…. In a few hours it will be light and we’ll be able to see the damage. There will be damage. The weather forecaster nailed it with his forecast. He told us just four hours ago everything we needed to know to prepare; time, track, intensity and duration. We did. In a coastal New England fishing village like ours the frequency and accuracy of these forecasts is an essential part of our sense of security and planning considerations. We’re the geeks that listen to the weather band on portable radios.
This is a metaphor for the perfect storm coming our way in financial terms.
It’s 3:32 a.m. I can once again hear the clock in the hallway ticking after waking to thunder, lightning and torrential rain at 3:04 a.m. The storm has passed as I can hear it rumble in the distance to the east. In a few hours it will be light and we’ll be able to see the damage. There will be damage.
The weather forecaster nailed it with his forecast He told us just four hours ago everything we needed to know to prepare; time, track, intensity and duration. We did. In a coastal New England fishing village like ours the frequency and accuracy of these forecasts is an essential part of our sense of security and planning considerations. We’re the geeks to whom Radio Shack sells those weather band radios.
This is a metaphor for the mounting storm coming our way in financial terms. At this point it is unavoidable. We’ve seen what happens throughout Europe. We now see it in our country as individual states attempt to come to terms with the financially irresponsible nature of our behavior of the past. Either we heed the warnings and take steps to prepare or simply wait until it’s over to survey the damage. For years we have been warned that the fiscal practices our leaders have exploited for their own political benefit are unsustainable in the long term and there will be a price to pay. The frequently updated forecast that Social Security, Medicare, Medicaid and a host of other tax financed entitlements are, or soon will be insolvent – has become old news. Instead of battening down the hatches we look for other windows and doors to open as the storm approaches. It makes no sense whatsoever.
Who can’t understand the forecast or recognize the signs? Who looks for reasons to blame the storm on something or somebody else? Who looks into their own empty wallet and the proceeds to order a Big Mac. Fries, and a milk shake?
Who entertains this sort of idiocy?
Regrettably, it’s the ones who have been called the smartest guys in the room. In this category we’ll put many of today’s bickering political wonks, a certain ilk of enlightened Ivy League intellect, the social justice crowd and anyone with their hand out. Is there anybody still out there with the slightest bit of confidence anymore in the medicine that Chairman Bernanke or Secretary Geithner are prescribing?
Add to this group a large portion of our population that couldn’t be bothered, is without access to information, or truly does not understand the totality of the financial mess we’ve gotten ourselves into. Into this group we can glom together debt ridden college age kids, senior citizens hopping from doctor to doctor on Medicare’s tab who still revere the days of FDR, or those standing in line at 8:59 a.m. enjoying a cigarette outside the downtown welfare office. Observe those in the Wal-Mart checkout line, singing hymns at the Sunday morning service, sitting next to you in traffic, or waiting to walk through airport TSA screening. How many of those folks comprehend, let alone have given serious thought to the serious financial situation in which we have ensnared ourselves? Most of them think a “bump in the road” like $4 per gallon at the pump is an imposition. Is this an informed electorate?
Much talk is being made about cobbling together a federal budget that will exceed $15 trillion or about raising the debt ceiling. For the average adult on the street what does this even mean? Imagine the response from American Express if you demanded more credit to pay off the interest on your Master Card when your credit score hovers near the Mendoza Line? Do you suppose there is a bona fide understanding of how much a trillion dollars really is (if a billion is the new million, what does that make a trillion?) or how much of what the government takes from those who actually pay taxes goes into the things that are bankrupting us? And finally, how much of what is in our federal budget can we actually pay for – just on tax revenue alone? These are pretty basic questions but it brings us back to the weather forecast metaphor.
We’re broke. Just the interest payments alone are enough to sink our ship if one looks just 10-15 years into the future. For many states it won’t be that long. Our debt won’t magically go away as it does when we routinely forgive other nations for the money they owe us. China isn’t as nice and won’t be forgiving as we are. The accumulated interest won’t get any smaller because we’re a good nation. The snowball just gets bigger.
We are a great nation but we have an attention deficit problem. The things that have the real potential to hurt us have a difficult time keeping our attention; you know, stuff like terrorists, national security, porous borders, and … debt.
What should we be doing?
This is the banner under which Forbes editorials have been published since the first issue of the magazine. It’s a translation from Proverbs 4:7. Knowledge leads to understanding which leads to wisdom. There are too many Americans that need an introduction to step one. Having an up to date working knowledge of the financial debate that is currently raging in Washington is essential to sifting through the political canards and hubris. Understanding the conversation, the opposing sides, and the overall implications are essential to joining the debate.
Secondly, put two and two together while watching the news. That legislative ruckus in Wisconsin over the winter, the economic news coming from individual states like California, New York, Illinois, aggressive budget reform measures undertaken by governors, and gaining knowledge of how the federal government tightens the financial noose on states with each unfunded federal mandate can give a pretty good picture of what we’re up against. Next, observe the repercussions of the disastrous European Union financial model and witness how the populations are dealing (not so civilly) with their new reality.
Finally, realize there is no silver bullet to this mess. For some the solution will be more painful than for others. Many won’t understand what is happening because they haven’t done their homework.
They will likely be the most astonished and vocal ones when they survey the damage in the morning.