murtha without a blink. What a strange time when we harangue CEO grandees for flying on private jets, while Nancy Pelosi flies to and from San Francisco on a monstrosity.
In short, I am not so worried about the recession, it’s the recovery that terrifies me, given looming energy hikes, inflation and interest sure to rise — overseen by a government intent on redistributing income.
Then There Are Things Overseas . . .
We are in a similar holding pattern of uncertainty abroad. For a year we reached out to the South American Marxists, Ahmadinejad, Putin, Assad, and other unsavory characters. We professed an end to George Bush’s war on terror, and even renamed its protocols.
But so far, it doesn’t seem that any of our enemies reciprocates. Chavez brags of his new nuclear plans and taunts the democratic Colombians.
Putin smiles, but does little to help us with Iran. There is no progress in the Mideast. Only George Bush’s Iraq warfront seems stable.
After the Major Hasan mass murdering, we broke up yet another plot of radical Islamic American terrorists. These latest don’t seem to appreciate Barack Obama’s kinder, gentler war on terror. Why did a terrorist shoot the innocent at Ft. Hood or plot in Pakistan when we promised to close Guantanamo and will try Khalid Sheik Mohammed in New York?
We are in a lull before the storm, as enemies look at each other sideways to see who is going to make the first move — and what our reaction to it will be.
After only 11 months of Barack Obama, nearly half the country polls that it would prefer instead the old bogeyman George Bush. The poor media is equally confused. It has two loyalties: 1) it likes, for social reasons alone, to be liberal; 2) but it also is popularity-driven and has no real independent judgment or core belief.
The result is that it wants to keep promoting Obama, but not if his popularity sinks to 40%. Then it too will pile on, and we will see all sorts of ‘insightful’ analyses proclaiming that this pundit or that reporter saw these Obama flaws “all along.”
Obama, the media, and the public all remind me of Old Stony Phiz in Hawthorne’s short story “The Great Stone Face” — the supposed prophet who once again like others disappoints those who want easy salvation in someone exotic and glib rather than in their own values.
When the Medicine Was Worse Than the Disease
Whom to trust? The public is angry at big finance on Wall Street, whose greed and recklessness helped to cause the panic that tore holes through retirement accounts. It is angrier at a big spending, big regulating government that started the mess with its warping of Fannie Mae and Freddie Mac. (It is as if we asked a heroin dealer to help wean an addict off his habit.) The public was angry with Bush, and is becoming even angrier, more quickly with Obama.
The people wanted tight-fisted sobriety and smaller government as antidotes to Bush’s deficits and new entitlement programs — and got instead with Obama even more reckless spending, mega-deficits, and bigger, more inefficient government. They wanted a more articulate explanation of American foreign policy, and instead got it turned upside down.
The Decline Mantra
Decline has always seemed a psychological state. Rome had as much territory and as many people in AD 450 as it did in 30 BC. What was different was that millions no longer followed Roman protocol or felt themselves to be Roman — a fragmentation brought on a by a corrupt governing elite, and a sense that Latin, habeas corpus, transparent courts and taxation were to be no longer part and parcel of being a civis Romanus.
Too many were outside the system and too few inside to make up for them. In our age, the problem with tax-cheating, shooting up the neighborhood and then rushing to the emergency room for free healthcare for injured gang-bangers, moonlighting while on disability, getting an insider private tax exemption from Congress, revolving-door influence peddling, rigging something like AIG or Countrywide, and perpetuating voting fraud — is, well, that the equilibrium of the society requires millions of others in recompense to go to work, pay all their taxes on time, buy health insurance, work when sick, participate fairly in elections, and not game the system for a free anything. So decline begins when the former outnumber the latter, as they did in Rome by the late 5th century, and as we are starting to see in Europe and the United States today.
Spiraling public debt, a sinking currency, and a bankrupt popular culture are simply symptoms when the body politic no longer adheres to a time-honored protocol of proven success. Ask ourselves — are we more hard-working, more lawful, more prudent, more independent — or less — than our grandparents? Can we say that we have on average lived more upright lives, both more productive and moral, than our grandparents? If in 50% of the cases, the answer is no, then we can begin to see the problem.
When schools cannot guarantee that their graduates are literate, know basic math, and have some sense of being American — the rights and responsibilities of citizenship — then those, rich or poor, who seek government assistance and violate the protocols will grow, and those able to pay sufficient taxes for them and who follow the letter of the law will shrink.
I haven’t a clue who will win in 2012. But millions will never again vote for a Chicago politician and his coterie of insiders like Emanuel, Axlerod, Jarrett, etc. They will value experience at governance, not gimmicky hopey/changey bromides. The voters want a Truman/Eisenhower sort of figure to talk no-nonsense, be tough with our enemies, supportive of our allies, and one who will pay down not expand the national debt.
Some Great-Stone-Face figure is out there, but we haven’t seen him/her quite yet. A lot of Old Stony Phizzes though.
©2009 Victor Davis Hanson