Passing the Burden Along

Several years ago there was a trend in American business where companies were bought out, hacked up, and resold. The Leveraged Buy Out (LBO) affected thousands of companies, and I dare say in a less than positive fashion. Additionally, I worked for a company that bought and sold itself several times by first going public, then returning to private status, and doing the cycle more than once. The net effect of these maneuvers was to run up incredible debt in these companies without having anything tangible to show for it. Debt that is making them do things that they would rather not do, like have cascading waves of downsizings to get through the “recession” while sacrificing their efforts on future products.

Why bring this up? Because I am getting tired of reading posts online that are simply crucifying the new administration in Washington for the economic policies they are putting in place. They have been in office just over 100 days! They really didn’t do much to create the mess they are trying to fix! The last two months of the Bush administration were spent watching the economic flames get bigger and bigger while they tried to figure out how to avoid the world finding out about “our” torture policies. And there were warning signs that many ignored.

The current mess was not created in a day, but sure needs to be fixed quickly. There are many who feel that we should just let the banks and automakers go under and move on. That is a strategy, I suppose, but where will the unemployment end? I believe that if unemployment soars to 25% we will be rooted to this spot in our economic history for at least a decade, and an entire generation will be lost. Think this is crazy? Check out what happened in Great Britain a generation ago! They have an entire generation of folks who couldn’t find work and it did not help that country prosper. It was painful.

Unlike many of the programs our federal government has undertaken, getting the economy back on its feet quickly is one of the primary services the federal government SHOULD undertake. Its function is to provide the infrastructure and economic base for business to flourish. Many of our entitlements probably should have never been implemented in the first place, but, in my opinion, had to be because greed got in the way. The greed of the American populace to have more and more. The greed of business to sell more and more. The greed of those same businesses to be more and more profitable, yet give less and less to those who did the work to generate the profits. This greed is why unions were needed in the first place, to stem the tide of the mass exploitation of the American worker.

And the mortgage/credit crisis of 2008 was inevitable. Home prices had to go up quickly to support the risks being taken by the gang on Wall Street. The house of cards had to fall because incomes were not going up as quickly, unless, of course, you were an executive or actually worked on Wall Street! Those incomes were soaring!!! Did they think that the rest of us were enjoying the same spoils of American prosperity? In fact, they knew that we weren’t because they were cooking the books and signing the checks!

In reality, what these clowns have done is a huge LBO of the entire country! They have extracted huge sums of money from the collective bank account and placed it into theirs. And just like the companies that ran up massive debt through the acquisition of absolutely nothing, the country has run up a massive debt through the acquisition of absolutely nothing. AND, just like these companies, the people of the United States are going to have to gradually pay down the debt over MANY years of hard work and focused spending control. The hard work will be done because it’s what Americans have done since we launched our country. Spending control? I do not have high hopes; think about who controls spending in Washington. The saving grace may be that we are going to be so far in debt that other countries will not loan us anymore. We can only hope! Ironic, but this is what happens when you or I get too far in debt and cannot pay our bills. What will happen when the Chinese decide to foreclose on America???

In getting back to my original distain for those railing against the new administration, I have a question: What are we supposed to do now? Where are their solutions? If the economy is in a tailspin with unemployment at 10-12%, can you imagine how much tax revenue we could generate at 25%? And how many goods would be flying off of the shelves at Wal-Mart? And how many retirement accounts would support retirement then? And how many more homes would be in foreclosure? And how many of those homes would be in the neighborhoods of those who instigated this mess? Far too few!!! But they are still raking in the bucks. They do not need to shop at Wal-Mart. They are keeping Tiffany’s and Bloomingdale’s in business! And their kids will have all of their bonus money to support their lifestyle and their families. I thought that the American dream was that we all could have this. I didn’t realize that I had to sell my soul to get this benefit.

And finally, I am seriously praying for the next two generations, and I recommend that you do too. We are saddling them with a tremendous burden, and they are going to need “real” help to get through the pile of bills we are leaving for them. One burden that our generation needs to consider taking on is improving the education system. Why? Because a wise man named Einstein once waxed that you cannot solve tomorrow’s problems using the same thinking that created them. And it looks like the wizards of Wall Street have given us the ultimate proof of his hypothesis!

Until Next Time!
Julius