It’s time for a jubilee

Seems like our world is going to hell in a corona basket.

I remember at the end of 2019 all my friends were saying they were never so glad to see a year end. 2019 was a miserable year. Now, most of us would prefer to be back to 2019. A recession that looks like it will become a depression and COVID-19, which may kill a million or more of us, seems like the beginning of the Armageddon that so many so-called Christians are looking forward to. Perhaps that’s why many of them were cheering Trump’s suggestion that everything go back to normal on Easter Sunday.

On that last point, I was going to make a blog post just on that, but I can’t possibly restate any better what so many others have already said about Trump’s unbelievable narcissism. Trump wants us to die so he can get reelected. The smart ones though are going to take a pass and will keep sheltering in place and obsessively washing hands and surfaces. I know we are. Evolution is not called “survival of the fittest” for nothing. For those happy to place emotion or devotion to an insane leader over rational behavior, well, you’ll be one of hundreds of thousands of candidates for the 2020 Darwin Awards. Clearly you weren’t reading my blog, but don’t say I didn’t warn you.

So rather than restate what so many others have already said, let me talk about something that isn’t being much talked about: the way our economy works appears to be crumbling. What do I mean by that? I mean the way we have been running an economy where the rich continue to get richer, the poor more desperate and in debt, and our government more dysfunctional is ripe. It’s not only not working, it’s not working badly for us. We are ripe for revolutionary changes. This upcoming depression (which it looks likely to be) should make us anxious for another New Deal.

It won’t look quite the same as the New Deal and hopefully any depression will be short lived. But our economy is loaded to the maximum with debt. Pretty much everyone, except the rich, holds it. That’s individuals and corporations, made possible by low interest rates since the Great Recession. The Federal Reserve’s recovery plan is to cut interest rates to zero or even lower, trying to coax us to take on even more debt. That’s because they don’t have any other tools to use. Trying to grow out of a depression based on taking on more debt that we already couldn’t afford doesn’t sound very sound to me. It feels desperate, as if we are desperately trying to keep the rules of our old sinking economy alive. The so-called $2T recovery bill signed into law today is an attempt to keep this hamster wheel turning.

I don’t think this will work. First, look how long it took us to emerge from the Great Recession. When we did emerge, our growth rate was always anemic. You’d be hard-pressed to find any quarter where our GDP increased by more than three percent annually. Our economy was like an overloaded subcompact running on three cylinders trying to merge onto the Interstate. It took a long time to get up to highway speeds. And while we technically recovered, we never really felt we recovered because we never fundamentally solved the problems that got us into it in the first place. The half-hearted attempts by Democrats in 2009 and 2010 were not nearly enough.

In fact, we went back and made the same stupid mistakes all over again, such as getting rid of much of Dodd-Frank banking regulation that was supposed to prevent it from happening again. The fundamentals of our recovering economy were never sound, but were propped up by low interest rates which had the side effect of causing markets to rise. Companies used cheap credit to buy back their own stocks, inflating their stock prices to surreal levels. The bubble would have burst anyhow; the coronavirus thing just made the hole gaping instead of possibly manageable.

What would really make the economy roar back when this pandemic is contained is a big haircut to a lot of creditors. Because an economy can’t roar back if overleveraged people have no cash to buy stuff. What we really need is a jubilee. This is where we force creditors to wipe their debt slates clean.

Take, for example, student loans. Last I checked, there were about a trillion dollars in outstanding student loans, owed by people the least able to pay them back. Desperate for an education instead of flipping burgers for forty years, they didn’t have much choice but to pay usury interest rates for educations whose costs were vastly inflated. Let’s declare all that debt insolvent. The creditors will scream, but a lot of people will have money to spend again on things that matter like food and housing.

It could be done for lots of debts. Write off, say, 25% of mortgage debt on housing purchased for up to $500,000. Wipe out 50% of credit card debt. If you want to encourage thrift, revert the debt if more is incurred over the next five years.

And tax the rich. They’ve been bleeding the rest of us dry for too long, in the process allowing infrastructure and services to degrade. Institute Elizabeth Warren’s proposed 2% wealth tax. Raise rates just to where there were for rich households during the Reagan Administration. Tax dividends the same as ordinary income, or higher. Make work pay again.

Then do what we all know we need to do: make Medicare available to all. Much household debt and personal bankruptcies are due to medical costs that are out of control. Controlling medical costs frees up all sorts of money for more productive use. Institute living wages for everyone with annual increases that keep pace with inflation. Overturn right to work laws.

This is probably beyond a President Biden. But without it, I suspect a President Biden will discover what President Obama discovered: the system will work in counterproductive ways against the needs of the people instead.

Our election, if it can be held fairly, will likely put Democrats in control of government plus give them the margins needed to make real change happen. The question is whether Democrats have learned their lesson, and can institute the changes we need to make the economy work for everyone again.

If not, election 2022 will look a lot like Election 2010, and the crazy cycle will continue to repeat and move us into second world status.

How the “American Dream” killed the American Dream

The truth is, I think of Tom a lot. Tom and I go back to fourth grade. He was the new kid in class and unlike any of the other boys there he was a bit geeky like me. So we struck up a friendship. Decades later we are still friends, but we are bicoastal. I’m still on the east coast; he’s on the west coast near Portland, Oregon.

We lost touch with each other for a long time. My family moved south to Florida. His call was advertising, which took him various places further and further west, including Alaska. Tom is a brilliant at advertising and art in general. Frankly, my talents were far less impressive than his. For a long time I didn’t know what I wanted to do. My BA in Communications was largely worthless. It was the rise of computers, the dearth of talent in a rising industry and my willingness to get into a rising field that finally gave me a calling that paid. This led to a career largely working for Uncle Sam, a master’s degree that came later in life at age 42, and retiring in 2014 on a comfortable pension.

Tom, truly the more talented of us, wasn’t so fortunate. Both of us are now age sixty plus. Tom works in an industry that worships the young. Tom has worked for many advertising agencies over the years. These turned increasingly into gig jobs. Younger talent, more conversant in the nuances of social media and willing to work for cheap, tended to get the work instead of him. Mostly he worked for himself. Huge economic forces like the 2008 recession left him reeling. He’s had some ups since then but arguably more downs than ups. Tom is hardly alone.

I am the exception. It’s unnatural to retire at age 57 these days. Only the rules of an old civil service system let me do so. Pensions are getting hard to find, but I got one. It pays for the bulk of my retirement, but I also have a 401K to supplement my income. I also am not quite unemployed. I do some consulting from home, and a little teaching as an adjunct too.

As for Tom, he is scrambling. I’m sure he does advertising gigs when he can get them. His talent though is undiminished, just largely not recognized anymore. Mostly he is scrambling. His most recent “gig” was working at a local Amazon distribution center, working the night shift for a small pay differential. Amazon was shamed into raising wages to $15/hour, so he’s earning a bit more than that. I’m sure his wife is working too. Clinging to their middle class life must be excruciatingly hard with two teens to raise.

How did this happen? It’s been driving me nuts, and filling me with something akin to survivor’s guilt. Granted, I really like retirement, but it feels like a gilded life. It’s not too hard to imagine me in Tom’s shoes. Through someone’s grace I got lucky. Tom didn’t get that grace.

It’s Tom and millions like him. They were supposed to live the American Dream and it was supposed to work for them, as it had for his parents. You educate yourself, you try your hardest, you give the best of yourself and you expect to get rewarded. It worked for Tom for a while, until it stopped. It wasn’t because Tom suddenly became less talented. It was because someone moved his cheese.

An early factor was that Tom dropped out of college. It didn’t stop him from getting into some great ad agencies and even teaching college for a while, but the student loans dried up. His father got his education from the GI Bill that paid all his tuition. Tom never joined the military. Tom’s father also rode a successful career with IBM as an engineer, which gave him a generous pension. You can’t get a pension if you work for IBM anymore.

In short, the American Dream left Tom behind, and he’s a smart white guy like me, supposedly a privileged sex and race. It probably would have left me behind too had not I sensed opportunity in this computer thing, made the best of it, and got lucky. It also helped that I made a career working for the government. There were times when I didn’t like the work, but the bills got paid regularly and I had only one incidence of unemployment.

The American Dream is that if you work hard and apply yourself you can live a reasonably prosperous life, one better than your parents’. The dream is that there will be opportunities there for you and that with persistence and tenacity you too can claim them. For a while, it was the American reality, not just a dream. It wasn’t for everyone of course, but for white men like Tom’s dad and mine it was.

The reality though is that the American Dream wasn’t so much a dream as it was the American system. The “Dream” was made possible by progressive government. The GI Bill funded not only Tom’s father’s education, but also my father’s. Without it, it’s unclear if he too would have gotten his engineering degree. He might have swept floors instead. There were plentiful scholarships for the talented, but also student loans. There were beneficent companies willing to invest in employees for the long term. Both our fathers had such employers. Climbing the ladder was possible because there were many rungs and they were fairly easy to climb.

Since about the time of President Reagan, the tables have turned. Pensions became 401Ks, if your employer even offered a 401K. Student loans became less generous, had higher interest rates and became harder to pay off. The cost of living in general went crazy, with housing disproportionately harder to afford. The cost to buy a ticket on the American Dream kept getting pricier: tuitions skyrocketed, class sizes swelled anyhow but the career you often aimed for often turned into something you could not market profitably. It happened to me with a BA in Communications and would have brought me down too had I not found an aptitude in information technology and low entry requirements at the time. Now, more of us have advanced degrees than ever. They just don’t buy us much. For example, there is my friend Tim who I met when we both worked retail. He has a PhD and earns his living largely through a lot of adjunct teaching. It doesn’t pay very well.

The American Dream used to come with a support system that made it possible. Now that support system is gone. The one that exists is mom and dad, if they are wealthy enough. Unsurprisingly, these people are the ones who are most likely to attain it and prosper. We have decided not to make the investment that makes the American Dream possible. Unsurprisingly a lot of people like my friends Tom and Tim arguably fell through the cracks. A few, like me, got lucky anyhow. But rather than making me feel good, it just makes me feel sick.