How and why America is declining

“One man with courage is a majority.”  Thomas Jefferson

My last post was about the disarray in Europe. What about America?

Let’s start with some interesting statistics. The famous American “fruit” company, Apple, according to the latest financial report, now has more cash to spend than the American government. While in itself not a critical factor, this still poses a sort of dilemma – is business so much ahead of the government in America?

In the backdrop of the on-going debt debate, Barack Obama looks like a man who picked a fight he is unable to finish. But wait. Obama just announced that Republican and Democratic leaders reached an agreement on raising the US debt limit and avoiding default. The deficit reduction is meant to happen over the period of 10 years. And both sides went to a seemingly lose-lose compromise just to get the deal. Will it hold or even pay off?

The debt-related stand-off in Washington is political in nature, having been initially thrust upon incredulous investors. Increasing America’s overdraft (which, according to Government Accountability Office, GAO, has been increased 74 times over the past 50 years) beyond $14.3 trillion (or facing the very 1st default in its history) should have been relatively simple. But Republican congressmen, furious about big government, have recklessly used it as a political tool to embarrass Obama.

America’s fiscal problem is not now — it should be spending to boost recovery — but in the medium term. Its absurdly convoluted tax system (allegedly changed 579 times only during last year) is very inefficient, and there is speculation that ageing of its baby-boomers will push its big number of entitlement programmes into bankruptcy. Obama set up a commission to examine this issue and until recently completely ignored its sensible conclusions. For long time, Obama also held the illusion that the panacea to the deficit is to tax the rich (top 5% who already pay 60% of taxes).

The problem, in America like in Europe, lies not just in the weak/inconsistent leadership and inability to commit to radical economic measures necessary to cure the ailing economy, but also in the political structures. Just like in Japan, its dysfunctional politics were stemming from its one-party system, in American Congress, the (moderate) centre — conservative Democrats and liberal Republicans — has collapsed, in part because partisan redistricting has handed over power to the extremes, ushering it into a radical quasi-one-sided system, not unlike the Japanese.

But American politics is less broken than many think or allege. Since 2009, Congress has passed a huge stimulus bill, ARRA (although there are 1.3 million fewer private-sector workers today than when the ARRA was passed), aimed at economic recovery, evidence that the legislature is still able to get things done.

American economy is becoming increasingly vulnerable. New data continue to reveal just how weak growth was in the 2nd quarter of 2011. The economy has expanded at a 1.3% annual pace. Markets are declining, and businesses are building up cash reserves as insurance against the worst. After two years of pitifully slow recovery, while tens of millions of workers are unemployed (currently at about 14 million) and wages are flat, the government is doing little to get back to economic growth.

Some possible solutions to the ailing American economy include:

  1. Government size to be reduced (public sector, expenditures) in order to put a dent in this debt.
  2. Congress to accept cuts on entitlements.
  3. Government to create a favorable environment for job creation; the private sector does the rest (recently, McKinsey conducted a research asking, “What is the single most important step the U.S. should take to create more jobs” and published the responses here).
  4. Continue pursuing/following-up with taxes for the top 5% (to be invested, for example, in increasing financial aid for college students).
  5. Move some (according to certain criteria) of 46% of American population, who pay no Federal income tax, into the ranks of the remaining 54%.
  6. Impose a national sales/VAT tax. Tax consumption (not investment) and reward savings.
  7. Let the capitalism (supply and demand) solve the housing problem instead of introducing artificial measures.
  8. Let the zombie (aka bailed out) banks/firms go, which might result (for some of them at least) in chapter 11/bankruptcy and making them (in majority of cases) downsize and restructure rather than liquidate.
  9. Wind down American military engagements abroad (two wars, Iraq and Afghanistan, would save up to $150 billion/year in addition to withdrawing, at least partially, 53,000 military personnel from Germany, 36,000 from Japan and thousands more in another 133 countries).

I started by quoting Jefferson and so I shall finish, hoping that Obama and Congress will act before it is too late.

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Thomas Jefferson

To work or not to work

Work brings a sense of content and fulfillment, or so claims the traditional wisdom. Those who have work seem happy or satisfied or both. Those who are unemployed usually have an air of depression, despair, and one can always tell there is something “missing” about them. But there also those who work but, besides financial and other inherent benefits of having a job, do not get satisfaction.  As one such person confessed (back in November 2007) – he knew full well that there are many who starve and die every day – he has a work but he considers himself a failure at work

…which is not to say that I can’t do my job – I’m actually quite good at it. But work, as a lifestyle, eventually wears me down. In the past I have started out at each new job with optimism and pleasure. After a few years working in the same location, I am completely burnt out. I have no desire to go to work, when I’m there, have little desire to do anything but go home early. I am a bear of very little ambition.

When I took my current job, I had decided to finally ‘grow up’, settle down, and stop looking for the perfect job. All it would take, I thought, was an attitude adjustment and 150 mg of Effexor/day. I’d stay in my job and enjoy the fruits of stability, for a change. I would focus on my personal life (another area where I am kind of a failure, but that’s for another, longer, more irritating post.)

In the 90’s I took a brief stab at being self-employed, but I was completely unsuited. Not only am I bad employee, I am a terrible boss. I lacked the confidence and skills needed to carry it off. I eventually went on strike, and finally had to let myself go.

So I’m caught on the horns of dilemma, as they say. I have a job I no longer want, and no longer want any job. On the other hand, I do enjoy the benefits of having a job. I’m not sure whether I should take the plunge and do something incredibly out of character, or hunker down and stop whining.
In the mean-time, millions of people around the world are being tortured, starved, and dying from lack of drinking water. I hope none of them read this post, I would die from embarrassment.

Nearly a year later, in the wake of the current economic crisis raging all over the world and America not in the least, he wrote a sequel to his original post.

The more I observe the workings of the average administrator, the more convinced I am that the concept of competence in the American business is a myth.  For instance, administrators in my workplace do little but attend meetings all day long.  When I express my opinion that meetings are mostly a waste of time, they agree heartily.  They don’t seem to worry that what they do all day is waste time.  Why should you?

The current state of American business is a perfect example of why the lowly worker should relax and go with the flow.  Corporate CEOs are raking in millions in bonuses without any proof of competence.  If they are fired, they will easily find a similar job elsewhere.  How?  Because other CEOs and future CEOs sit on the hiring committees of American corporations.  These people certainly don’t want to start a trend of businesses demanding results as a condition for gargantuan golden parachutes.  To do so would be to ensure smaller payouts for them in the future.

So administration has the game rigged.  Workers do not enjoy the same power.  So the least you can do is stop believing the lie, the lie that you are somehow required to attain a level of competence unnecessary for your “betters.”  All they have that you don’t have is a $1000 suit and an old-boy conspiracy network.

What he says, especially about CEOs and their disproportionate salaries and bonuses versus their overly long time spent in meetings half in slumber half in dream, rings true to my ears from the personal experience and from what I have read and seen.

To work or not to work, this is the question.