The Elusive Palace of Wisdom

Image by SS&SS via Flickr

Perhaps this would be a good time to summarize the many roots of America’s financial malaise.  While most pundits bemoan its symptoms, they tend to shun its root causes.  Symptoms include the high costs of gasoline, air fares, baggage fees, electricity, college tuition, medical care, cars and food.  Other symptoms include massive national debt, growing instability of the bond market (including Treasuries), and a plateauing stock market.  Why is this happening?  After a brief survey of blog history, here are my conclusions about root causes.

Medical care.  The costs of medical care are disproportionate to the benefits.  While of generally high quality, our health care costs roughly double that of care in countries like Canada and Finland for a similar result.  The reason?  Patients have no “skin in the game”, i.e., no incentive to shop for low cost.  The elderly and the poor are covered by Medicare and Medicaid and more than a third are content to shun medical insurance and rely on emergency room care, bills for which mostly go unpaid.  The medical care problem is so large that the national debt problem and the budget deficit problem can not be solved without addressing it, and yet the electorate, and hence the pols, are unwilling to face the necessity of dealing with it.  Democrats failed the people when they passed the ACA, an otherwise admirable bill, without addressing the cost issue.  They were essentially spoiling their constituents like children by so doing.

Housing.  Far too many mortgages are still underwater and homeowners are walking away from their payment obligations.  How did this happen?  Congress catered to public demand for liberal regulations that enabled extremely low or zero down payments while at the same time, both GOP and Democrat administrations were complicit in permitting the bundling of mortgages into salable “instruments” which hid the risk element.  It was a failure of government oversight and regulation enabled by popular self-indulgence (more child-spoiling).

Education.  College students are paying far more than they should for a product of increasingly dubious value.  The college educational system operates as a virtual monopoly.  With the complicity of state and federal pols, it uses limited accreditation to punch tickets and issue diplomas, often without meaningful standards (exceptions perhaps being with engineering, some sciences and medicine).  It is an incestuous industry, selling graduate degrees also to themselves (teachers), as though multiple courses could improve inherent teaching ability.  Increasingly, college courses are taught by TA’s while grade inflation is rampant.  No objective measure of educational quality exists.  Although the industry touts their product as essential for getting good jobs, more than half of recent college graduates are currently living with their parents because they can’t find jobs.  Not all the fault of this is due to the Great Recession – part of it is that college has failed to properly equip students for the workplace.  The massive size of student debt has now exceeded that of credit-card debt.

Nation building.  The cost of rebuilding Iraq and Afghanistan will probably top One Trillion dollars before we manage to disentangle, providing we do.  And the real horror is, it might have all been wasted.  The jury is still out.

Energy policy.  We don’t have one.  Wealth has been flowing out of America to OPEC and its kin (like Gabon) for decades.  While third-world people languish in poverty, their oil-rich leaders (like Gabon president Bongo) lead life-styles of disgusting luxury.  The American electorate has been unwilling to sacrifice in the short term to be free from this heavy burden in the long term.  It could have been done through tax policy.

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Government size.  It is way too large.  America, already having too large a federal government, was scared into increasing it still further by 9/11.  The creation of the Department of Homeland Security and the powerless Directorate of National Intelligence simply added unnecessary and very expensive layers of bureaucracy that probably made government less rather than more effective.  The Education Department is another failure, in my opinion.  No Child Left Behind has degraded education by placing testing above quality.

Immigration.  America needs cheap labor to harvest crops, make beds and do basic muscle jobs.  Every economy is a pyramid with the affluent at the top.  Without a broad base at the bottom, everyone suffers, and yet we have allowed xenophobia and demagoguery to keep us from having a sensible immigration policy.  That was on full display during the last presidential election when John McCain unforgivably abandoned his previous position on immigration reform.

Tax policy.  The George W. Bush tax cuts have been a failure because they pushed past the point where trickle-down no longer balanced revenues.  Current GOP intransigence on taxation insists on rewarding the wealthy few percent at the expense of the rest.  Trickle-down is a meme of partial truth, one that fails at the low extreme and that is where the economy is now.  Even worse, the black-market economy is enormous, allowing myriad lapses in proper tax collection.  Some countries have successfully repaired their taxes, but our Congress clings to the Frankenstein’s Monster tax code as a source of political power and corrupt influences.

Culture.  In America, success is defined as more and bigger.  More stuff, bigger houses, cars and boats.  Is this the way it should be, or should we have learned differently in, well, college for example?

The road of excess leads to the palace of wisdom.  — William Blake

But, how bad must it get before wisdom comes?  What leader will have the courage to tell us the truth about the root causes of our problems?  I’m still looking.