America Faces Critical "Colonel Jessup" Moment
Jessup: You want answers?
Kaffee: I think I'm entitled to them.
Jessup: You want answers?
Kaffee: I want the truth!
Jessup: You can't handle the truth!
Scene from A Few Good Men, written by Aaron Sorkin
The context of that quote from A Few Good Men has nothing to do with the current economic problems facing the world but it perfectly captures why we are still struggling to recover from the financial crisis that gripped the world almost three years ago. Like Colonel Jessup, President Obama - and President Bush before him - believes he is doing what is necessary to protect us and that we are ingrates for questioning his methods. He and the other leaders of the world don't believe we can handle the truth about the causes of the crisis or the necessary steps required for real recovery. Rather than lead the world to a better future they waste our resources trying to maintain the illusion of the past.
This failure of leadership is not confined to the present administration or any particular political party. As the present Greek tragedy amply demonstrates, it is not just an American failure but a collective, worldwide abdication of responsibility. It is a lack of confidence in the abilities of the average world citizen and a fear of the political consequences of revealing the truth that motivates our leaders. While these "leaders" often claim to be protecting the less fortunate among us - and most likely believe it themselves - their actions have the effect of shielding the wealthy and powerful from the consequences of their failures. It is ironic that many of these "leaders" who have in the past ridiculed the idea that the success of the few can trickle down to the many now steadfastly believe that failure of the same few will.
Solving the worldwide debt crisis will involve sacrifices beyond what have already been endured. Whether the EU bails out Greece in the short term will only determine the timetable of their eventual default. It may be possible to keep them liquid in the short term but no amount of new debt will make them solvent in the long run. The only question is who will bear the burden of the losses and how quickly they will be realized. If the losses are realized quickly and borne by the responsible parties, the pain will be intense but relatively short lived. If the losses are realized slowly, a remedy pioneered by the Japanese over the last two decades, the pain may be less intense but the duration may well be measured in generations.
The political unrest fomented by forcing society as a whole to shoulder the imprudent bankers' share of the losses cannot be ignored. The Greek people are being asked to endure potentially decades of economic depression for the sake of the European banks who lent their politicians the money to buy their votes. While the Greek people surely deserve blame for accepting the generous benefits doled out by their political class, it is immoral to force them to shoulder the blame properly apportioned to Greece's bankers. The pain of solving this crisis must be shared by borrowers and lenders alike.
If Greece's debts are restructured and reduced to a reasonable level the ability of the Greek government to borrow would be sharply curtailed for at least a few years. The Greek people would then have little choice but to accept a reduction in their overly generous, government provided benefits. They might also be more willing to accept those conditions peacefully if the debt reduction allows their economy to grow. The opportunity to replace the lost benefits through economic growth is an acceptable compromise but losing both the benefits and the potential for growth is not. It isn't the truth that the Greeks can't handle; it is the lie that they alone must suffer to save the rest of Europe.
The Great Lie that politicians have told for decades is that they can provide a world of perpetual economic growth where no one suffers the consequences of bad decisions. Here in the US we were told that the Federal Reserve had solved the mysteries of monetary policy to such a degree that recessions had been rendered obsolete. This free lunch monetary policy, where all economic disruptions were solved by reducing the price of credit, has brought us to a point where no amount of credit is sufficient to restore growth. The truth is that there is no free lunch and the bill for perpetual growth through credit has now come due. The truth is that there are always disruptions to growth, some natural and some the result of bad policy. The proper response is to allow the natural disruptions to run their course and to correct the bad policies.
The Truth of our current situation is that both government spending as stimulus and Federal Reserve attempts to create sufficient credit to restore growth have failed. The negative consequences of both now far outweigh any potential benefits. Further deficit spending will just move us closer to our own Greek moment while further expansions of the Federal Reserve's balance sheet risks our privileged status as the world's reserve currency. Either outcome carries consequences well beyond anything we've experienced to date. It is time for the government to perform the only role for which it is suited - providing stability to allow the economy to recover naturally.
Our fiscal situation is dire but it can be solved with bold leadership. Cut spending, reform the tax code, Social Security and Medicare and do it now, not after the next election. Close the loopholes that benefit the few at the expense of the many. Stop government directed investments with dubious benefits and trust that the genius of millions will create more jobs than politically correct boondoggles devised by a few K Street Congressional cronies. Reform Social Security and Medicare so they can fulfill the promises made to our most vulnerable senior citizens by raising the retirement age and reducing future benefits for those who can afford to fund their own retirement. Reduce corporate taxes to 15%, eliminate all the loopholes and shift to territorial taxation so the US becomes a magnet for global capital. Bring the troops home, reduce and redirect defense spending so our military can perform its one vital mission of protecting America.
Our monetary system also requires reform so the rewards of capitalism are once again shared more equally among our citizens. The chasm that has developed between the wealthy and the poor is a direct result of monetary manipulation that creates opportunity for those with the means to protect themselves from the changing value of the dollar and misery for those who don't. The poor and middle class do not have the necessary level of financial knowledge or the ability to rearrange their financial affairs in ways to offset the effects of a fluctuating currency. Those on fixed incomes, who depend on safe investments for their well being, have been sacrificed on the altar of low interest rates for the benefit of financial company CEOs. It isn't right, fair or moral and it has to stop. The Federal Reserve should have one and only one objective - provide a stable value for the dollar. The culture of credit must come to an end.
The time has come to build a better future rather than continuing to borrow from future generations. It won't be easy and will require sacrifice from all Americans but the Truth - and responsible leadership - shall set us free.